On October 6, 2017, the Department of Labor (DOL) proposed a 90-day delay to the Final Rule amending disability claims procedures for ERISA plans that provide disability benefits. This proposed delay would push the applicability date back to April 1, 2018 for the remaining changes that need to be implemented under the Final Rule. Also, this delay would give the DOL time to examine whether to modify, amend, or repeal the Final Rule.
Background on the Final Rule Amending Disability Claims Procedures
In final regulations published December 19, 2016, the DOL modified the claims procedure requirements for ERISA plans providing disability benefits, including qualified retirement plans and non-qualified deferred compensation arrangements. The technical effective date was January 18, 2017, when the DOL began imposing additional standards for benefit denial determinations. Full implementation of the remaining claims procedure changes was scheduled to take effect January 1, 2018. These changes include, among other requirements, enhanced disclosure requirements, additional protections for independent and impartial review of claims, and culturally and linguistically appropriate notice requirements. For complete details about changes in the Final Rule, you may read our previous client alert on the subject.
After the DOL published the Final Rule, some stakeholders asserted that the Final Rule would escalate disability benefit plan costs, increase litigation, and ultimately impair workers’ access to disability insurance protections. In light of these assertions and an Executive Order directing federal agencies to reduce the regulatory burdens agencies place on the American people, the DOL concluded it was appropriate to seek additional public comment on the regulatory impact of the Final Rule. If additional reliable data and information is submitted, the DOL will consider whether to modify, amend, or repeal the Final Rule.
Comments on the proposal to delay the applicability date by 90 days must be submitted no later than October 27, 2017. The DOL will accept comments on the potential impacts of the Final Rule until December 11, 2017.
What This Delay Means for ERISA Plans
Although this proposed delay may provide a minor reprieve for those still updating their plan claims procedures, plan sponsors are encouraged to comply with existing requirements while this situation unfolds.
Some retirement plans may consider making amendments to avoid having to comply with the special rules for disability claims procedures altogether. Where a plan provides a benefit conditioned on an independent disability finding made by a party other than the plan, such as the Social Security Administration or the employer’s long-term disability plan, the claim is not treated as a disability claim. As such, the plan would not have to comply with special disability claims procedure rules. Therefore some retirement plan sponsors may consider updating the definition of disability under the plan to rely on a third party disability determination. Plan sponsors may also want to consider adding a conditional amendment adopting the new claims procedure requirements if they ultimately become effective April 1, 2018, to protect against not having compliant plan language if the changes do go into effect on April 1, 2018 without modification.
If you have questions about the proposed extension or how the Final Rule could impact your ERISA plan, please contact Jorge Leon, Julia Mader, or Martin Tierney.