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New rule gives workers seeking benefits under ERISA-covered disability plans greater protection

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Private-sector employees who submit claims for benefits under their workplace disability insurance plan can derive much-needed comfort from the fact that they are covered by the Employee Retirement Income Security Act of 1974 -- or ERISA -- the groundbreaking federal law that essentially safeguards disability benefits and establishes standards for plan administrators.

By way of example, consider Section 503 of ERISA, which dictates that employee benefit plans cannot simply deny benefits without providing either notice or a chance to challenge the denial. Indeed, plan administrators are required to provide written notice to workers if a claim for disability benefits is denied under section 503, as well as an equitable appeals process. 

Interestingly enough, thanks to everything from the holidays to the recent elections, it has gone largely overlooked that the Department of Labor, the agency tasked with enforcing ERISA, recently published a final rule that will further strengthen the procedural protections and consumer safeguards under Section 503.

Specifically, the DOL says that the final rule "protect(s) claimants from conflicts of interest, increases transparency, and ensures that claimants have a fair opportunity to respond to the evidence and reasoning behind the decision."

As for the actual changes to section 503 that will apply to plans, plan fiduciaries and insurance providers starting January 1, 2018, these include:

  • Basic disclosure requirements improved: The written denial notices sent to claimants must provide a comprehensive discussion of the reasons for the denial of disability benefits, as well as the standards relied upon in reaching this decision.
  • Ability to review and react to new information: A plan's denial of disability benefits on appeal cannot be based on either new or additional evidence/rationales not previously disclosed to the claimant during the initial review stage -- unless he or she is provided with both notice and fair opportunity to respond.
  • Right to access claim files and internal protocols: The written benefit denial notices sent to claimants must include language providing that he or she is able to request and receive the entire claim file and other pertinent documentation. Furthermore, these notices must include the internal rules, protocols, standards, guidelines, etc. relied upon in reaching the decision, or a statement indicating that none were used.

We'll continue discussing these important changes introduced to section 503 under the newly finalized rule in our next post ...

Source: U.S. Department of Labor, "Final rule strengthens consumer protections for workers requesting disability benefits from ERISA employee benefit plans," December 2016    

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