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New ERISA Disability Claims Regulations Take Effect – Part 1

In the first installment of our three-part series on ERISA’s new disability claim-processing procedures, we will focus on the background leading up to the implementation of the new regulations.

Not all days are created equal. Some just seem to soak up more glory than others. This year, for example, December 10 is the First Sunday of Advent, the start of Hanukah, International Day for the Abolition of Slavery, Jane Addams Day, and Dewey Decimal System Day (if you’re under 30, we’ll wait while you look that last one up). Personally, we’re looking forward to National Talk Like a Pirate Day on September 19.

But no day improved its stock more this year than April 1, making up for its past irrelevance this year with Easter, the second day of Passover, and April Fool’s Day.

But for ERISA advocates across the country, there was an additional reason to celebrate April 1 this year: the U.S. Department of Labor’s (“DOL”) new claim regulations governing disability benefit determinations, 81 Fed. Reg. 92316 (“the Final Rule”), finally went into effect!

The Final Rule is a long overdue upgrade to ERISA’s claim-processing regulations that strengthens procedural protections and safeguards for private-sector employees making disability benefit claims. It amends the DOL’s current claims procedure regulation at 29 C.F.R. §2560.503-1, last amended in 2000, to strengthen the rules applicable to disability benefit claims consistent with changes made to group health benefits claims pursuant to the Affordable Care Act (“ACA”). And while the Final Rule specifically applies to disability benefit claims, the DOL has made it clear that it also applies to 401(k) and pension plans where those benefits are conditioned upon the claimant’s disability status.

We’ll summarize the actual changes to the regulations in parts two and three of this series, but first, a brief history of the rocky steps it took us to get to April 1 is in order.

On November 18, 2015, the DOL announced its Initial Proposal, giving notice of its proposed revisions to ERISA’s disability regulations and seeking public comment. 145 comment letters were submitted through the DOL’s public comment portal from plan participants, consumer groups, plan sponsors, insurers, employer groups, trade groups, and attorneys that handle ERISA claims on both sides of the v. The majority of the comments received were from attorneys that regularly represent plaintiffs/employees like we do. You can read our comments to the DOL here.

Thereafter, on December 16, 2016, the DOL announced that it was releasing the Final Rule, taking into account the comments submitted. The Final Rule was given an effective date of January 18, 2017 and made applicable to claims filed after January 1, 2018.

On February 24, 2017, however, newly elected President Trump issued an executive order directing federal agencies to reduce the number and burden of regulations. Seizing on this opportunity, a group of insurance companies, trade associations, and other insurance industry representatives, calling themselves the “certain stakeholders,” unhappy with the new protections provided for disabled American workers, asserted that “the Final Rule will drive up disability benefit plan costs, cause an increase in litigation, and consequently impair workers’ access to disability insurance protections.” The certain stakeholders also secured the support of several members of Congress who presented similar concerns in a letter addressed to the Labor Secretary. As an aside, if you’re wondering whether or not your Congressman or woman sided with the insurance lobby, you can check here.

On October 12, 2017, the DOL proposed a 90-day delay of the regulation applicability date and again sought public comment. As before, the majority of the comment letters submitted were from attorneys representing plaintiffs/employees like us. You can read our comments to the DOL here.

On November 29, 2017, the DOL announced a 90-day delay of the regulation effective date from January 1, 2018 to April 1, 2018 to allow the certain stakeholders to provide the cost and other data promised. In so doing, the DOL again sought public comment on the merits of rescinding, modifying, or retaining the Final Rule. And once again, we were right there advocating on behalf of our clients. You can read our comments to the DOL here.

At long last, on January 5, 2018, the DOL announced that there would be no further delay and the Final Rule was going into effect without any additional changes on April 1, 2018. Despite receiving approximately 200 comment letters, the DOL stated that only a few commenters actually “responded substantively to the Department’s request for quantitative data to support assertions that the final rule would drive up disability benefit plan costs by more than the Department had predicted, cause an increase in litigation, and consequently reduce workers’ access to disability insurance protections.” As such, the DOL concluded that the information it received during the delay period did not justify modifying or rescinding the final rule.

And with that, as of April 1, 2018, we have new and improved protections in place for disabled employees in America.

In Part 2, we’ll share our view of the five most significant changes to the disability regulations.

Disclaimer: We are ERISA attorneys, but we are not your attorneys and this article does not create an attorney-client relationship. The information in this blog post is provided for general information purposes only, and may not reflect the current law in your jurisdiction. No information in this blog post should be construed or seen as legal advice, nor is it intended to be a substitute for legal counsel on any subject matter.