News & Events

What Should Employers Do About the Delay In the New Disability Claims Procedure Requirements?

Submitted By Firm: Bond, Schoeneck & King, PLLC

Contact(s): Louis P. DiLorenzo, Thomas G. Eron

Author(s):

Ted Lewkowicz

Date Published: 11/29/2017

Article Type:

Share This:

On November 24, 2017, the United States Department of Labor ("DOL") announced a 90-day delay in the effective date of regulations that will significantly change the claims procedure requirements for employee benefit plans covered by the Employee Retirement Income Security Act ("ERISA") that provide disability benefits ("New Disability Claims Requirements"). The New Disability Claims Requirements are now scheduled to become effective for disability claims filed after April 1, 2018, as opposed to the current requirement of becoming effective for disability claims filed on or after January 1, 2018. This change gives employers an additional 90 days to modify the disability claims procedures in their ERISA-covered plans with disability benefits ("ERISA Disability Benefit Plans"). It is also possible that prior to April 1, 2018 the DOL could further delay the April 1, 2018 effective date of the New Disability Claims Requirements, and/or modify or rescind the New Disability Claims Requirements.

This uncertainty over the future of the New Disability Claims Requirements raises questions about how employers with ERISA Disability Benefit Plans should proceed:

  • Employers That Have Already Made the Changes To Comply With the New Disability Claims Requirements – If an employer has already amended its ERISA Disability Benefit Plans to include the New Disability Claims Requirements, it is recommended that such amendments be retained for now. Each such employer should monitor any additional action that might be taken by the DOL to change and/or rescind the New Disability Claims Requirements.
  • Employers That Have Not Yet Started To Make Changes To Comply With the New Disability Claims Requirements – If an employer with ERISA Disability Benefit Plans has not yet made changes to comply with the New Disability Claims Requirements, that employer will need to decide whether to delay making those changes until the DOL provides additional guidance on what it intends to do with the New Disability Claims Requirements. The DOL has asked for comments by December 11, 2017 on whether the April 1, 2018 effective date should be delayed further, and whether the New Disability Claims Requirements should be changed or rescinded. Although it is possible the DOL could delay the April 1, 2018 effective date further and/or change the New Disability Claims Requirements, it is not yet clear whether that will occur. If an employer decides to delay making changes to comply with the New Disability Claims Requirements, it will avoid any additional time and expense that might arise if the DOL changes and/or rescinds the New Disability Claims Requirements. However, such an employer should also be aware that even if it does not make changes to comply with the New Disability Claims Requirements, it: (1) could still be obligated to comply with several federal court decisions that require a full and fair review when reviewing claims for disability benefits in an ERISA Disability Benefit Plan; and (2) should make sure that it satisfies any applicable full and fair review requirements when handling such disability claims.

Why Did the DOL Delay the New Disability Claims Requirements?

On October 12, 2017, the DOL published a document in the Federal Register asking for comments on a proposed 90 day delay in the effective date of the New Disability Claims Requirements, and for comments and data on the merits of rescinding, modifying, or retaining the New Disability Claims Requirements. The DOL said it received approximately 110 comment letters, with many commentators strongly supporting a delay of more than 90 days (most requested a delay of six months to a year) and at least as many commentators equally strongly opposing any delay of any length.

The DOL said that the decision to delay the effective date for the New Disability Claims Requirements arose as a result of an executive order issued by President Trump on February 24, 2017 that directed federal agencies to do a regulatory review, and make recommendations, regarding regulations that could be repealed, replaced, or modified in a way that would make them less burdensome. After the New Disability Claims Requirements were issued in final form by the DOL on December 19, 2016, the DOL said that it started receiving complaints from various stakeholders and members of Congress that implementation of the New Disability Claims Requirements would:

  • increase the costs of administering disability benefit plans by, among other things, imposing new requirements and evidentiary standards when adjudicating claims;
  • result in more litigation of claims for disability benefits, and in certain circumstances make it more difficult for employers to prevail in such litigation; and
  • increase the costs of premiums for disability insurance plans, which could make it harder for employees to obtain disability insurance benefits (a survey of long-term disability carriers estimated that the New Disability Claims Requirements could result in premium increases of five to eight percent in 2018, and the carriers said that such increases could result in employees dropping or forgoing long-term disability coverage).

