New requirements will apply to disability claims filed on and after April 1, 2018. Most folks in-the-know thought DOL would either withdraw the new rules or severely curtail them. Turns out DOL chose not to do either.
What Benefits Are Affected?
The new rules don't apply just to long-term disability (LTD). They also apply to short-term disability (STD) and any other ERISA-covered benefit that includes a determination of disability, including qualified defined contribution plans like 401(k) plans, qualified defined benefit pension plans, non-qualified deferred compensation plans and top-hat executive compensation plans under which disability is a potential distribution event (which is most of them, by the way). One way or another, all of these plans will need to be amended.
Basically, DOL wants disability claims—and really anything involving a determination of disability—to work more like the ACA's expanded claims and appeals procedures for group health plan claims. The changes are significant and would likely require the retention of a third party to determine disability status if the plan isn't amended to avoid the regulations. Changes include:
- Required language assistance. For any denial of a claim involving disability, the notice of denial must include an offer of language assistance if the claimant lives in a county where 10% or more of people speak the same non-English language. The language assistance content of the notice itself is not difficult to produce, but the employer must actually provide language assistance if the claimant requests it.
- Independent and impartial decision-maker. DOL added a requirement similar to the ACA group health requirement that the disability decision-maker be independent and impartial, making it more difficult for employers to self-administer claims.
- Enhanced claim notices. DOL added more content requirements to disability benefit notices—again, similar to group health plan claim notices used by health insurance carriers—making it much more difficult for employers to prepare these notices themselves, at least not without compliance help.
What Do I Need to Do?
- Don't worry about your insured LTD or STD benefits. The carrier should be on top of things.
- Determine if your self-insured STD benefit is subject to ERISA. Most times it's exempt, but that's not always the case. For example, if there are employee contributions (such as for a buy-up option), or if STD benefits are payable after termination of employment, the exemption from ERISA won't apply, and you'll need to amend your STD plan docs for the new regulations.
- If your self-insured STD benefit is, in fact, subject to ERISA, you'll need to amend your plan documents. If ERISAfire maintains your plan documents, we will proactively reach out to you to determine whether an amendment is required and provide you with any necessary amendments.
- If your self-insured STD benefit is, in fact, subject to ERISA and you are making disability determinations in-house, consider looking for an advise-to-pay vendor. The new regulations likely will add a fair amount of additional cost and risk to disability claims administration.
- Review the definition of "disability" or "disabled" in your other ERISA-covered benefit plans (e.g., profit-sharing, 401(k), defined benefit, non-qualified deferred comp, top-hat, etc.) and consider whether and to what extent you should change that definition. If the plan does not provide for its own determination of disability but rather references a third party’s determination of disability—such as by defining “disabled” as being deemed disabled by the Social Security Administration or under another employer-sponsored plan like the long-term disability plan—then the new regulations won't apply and you won't have to add more administrative processes and related expenses to the plan.
When Do I Need to Do It?
Administratively, all claims involving disability that are filed under ERISA-covered plans on and after April 1, 2018, will need to comply with the regulations. Any plan amendments required by the new regulations will need to be adopted by the end of the plan year. For calendar year plans, that would be December 31, 2018.
If the definition of "disability" is changed to avoid the new regulations by referring to a third party's determination of disability (i.e., SSA or by the LTD carrier), the resolution making that change may need to be adopted by March 31, 2018. Check with legal counsel to confirm.
What if I need help?
Just ping us on the blue in-app messenger, and we'll work with you and your broker to ensure your disability benefits and plan documents are in compliance.