Employers: It’s Time to Evaluate Disability Claims Procedures

Authored by Dannae L. Delano

Jan 27, 2017

In light of new regulations, employers should immediately evaluate their disability benefits claims procedures. The Department of Labor issued final regulations revising the required claims procedures effective Jan. 1, 2017 for disability claims filed on or after Jan. 1, 2018.

The new rules are similar to the claims and appeals requirements added to group health plans by the Affordable Care Act and add the following requirements to the claims and appeals process for disability benefit claims:

  • Claims and appeals decisions must be made independently and impartially – this means that plans cannot contract for specific outcomes or incentivize claim denials.
  • Denial letters must include specific information explaining the reason for the denial, claimants’ rights, procedures or criteria relied upon, as well as any time limits related to the process and proof that the denial was communicated in appropriate language (including a prominent statement of the availability of language services).
  • Appeal denials must allow the claimant an opportunity to respond if any new evidence or reasoning is relied upon.
  • If claims procedures are not followed, claimants cannot be barred from suing the plan for failure to exhaust the claims procedures.
  •  Any retroactive termination of coverage due to alleged misrepresentations of fact must be treated as a denial that triggers appeal procedures.

These new requirements apply to all disability claims, including disability claims under pension or 401(k) plans where the availability of the benefit is conditioned on a determination by the plan administrator that the participant is disabled. If the disability determination is based on a finding by the Social Security Administration or an employer’s long-term disability insurance carrier, the new requirements do not apply.

Employers must evaluate their plans and benefits related to disability in 2017 for possible amendment to ensure compliance with these new requirements for claims made on or after January 1, 2018. This would involve evaluating terms for disability benefits under retirement plans, reviewing disability benefit plan procedures, and working with service providers engaged for the claims and appeal process.

If you have any questions about ERISA claims and appeal procedure requirements or any other employee benefits matter, please do not hesitate to contact Dannae Delano.

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