Commentators who opposed a delay of the January 1, 2018 effective date of the New Disability Claims Requirements said that:

  • employees with disability claims need to have the increased procedural protections provided by the New Disability Claims Requirements;
  • industry assertions that the New Disability Claims Requirements would result in increased costs and reduced coverage were unsubstantiated and undocumented; and
  • serious issues exist as to whether a delay of the New Disability Claims Requirements would comply with the applicable requirements of the Administrative Procedures Act, and that litigation could occur regarding such issues.

After reviewing the comments received, the DOL decided to adopt the proposed 90 day delay to April 1, 2018 without change. The DOL said that it expects to receive data and information by December 11, 2017 regarding whether the New Disability Claims Requirements would result in increased costs and reduced coverage. After such data and information are received, the DOL said that it would give the public a reasonable opportunity to review and respond to such data and information. After that process is completed, the DOL will then consider whether any additional delay of some or all of the New Disability Claims Requirements beyond April 1, 2018 should occur. The DOL said its objectives with respect to its review of the New Disability Claims Requirements are to ensure full and fair reviews of disability claims, while not imposing unnecessary costs and adverse consequences.

What Types of Plans Are Subject To the New Disability Claims Requirements?

ERISA-covered retirement and welfare benefit plans that provide benefits if an individual becomes disabled generally will be subject to the New Disability Claims Requirements. Certain government plans, church plans, and plans maintained solely for the purpose of complying with applicable workers’ compensation law(s) and disability insurance law(s) are exempt from ERISA. Private employers and tax-exempt employers with ERISA Disability Benefit Plans generally will have to comply with the New Disability Claims Procedures. Examples of the types of non-governmental and non-church plans that could be subject to the New Disability Claims Requirements include:

  • short-term disability insurance plans that provide benefits in excess of those required by applicable laws;
  • long-term disability insurance plans;
  • other welfare benefit plans that provide certain benefits if an individual becomes disabled (e.g., continued coverage under a health plan, or a waiver of a requirement to pay premiums under a life insurance plan);
  • retirement plans that provide certain benefits if a participant becomes disabled; and
  • nonqualified deferred compensation agreements or plans that provide certain benefits if a covered employee becomes disabled.

What Are the New Disability Claims Requirements?

Among the more important New Disability Claims Requirements for the processing of claims and appeals for disability benefits under ERISA Disability Benefit Plans are the following:

  • More Disclosure Requirements For Benefit Denials – If a disability benefit denial is going to be issued, it will have to include a more detailed explanation of: (1) the reasons why the benefit is being denied, (including, if applicable, the reason for any disagreement with the viewpoint of a medical or vocation professional, or with a disability determination by the Social Security Administration); and (2) the specific internal standards, rules, guidelines, protocols, or other similar criteria of the plan (collectively, "Standards") that were used in making that denial (or an explanation that such Standards do not exist).
  • A Benefit Denial Must Describe a Right To Request a Claim File – A benefit denial must include a statement that the claimant has the right, upon request, to receive a copy of the whole claim file and certain other documents that are relevant.
  • An Appeal Denial May Not Be Based On New Information, Unless a Claimant Is First Allowed To Review and Respond To the New Information – If the denial of an appeal is going to be based on new evidence or a new rationale that was not in the initial benefit denial, the claimant must be notified about the new evidence or rationale free of charge and must be provided a fair opportunity to respond to it before the appeal is denied.
  • Conflict of Interest Requirements For Individuals Involved In Claims and Appeals Decisions – Conflict of interest procedures must be followed by ERISA Disability Benefit Plans that generally will help ensure that certain individuals involved in claims and appeals decisions (e.g., individuals deciding claims, medical experts, and vocational experts) are independent and impartial. Such individuals may not, for example, be hired, compensated, promoted, or terminated based on how claims or appeals are handled.
  • Certain Violations of the Claims Requirements Could Allow a Claimant To Immediately Go To Court – Certain violations of the benefit claims requirements could be treated as a deemed exhaustion of administrative remedies that would allow a claimant to immediately go to court to challenge a denial of disability benefits.
  • Certain Rescissions of Coverage Will Be Treated As a Benefit Denial – Certain rescissions of coverage by a plan (e.g., a retroactive termination of coverage due to a false statement made on an application for coverage) will be treated as a benefit denial that will require the claims procedure requirements to be followed.
  • Denial and Appeal Communications May, In Certain Circumstances, Have To Be Provided In Non-English Languages – If a claimant for disability benefits lives in a county where 10 percent or more of the population is only literate in a non-English language, benefit denials will have to include a statement in the applicable non-English language that certain language services will be available upon a claimant’s request to assist with the processing of the claim.

