DOL to Delay Updated Disability Claims Rules Through April 1, 2018 | Practical Law

DOL to Delay Updated Disability Claims Rules Through April 1, 2018 | Practical Law

The Department of Labor (DOL) has proposed a 90-day delay of the applicability date for its final regulations that updated the claims procedure requirements for plans providing disability benefits under the Employee Retirement Income Security Act of 1974 (ERISA). The proposal would delay the final regulations' applicability date from January 1, 2018, to April 1, 2018.

DOL to Delay Updated Disability Claims Rules Through April 1, 2018

Practical Law Legal Update w-010-8205 (Approx. 5 pages)

DOL to Delay Updated Disability Claims Rules Through April 1, 2018

by Practical Law Employee Benefits & Executive Compensation
Published on 10 Oct 2017 • USA (National/Federal)
The Department of Labor (DOL) has proposed a 90-day delay of the applicability date for its final regulations that updated the claims procedure requirements for plans providing disability benefits under the Employee Retirement Income Security Act of 1974 (ERISA). The proposal would delay the final regulations' applicability date from January 1, 2018, to April 1, 2018.
On October 10, 2017, the DOL issued a proposed rule that would delay by 90 days the applicability date of final regulations governing the claims procedure requirements for ERISA plans that provide disability benefits (81 Fed. Reg. 92316 (Dec. 19, 2016); 29 C.F.R. § 2560.503-1). The final regulations amended the existing DOL claims regulations for plans providing disability benefits (see Legal Update, Final DOL Disability Claims Regulations Require Notice of Contractual Limitations Periods and Practice Note, Claims Procedure Requirements for Disability Claims).
Without the proposed 90-day delay, the DOL's final regulations apply for disability benefits under ERISA plans that are filed on or after January 1, 2018. The proposal would make the final regulations' changes applicable to claims for disability benefits filed after April 1, 2018.

Enhanced Procedural Requirements Under the DOL Final Regulations

The changes under the DOL's disability final regulations reflected similar claims procedure enhancements applicable to group health plans under the Affordable Care Act's (ACA's) internal claims and appeals rules (see Practice Notes, Internal Claims and Appeals Under the ACA and Affordable Care Act (ACA) Overview). Among other changes, the DOL's disability final regulations:
  • Limit conflicts of interest by requiring independence and impartiality of plan decisionmakers.
  • Expand the content requirements for denial notices involving disability claims.
  • Provide claimants notice and an opportunity to respond prior to appeal-level denials based on new or additional evidence or rationales.
  • Strengthen deemed exhaustion rules in the context of disability benefit claims.
  • Expand the definition of "adverse benefit determination" to include rescissions of disability benefit coverage.
  • Require that claims notices be provided in a culturally and linguistically appropriate manner.
For analysis of these changes in the context of plans that provide disability benefits, see Practice Note, Claims Procedure Requirements for Disability Claims.

Reasons for the Delay

Public Comments

In explaining the need for a 90-day delay, the DOL indicated that comment letters received in response to their initial proposal to update the disability-related claims procedures generally did not provide the government alternative cost and benefits estimates or data that DOL could use to estimate costs and benefits under the final regulations.
In response to the final disability regulations, however, the DOL received comments asserting that the final regulations:
  • Would increase plan costs, resulting in employers reducing or eliminating disability coverage or employees choosing to drop coverage.
  • Would result in increased litigation.
  • Are unnecessary in light of existing protections for participants and beneficiaries.
Regarding specific provisions in the final regulations, commenters argued that:
  • The right to review and respond to new information and rationales unnecessarily complicates the benefits process.
  • Certain disclosure requirements require plans to look at disability standards and definitions that differ from those in the plans.
  • The deemed exhaustion provision places plans and insurers at a disadvantage in litigated disability disputes.

Trump Executive Order on Reducing Regulatory Burdens

The DOL also cited Executive Order 13777 as part of the reason why additional public comment is warranted. The order, issued by President Trump in February 2017, instructs federal agencies to take steps to reduce regulatory burdens (82 Fed. Reg. 12285 (Feb. 24, 2017)). The DOL indicated that it could not complete a notice and comment and reexamination process before January 1, 2018.

Two-Part Comment Deadline

In its proposed 90-day extension, the DOL specifically requests:
  • Cost estimates on a provision-by-provision basis.
  • Data on price elasticity of demand for disability insurance coverage.
  • Comments on the merits of rescinding, modifying, or retaining the final regulations.
The DOL's proposal includes a two-part comment deadline. First, comments on the proposed 90-day applicability date extension must be submitted to the DOL on or before 15 days from when the proposal is published in the Federal Register. (As presently scheduled, this publication date is Thursday, October 12, 2017.) Second, comments providing data or otherwise relevant to the question of whether to rescind or change the final regulations must be submitted on or before 60 days from when the proposal is published in the Federal Register.

Practical Impact

It remains to be seen whether the DOL's proposed delay is the first step in what will ultimately be a full withdrawal of the final disability regulations, or if the DOL will eventually implement part (or even all) of their regulations. However, the proposed 90-day delay, assuming it is finalized, offers a reprieve for calendar year plans that would otherwise need to be completing their efforts to comply with the enhanced disability claims procedures beginning January 1, 2018. It is worth noting, though – as the DOL acknowledges in a footnote addressing the proposed delay – that some of the changes under the DOL's final disability regulations may reflect court-imposed rules and precedents that the 90-day delayed applicability date will not undo. Other aspects of the final regulations – such as providing claimants a description of any applicable contractual limitations period under the plan and the corresponding expiration date – may be useful practices that help the plan enforce its provisions in the event of a litigated disability benefits dispute.