Back to all articles

ERISA Disability Regulations

Insurance Coverage

Share Post:

The Employee Retirement Income Security Act of 1974 or “ERISA” applies to most private sector employee benefit plans.  Federal law already requires that participants under an ERISA disability benefits plan receive (1) adequate, written notice stating the specific reasons for a denial of a claim and (2) a full and fair review by the appropriate named fiduciary of the denial.  29 U.S.C. § 1133.  The Secretary of Labor is authorized to prescribe regulations to implement these protections.  See 29 U.S.C. § 1135; § 1001(b).  In new regulations poised to take effect April 1, 2018, the Department of Labor has made requirements for handling ERISA disability claims even more stringent.  To gauge the significance of the new rules, it is helpful to review the rules already on the books.


Current Rules: Reasonable Claims Procedure

For example, current regulations require that every employee benefit plan:

For disability benefit plans specifically, claims procedures are reasonable only if they:

See id.  There are also timing and appeal requirements.  See id.


What Prompted the New Rules?

According to the Department of Labor, it was prompted to revisit disability claims procedures based in part on the number of disability claims litigation relative to other ERISA disputes.  See Claims Procedure for Plans Providing Disability Benefits; Extension of Applicability Date, 81 Fed. Reg. 92316 (Dec. 19, 2016).  The DOL cited concerns over conflicts of interest and fairness, which were addressed in enhanced regulations for group health benefits in the Affordable Care Act and, according to the Department, equally applicable to disability claims.  See id., 92316-17.  Such provisions include the right of claimants to respond to new and additional evidence and the requirements of independence and impartiality of the persons involved in the benefit determinations.  See id.  As summarized by the Department, the Final Rule includes additional requirements for the processing of claims and appeals for disability benefits:

Claims Procedure for Plans Providing Disability Benefits; Extension of Applicability Date, 82 Fed. Reg. 47409, 47410 (Oct. 12, 2017).


Rules Set to Take Effect Despite Delay, Criticism

The Final Rule was made effective January 18, 2017, but applicability was initially delayed until January 1, 2018 to provide adequate time for disability benefit plans and their affected service providers to make adjustments, as well as to give time for consumers and others to understand the amendments.  Id. at 47410.  It was further delayed in response to concerns by stakeholders and members of Congress that the regulations will increase disability benefit plan costs and litigation, and, as a result, decrease access to such benefits.  See id., 47411.  In a confidential survey of carriers, average premium increases were estimated at between 5-8%.  Id., 47411.  Delay was also in response to the issuance of executive order 13777 (“Enforcing the Regulatory Reform Agenda”) on February 24, 2017.

The Department indicated that it would use the additional time to review data including cost estimates on each of the provisions in the Final Rule and detrimental impacts on access to coverage, and reach a decision on “whether and how long to delay the applicability date.”  See 82 Fed. Reg. 47410, 47412-13.  In a news release on January 5, 2018, however, the Department noted receipt of approximately 200 comment letters but little substantive information concerning added cost and litigation.  See Dep’t of Labor, News Release, 1/5/2018.

As such, the Department confirmed that the new rules will take effect on April 1, 2018.  To that end, careful review of 29 C.F.R. 2560.503-1 as amended is recommended to ensure compliance with the new requirements.

Contact us today to schedule your consultation.

Get Started