On April 1, 2018, the U.S. Department of Labor (DOL) implemented new procedures for processing disability claims. This change impacts employer-sponsored plans, which deal with disability claims. The Society of Human Resource Management recommends amending plans as needed, with the significant change in procedure processing. The final rule was published in the Federal Register in December of 2016 and initial implementation was scheduled for January 1, 2018. In November 2017, the DOL delayed the rollout of the new procedure until April 1, 2018.
The 5 changes for disability claims:
- “Requires that the reason for a denied claim be provided as soon as possible and sufficiently in advance of the date that the plan’s decision on appeal is due, to give the claimant a reasonable opportunity to respond.
- Ensures that disability claimants receive a clear explanation for why their claim was denied, as well as information on their rights to appeal a denial and to review and respond during the course of an appeal to any new or additional evidence the plan relied on in connection with the claim.
- Requires that a claims adjudicator cannot be hired, promoted, terminated or compensated based on the likelihood of denying claims.”[i]
- The new procedures can impact disability claims under the employee benefit plan, which is covered by the Employee Retirement Income Security Act (ERISA). In some circumstances, this can impact retirement plans, as well as medical coverage and other perks. “Nonqualified deferred compensation or supplemental retirement plans…may have different benefit terms or entitlements based on disability.”[ii]
- “If employers have fully insured plans, they should monitor their insurance providers to ensure that the new procedures are being followed, Mindy said. For the most part, insurers have started implementing these procedures,” and they have reason to do so, since the courts can hold them liable as plan fiduciaries for a fully insured plan, he noted. For self-funded plans, typically managed by a third-party administrator (TPA), there’s obviously more for plan sponsors to look at” because the employer bears greater liability for noncompliance.”[iii]
The reporting and disclosure guide for employee benefit plans outlines the required steps plan sponsors and organizations need to take when communicating changes to the summary plan description or summary of material modifications. The modifications should outline the claims procedures and distribution should take place 120 days after the end of the plan year in which the change is made or as outlined in the reporting disclosure guide. As discussed in previous articles, we continue to see significant changes in laws and compliance requirements. Ensure your organization is working with your plan sponsors to communicate the required information.
– Matthew Burr, HR Consultant