Why Is It Important For Employers To Implement the New Disability Claims Requirements If They Become Effective?

If the New Disability Claims Requirements become effective, employers with ERISA Disability Benefit Plans will want to timely amend each such plan to incorporate the New Disability Claims Requirements in order to try to obtain a favorable judicial standard of review if the disability claim is ever litigated. Certain failures to follow ERISA’s benefits claims procedure requirements could:

  • allow a claimant to start litigating a claim in court before having to exhaust the plan’s administrative remedies (i.e., before have to comply with all of the applicable requirements of the plan’s benefit claims procedures); and
  • allow a court to review the merits of the claim without having to give deference to any decision or interpretation made by the claims administrator with respect to the claim.

Timely implementation of the New Disability Claims Requirements could, therefore, increase an employer’s chances to prevail on disputed claims for disability benefits in an ERISA-covered plan.

What Documents Should Be Changed If the New Disability Claims Requirements Become Effective?

If the New Disability Claims Requirements become effective, employers with ERISA Disability Benefit Plans should make any needed changes in the benefit claims procedures for those plans. Documents where such changes may need to be made include:

  • the plan document;
  • the summary plan description for the plan; and
  • any other document that references the plan’s benefit claims procedures (e.g., some nonqualified deferred compensation agreements have benefit claims procedures in a separate document).

What Is Likely To Happen To the New Disability Claims Requirements?

The DOL has asked for a substantial amount of data that will help it assess whether the New Disability Claims Requirements will be burdensome for employers to comply with, and it would not be surprising if the 90 day extension is extended further to allow all that data to be analyzed. If an analysis of that data indicates that the New Disability Claims Requirements will be burdensome for employers, it also would not be surprising if the DOL eventually decides to modify the New Disability Claims Requirements.

In light of the uncertain status of the New Disability Claim Requirements, employers with ERISA Disability Benefit Plans should monitor future DOL guidance on the New Disability Claims Requirements to see what changes, if any, may need to be made to those plans.

If you have any questions about this memorandum, please contact Ted Lewkowicz, any of the attorneys in our Employee Benefits and Executive Compensation Practice, or the attorney in the firm with whom you are regularly in contact.

Find a Member

View or print a complete ELA member list »

Client Successes

Altra Industrial Motion Inc.

Altra Industrial Motion Inc. has multiple locations in the U.S., as well as Central America, Europe, and Asia. The Employment Law Alliance has proved to be a great asset in assisting us in dealing with employment issues and matters in such diverse venues as Mexico, Australia, and Spain. We have obtained excellent results using the ELA network for matters ranging from a multi-state review of employment policies to assisting with individual employment issues in a variety of foreign jurisdictions.

In one instance, we were faced with an employment dispute with a former associate in Mexico that had the potential for substantial economic exposure. The matter had been pending for over a year, and we were not confident in the employment advice we had been receiving. I obtained a referral to the ELA counsel in Mexico, who was able to obtain a favorable resolution of the dispute in only a few days. Based on our experiences with the ELA, we would not hesitate to use its many resources for future employment law needs.

