Does your retirement plan (or other ERISA-regulated benefit, including nonqualified “top hat” plans) contain a disability benefit? If so, do you know about the new DOL rules that took effect in April 2018? The new regulations, in the works since 2015, pertain to disability claims and the processes governing appeals of a denial of disability benefits. Sponsors of 401(k) plans and defined benefit pension plans have until the end of this year to amend their plans to reflect the new rules.
A key aspect of the new rules is increased disclosure requirements. If the claims adjuster rejects a disability claim, you’ll now need to provide a more detailed explanation than before. For example, you must explain the principles and standards applied in making the determination. Previously, you only had to tell the claimant that you would provide that list on request.
You also must now inform the claimant that, on request, he or she is entitled to the entire case file. Under the previous rule, claimants were entitled to that information, but only as part of an appeals process. In addition, you need to explain why you didn’t accept the recommendation of the medical or vocational professional who had supported the employee’s benefit request.
The new rule states that, if an employee appeals a claim rejection, you cannot introduce new information that wasn’t included in the original decision-making process to support your original decision. The rules give an exception to that, however: You can introduce new evidence if you give the employee an opportunity to rebut it.
Other new procedural requirements call for plans to write all required communications with respect to claims and employees’ rights in a cultural and linguistic style appropriate to the recipient and assure that the person determining the validity of the claim in the appeal process is impartial.
The rules now treat some rescissions of disability benefits the same way as a denial of benefits, subjecting that rescission to the standards of the revised regulation. Finally, if you deny a disability benefit claim in a way that violates the regulations, the employee can bypass your appeals process and directly pursue the claim in the court system.
Time for action
The regulations apply only to plans with claims adjudicators who determine eligibility for the disability benefits. So if your plan gives that authority instead to, for example, the Social Security Administration (even if the benefit itself is provided by your plan), the new regulations don’t apply. Now is the time to make sure you’re in compliance with the new rules. Contact your employee benefits advisor to find out more.