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New DOL Rule on Disability Claims Procedures: Employer Action Required

    Client Alerts
  • February 16, 2018

The U.S. Department of Labor announced earlier this year that the effective date for employee benefit plans to comply with its new final rule on disability claims procedures is April 1, 2018. The rule applies to claims for disability benefits that are filed under certain ERISA-covered plans on or after that date.

Affected plans are not limited to disability plans. Any plan where a participant could be entitled to a particular benefit based on a determination of disability (such as acceleration of vesting, additional accruals, or special distribution rights) is subject to the new rule.  This could include welfare plans, 401(k) plans and other qualified retirement plans, 403(b) plans, 457(b) plans, and even non-qualified deferred compensation plans that are subject to ERISA.

However, not all ERISA plans are affected. The rule applies to ERISA plans where a plan fiduciary has discretion when determining whether a participant is entitled to specific disability benefits. Therefore, plans that by design rely on a determination of disability by the Social Security Administration or by the insurance carrier under a separate long-term disability insurance plan are not affected by the new rule.

Generally, the new rule imposes additional procedural safeguards for participants with respect to disability-based claims for benefits. Plan documentation that describes applicable claims procedures should be revised and updated to reflect the new requirements. In addition, benefit denial notices must be revised to include new information required by the rule.

Employers should promptly identify which benefit plans are affected by the new rule so that the applicable claims procedures (whether they are stated in formal plan documents, summary plan descriptions, and/or other employee communications) and benefit denial notices can be revised to reflect the new requirements. To the extent a plan is fully insured and the administration of claims is the responsibility of the insurer, the employer should obtain confirmation from the insurer that applicable claims procedures and benefit denial letters have been revised, as required by and consistent with the new DOL rule.