American University in Bulgaria

In my career I have been a practicing attorney, counsel to the Governor of Maine, and CEO of a major public utility. I have worked with many lawyers in many settings. When the American University in Bulgaria needed help with employment litigation in federal court in Syracuse, New York, we turned to Pierce Atwood, the ELA member we knew and trusted in Maine, for a referral. We were extremely pleased with the responsiveness and high quality of service we received from Bond Schoeneck & King, the ELA's firm in upstate New York. I would not hesitate to recommend the ELA to any employer.

David T. Flanagan
Member of Board of Trustees 

Arcata Associates

I really enjoyed the Conducting an Effective Internal Investigation in the United States webinar.  We are in the midst of a rather delicate employee relations issue in California right now and the discussion helped me tremendously.  It also reinforced things that you tend to forget if you don't do these investigations frequently.  So, many, many thanks to the Employment Law Alliance for putting that webinar together.  It was extremely beneficial.

Lynn Clayton
Vice President, Human Resources

Barrett Business Services, Inc.

I recently participated in the ELA-sponsored webinar on the Employee Free Choice Act.  I was most impressed with that presentation.  It was extremely helpful and very worthwhile.  I have also been utilizing the ELA's online Global Employer Handbook.  This compliance tool is absolutely terrific. 

I am familiar with several other products that purport to provide up-to- date employment law information and I believe that this resource is superior to other similar compliance manuals.  I am delighted that the ELA provides this free to its members' clients.

Boyd Coffee Company

Employment Law Alliance (ELA) has provided Boyd Coffee Company with a highly valued connection to resources, important information and learning. With complex operations and employees working in approximately 20 states, we are continually striving to keep abreast of specific state laws, many of which vary from state to state. We have participated in the ELA web seminars and have found the content very useful. We appreciate the ease, cost effectiveness and quality of the content and presenters offered by these web seminars.  The Global Employer Handbook has provided our company with a very helpful overview of legal issues in the various states in which we operate, and the network of attorneys has helped us manage issues that have arisen in states other than where our Roastery and corporate headquarters are located in Portland, Oregon.

Capgemini Outsourcing Services GmbH

As an international operating outsourcing and consulting supplier Capgemini has used firms of the Employment Law Alliance in Central Europe. We were always highly satisfied with the quality of employment law advice and the responsiveness. I can really recommend the ELA lawyers.

Hirschfeld Kraemer

Stephen HirschfeldAs an employment lawyer based in San Francisco, I work closely with high tech clients with operations around the globe. Last year, one of my clients needed to implement a workforce reduction in a dozen countries simultaneously. And they gave me 48 hours to accomplish this. I don't know how I could have pulled this off without the resources of the ELA. I don't know of any single law firm that could have made this happen. My client received all of the help they needed in a timely fashion and on a cost effective basis.

Stephen J. Hirschfeld
Partner 

Hollywood Entertainment Corporation

As the Vice President for Litigation & Associate General Counsel for my company, I need to ensure that we have a team of top-notch employment lawyers in place in every jurisdiction where we do business. And I want to be confident that those lawyers know our business so they don't have to reinvent the wheel when a new legal matter arises. With more than 3400 stores and 35,000 employees operating in all 50 U.S. states and across Canada, we rely on the ELA to partner with us to help accomplish our objectives. I have been delighted with the consistent high quality of the work performed by ELA lawyers. I encourage other in-house counsel to use their services, as well.

Ingram Micro

Ingram Micro is the world's largest technology distributor, providing sales, marketing, and logistics services for the IT industry around the globe. With over 13,000 employees working throughout the U.S. and in 35 international countries, we need employment lawyers who we can count on to ensure global legal compliance. Our experience with many multi-state and multi-national law firms is that their employment law services are not always a high priority for them, and many do not have experts in many of their offices. The ELA has assembled an excellent team of highly skilled employment lawyers, wherever and whenever I need them, and they have proven to be an invaluable resource to our company.

Konami Gaming

Our company, Konami Gaming, Inc., is growing rapidly in a very diverse and highly regulated industry. We are aggressively entering new markets outside the domestic U.S., including Canada and South America. I have had the recent opportunity to utilize the services provided by the ELA. The legal advice was both responsive and professional. Most of all, the entire process was seamless since our Nevada attorney coordinated the services and legal advice requested. I look forward to working with the ELA in the future, as it serves as a great resource to the legal community.

