Breaking news: Department of Labor proposes to delay application of rules for disability claims procedures — Now what?



October 11, 2017

Benefits Law Alert

Author(s): Jenny L. Holmes, Claire P. Rowland

On October 10, 2017, the Department of Labor (DOL) proposed a 90-day delay in the applicability of the Final Rule amending the claims procedure requirements for ERISA-covered employee benefit plans providing disability benefits. The DOL will publish its proposal in the Federal Register on October 12, 2017. The proposed delay would push the applicability date back to April 1, 2018.

The Final Rule

The Final Rule was published in the Federal Register on December 19, 2016; became effective on January 18, 2017; and was originally scheduled to apply to all claims filed on or after January 1, 2018. Among other requirements, the Final Rule imposes additional disclosures to be included in benefit denial notices, enhanced rights of review, independent and impartial claims reviews and culturally and linguistically appropriate notices. For a more detailed discussion on the new requirements, please see our October 3, 2017, Benefits Law Alert, “The final rule and disability claims procedures: Are you ready? Do you have to be?

Criticism of the Final Rule

Soon after the Final Rule was published, many critics argued that it would not only drive up disability benefit plan costs, but also cause an increase in litigation and impair workers’ access to disability insurance benefits. According to the DOL, stakeholders believed the DOL underestimated the costs of the changes, and had the DOL “properly estimated costs,” it would have found that those costs outweighed the benefits.

Review and delay of the Final Rule

On July 20, 2017, the current administration announced that the Final Rule was part of the Spring 2017 Unified Agenda of Regulatory and Deregulatory Actions and was therefore being reviewed for “law and policy” to determine whether it should be delayed, amended or withdrawn. On September 21, 2017, the DOL sent a proposed rule to the Office of Management and Budget (OMB) for review and on October 10, 2017, the DOL announced it was seeking public comment on a proposed 90-day delay of the applicability of the Final Rule in order to solicit additional public input and examine regulatory alternatives.

Gathering data for Final Rule impact analysis

Acknowledging in its regulatory impact analysis that it did not have enough data to rely on when the Final Rule was published last year, the DOL, pursuant to Executive Order 13777, deemed it appropriate to give the public an additional opportunity to submit comments and data concerning the potential impact of the Final Rule. The DOL believes that aggregating more data on the economic effects the Final Rule may have on disability plans and consumers will help the DOL re-evaluate the Final Rule.

Comments on proposed changes

Comments on the proposal to extend the applicability date for 90 days must be submitted to the DOL on or before October 27, 2017. However, commenters providing data and information otherwise germane to the examination of the merits of rescinding, modifying or retaining the rule have until December 12, 2017, to submit. If the proposal to delay the applicability date is finalized, the Final Rule will apply to claims for disability benefits that are filed on or after April 1, 2018, rather than January 1, 2018.

To amend or not to amend?

The potential delay grants a brief reprieve to those who must still update their plan claims procedures to ensure compliance with the Final Rule. Nonetheless, we encourage all plan sponsors to review and update their claims procedures, health and welfare plan documents, retirement plan documents, summary plan descriptions, disability claims and appeals denial notices and any other forms and documents containing claims procedure information to comply with the Final Rule.

The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.

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