June 12, 2018Nelson Mullins’ Trish Markus appointed to N.C. Institute of Medicine
January 17, 2017
New final regulations on claims procedures for disability benefits take effect January 18, 2017. These new procedures borrow heavily from the health claim procedures under the Affordable Care Act (ACA). Employers should review the terms of their claims procedures in all affected plans and consider revisions to summary plan descriptions (SPDs).
Plans subject to ERISA must establish claims procedures, including pension and "top hat" plans as well as health and disability plans. The new regulations address only disability claims. A "disability claim" exists where the claims administrator must make a determination of disability to decide the claim. However, if the claim depends on a finding of disability that is made by a party other than the plan for non-plan purposes, it is not treated as a "disability" claim and these new claims procedures are not applicable.
The regulations are effective January 18, 2017 and apply to all claims for disability benefits filed on or after January 1, 2018. There are some transitional rules for 2017 that delay some of the changes made to the content of denial notices.
Most disability claims are made under long term disability insurance policies where the insurer makes the determinations of disability. When a claimant whose claim has been denied sues, often the employer sponsoring the plan is sued along with the insurer. To reduce litigation risk, employers should confirm with their insurer that they are in compliance with the new disability claims procedures, request updated SPDs and benefit booklets, and monitor the claims for procedural compliance. According to industry comments on the proposed regulations, many of the changes were already "best practice."
For employers with pension, 401(k), and other ERISA plans that have disability benefits, claims procedures should be reviewed and revised, as needed. Also consider reviewing the definition of "disability" to determine whether incorporating a third party's determination of disability for a non-plan purpose, will allow the plan able to avoid the additional burden of the new disability claim procedures. For example, if a pension plan provides benefits to participants who have been determined to be disabled by the Social Security Administration or the long term disability insurer, the pension plan is not subject to the new disability claim rules.
 This is a correction of our original alert, which mistakenly referred to a January 1, 2017 claim filing date.
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