On April 1, 2018, employer sponsored plans subject to ERISA and providing a benefit contingent on a disability determination will need to comply with new rules finalized by the Department of Labor (DOL). The new rules were originally to take effect January 1.
Impacted benefit plans
Plans impacted include long term disability plans, short term disability plans, and some pension plans. The revisions more closely align these plans’ claims procedures with procedures applicable to health plans.
The newly revised rules include:
- changes to the content of adverse benefit plan determination notices
- prohibition on claims adjudicators being hired, terminated, compensated or promoted based on the likelihood of denying claims
- requirements that notices be provided in a culturally and linguistically appropriate manner
- limitations on rescissions.
Here is a DOL summary of the rule changes.
Excluded benefit plans
These new rules are only applicable to ERISA covered plans. Public employers and church plans not subject to ERISA are not required to comply. In addition, a short term disability plan that pays benefits from the employer’s general assets is also generally excluded from ERISA.
Employers with questions on whether their plans are subject to ERISA should contact their benefits advisor or legal counsel.
As the plan sponsor, employers are required to ensure these regulations are followed; however, insurers are also required to follow the new rules. To the extent an employer has purchased a fully insured disability product, the insurer should be implementing these changes.
In the self-funded context, the employer should ensure its third-party administrator (TPA) is implementing the revisions as well as updating its plan document, summary plan description, and drafting the appropriate notices.
We recommend self-funded employers reach out to their TPA to ensure impacted plan’s policies have been updated to comply with the new regulations. Employers should also ensure their agreements with TPAs require them to administer plans in accordance with ERISA and its regulations, which include these new procedures.
Employers with fully insured plans can likely assume their insurance carrier is in compliance; however, if the employer has not already heard from its carrier regarding the new rules we suggest checking in with them to ensure the plan will be in compliance. Employers should also carefully review their various benefit plans to determine which condition benefits on a disability determination. To the extent the employer has pension or other non-disability plans which hinge a benefit on a determination of disability, the employer should discuss the applicability of these regulations with its insurer, TPA, benefits advisor, and legal counsel.
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