Jennifer Martinez
Vice President, Human Resources

Nikkiso Cryo, Inc.

Until recently, I was unaware of the ELA's existence. We have subsidiaries and affiliates throughout the United States, as well as in Asia, the Middle East and Europe. When a recent legal issue arose in Texas, our long-time Nevada counsel, who is a member of the ELA, suggested that this matter be handled by his ELA colleague in Dallas. We are very pleased with the quality and timeliness of services provided by that firm, and we are excited to now have the ELA as an important asset to help us address employment law issues worldwide.

Palm, Inc.

The ELA network has been immensely important to our company in helping us address an array of human resources challenges around the world. I strongly encourage H.R. executives who have employees located in many different jurisdictions to utilize the ELA's unparalleled expertise and geographic coverage.

Stacy Murphy
Former Senior Director of Human Resources

Rich Products

As the General Counsel for a company with 6,500 employees operating across the U.S. and in eight countries, it is critical that I have top quality lawyers on the ground where we do business. The ELA is an indispensable resource. It has taken the guesswork out of finding the best employment counsel wherever we have a problem.

Jill K. Bond
Senior Vice President/General Counsel, Shared Services and Benefits

Ricoh Americas Corporation

We have direct sales and service offices all over the U.S., but have not necessarily had the need in the past for assistance with legal work in every state where we have a business presence. From time to time, we suddenly find ourselves facing a legal issue in a state where we have no outside counsel relationship. It has been a real benefit to know that the ELA has assembled such an impressive team of experts throughout the U.S. and overseas.

A few years ago, we faced a very tough discrimination lawsuit in Mississippi. We had never had to retain a lawyer there before. I was absolutely delighted with the Mississippi ELA firm. We received an excellent result. They will no doubt handle all of our employment law matters in Mississippi in the future. I have also obtained the assistance of several other ELA firms around the U.S. and have received the same outstanding service. The ELA is a tremendous resource for our company.

Roberts-Gordon LLC

Our affiliated companies have used the Employment Law Alliance in connection with numerous acquisitions, and have always been extremely pleased with our ability to obtain the highest quality legal advice on due diligence issues from jurisdiction to jurisdiction. We have found the Employment Law Alliance firms to be not only first rate with respect to their legal advice but also responsive and timely in assisting us with federal and state law issues critical to our due diligence efforts. We consider the Employment Law Alliance to be an important part of our team.

Rockwell Collins, Inc.

We have partnered with many ELA firms on the development and execution of case management strategies with very positive results. We have been very pleased with the legal advice and counsel provided by the law firms we have utilized who are affiliated with the Employment Law Alliance. The ELA firms we have worked with are customer focused, responsive, and thorough in their approach to handling labor and employment law matters.

Elizabeth Daly
Assistant General Counsel

Sanmina-SCI

Sanmina-SCI has facilities strategically located in key regions throughout the world. Our customers expect that we will provide them with the highest quality and most sophisticated services in the marketplace. We have that same expectation for the lawyers with whom we do business. With operations in 17 countries, we need to be certain that we have a team of lawyers working together to address our employment law needs worldwide. The ELA has delivered exactly what it promised-- seamless and consistent high quality services delivered in each locale around the globe. It has quickly become a key asset for our human resources department.

Starwood

We own, manage, and franchise hotels throughout the U.S. and in more than 90 countries. With more than 145,000 employees worldwide, ensuring that we comply with the complex web of local labor and employment laws in every one of these jurisdictions is a daunting task. The Employment Law Alliance has served as an important resource for us and we have benefited greatly from its expertise and long reach. When a legal dispute or issue has arisen in some far-flung place, Employment Law Alliance lawyers have always provided responsive, practical, and cost-effective assistance.

Wilmington Trust Corporation

Wilmington Trust has used the ELA to locate firms in California, Washington State, Georgia, and Europe. Our experience with the ELA lawyers with whom we have worked has always been one of complete satisfaction and prompt, practical advice.

Michael A. DiGregorio
General Counsel