Last year, the Department of Labor (“DOL”) released final regulations changing the way employers and other administrators handle benefit claims that necessitate a finding of disability (“Final Regulations”). These changes were reported by Maynard Cooper & Gale in "New Disability Claims Regulations: Review and Revise Claims Procedures by January 1, 2018." In general, the Final Regulations are more protective of a claimant, requiring the decision-maker to provide additional disclosures and information to claimants and imposing new procedural safeguards against biased, untimely or unreasoned decisions, along with other new requirements.
The DOL has been reviewing the Final Regulations to determine whether the new protections will, as asserted by commenters, negatively impact the availability of disability benefits in the workplace. One of the more difficult challenges has been identifying reliable data that will show whether the Final Regulations are likely to adversely affect availability and cost of disability insurance. Insurers representing about 45% of the current group disability insurance market, however, have agreed to collaborate on collecting and aggregating related insurance data in order to show the effect procedural changes can have on disability insurance. So, two weeks ago, in order to gain more time to review the impact of the Final Regulations, including the new data from insurers, the DOL proposed a 90-day delay before plans are required to comply with the Final Regulations. If approved, the 90-day delay will mean that the date an ERISA plan’s written claims procedures must be amended to reflect the new requirements is officially delayed from January 1, 2018 until April 1, 2018.
Meanwhile, the DOL is seeking comments on the merits of changing, keeping or rescinding the Final Regulations, so additional changes may be announced following the DOL’s review. For now, employers may use the extra time to identify which of their ERISA plans provide benefits that depend on a disability determination. Obviously, long-term and short-term disability plans have disability claims. But many other plans have special benefits that apply only in the event the participant or beneficiary is disabled. For instance, many pension plans offer an unreduced disability retirement benefit. A defined contribution plan may require the participant to be employed on the last day of the plan year in order to share in a profit sharing or matching allocation, unless the participant retires, dies or becomes disabled. Many life and accident insurance policies provide a premium waiver if a participant is disabled. Executive compensation plans tend to have disability distribution features. In short, there are many ways a disability finding can affect plan benefits. And, unless the plan relies on an outside entity such as the Social Security Administration or the employer’s disability insurance carrier to decide who is disabled and who is not, the plan’s written claims procedures need to conform to applicable requirements, and the plan documents need to be consistent with the claims procedures. Having a few more months to identify affected plans is a welcome development during the normally busy calendar year-end.