An employer should be cautious to not “endorse” a voluntary benefits program that the employer wants to be exempt from ERISA. The DOL’s safe harbor exempting certain plans from ERISA (often called “voluntary plans”) requires the sole function of the employer to be, without endorsing the program, to permit the insurer to publicize the program to employees and to collect premiums and remit them to the insurer. Federal courts have found impermissible endorsements where employers either encouraged their employees to participate in their voluntary benefits program or selected the insurer and limited eligibility criteria. For example, in October 2018, the U.S. Court of Appeals for the Third Circuit decided a case involving whether the employer’s endorsement of a volunteer disability benefits program caused it to be subject to ERISA. The Court found that (i) a reasonable employee would not view the program as being merely a third-party offering and (ii)… Continue Reading
New disability benefit claims procedures regulations were issued by the DOL and became applicable to disability benefit claims filed after April 1, 2018. Employers who maintain retirement plans that provide certain disability benefits (i.e., benefits based upon a determination of disability that is made under the plan) must amend the plan’s claims procedures by no later than December 31, 2018, to reflect the required changes in disability claims administration. These regulations do not apply to retirement plans that provide disability benefits that are based upon a determination of disability made outside of the plan (e.g., disability determinations made by the Social Security Administration or by the administrator of the employer’s long-term disability plan).
Employers sponsoring employee plans that provide “disability benefits” are reminded that the new disability benefit claims procedures, as issued by the DOL under ERISA (the “Disability Procedures“), are applicable to disability benefit claims filed after April 1, 2018. According to the DOL, a benefit is a “disability benefit” under ERISA’s claims regulations (including the Disability Procedures) if the plan conditions the availability of the benefit upon evidence of the participant’s disability. The Disability Procedures may thus apply not only to long-term and short-term disability plans that are subject to ERISA, but also to other types of ERISA benefit plans, such as group health plans and qualified and non-qualified retirement plans, if the plan provides benefits that are based upon a determination of disability that is made under the plan. (See our prior blog post for more details regarding impacted plans.) Plan sponsors should ensure that (i) the claims procedures of… Continue Reading
The DOL announced that the new claims procedures for disability benefits will apply as of April 1, 2018. As previously discussed here, the DOL had delayed the effective date of the new disability claims procedures until April 1, 2018, to provide additional time for comments and revisions to the regulations. In its announcement, the DOL stated that the comments it received did not establish the need to make any revisions to the regulations. Employers should now proceed with revising their plan documents, summary plan descriptions, and policies and procedures for employee benefit plans subject to ERISA that provide any disability benefits. View the DOL’s announcement.
The DOL has now officially delayed until April 1, 2018 its regulations that amend the claims review and appeal procedures applicable to ERISA-covered employee benefit plans providing disability benefits. Such regulations were originally scheduled to apply to disability benefit claims filed on or after January 1, 2018. We previously commented on the DOL’s proposal to delay these regulations here. The delay gives the DOL time to consider additional comments and data, reassess the impact of the new claims procedures, and revise the regulations as deemed appropriate. Employers should thus expect to receive additional guidance from the DOL before the April 1 effective date. View the final regulations that provide for the delay.
U.S. Department of Labor Proposes Extension of Applicability Date of New Disability Claims Procedures
On October 12, 2017, the DOL issued a proposed rule to delay for 90 days (through April 1, 2018) the applicability of the final regulations which amended the claims procedure requirements for ERISA-covered employee benefit plans that provide disability benefits. The final regulations were issued by the DOL in December 2016 and, as issued, would apply to claims for disability benefits filed on or after January 1, 2018. (Note: a more detailed discussion of the final regulations is available in our prior blog post.) Following the DOL’s issuance of the final regulations, various stakeholders asserted that the final regulations would drive up disability benefit plan costs and cause an increase in litigation and, in doing so, impair workers’ access to disability benefits. The DOL seeks public comments on its proposed 90-day delay of the applicability date of the final regulations in order to solicit additional public input and examine regulatory… Continue Reading
Fifth Circuit Holds Disability Benefit Offset Inappropriate Because of Ambiguous Language in Summary Plan Description
Verizon maintained a long-term disability plan (the “LTD Plan”) insured through MetLife, who had the discretionary authority to interpret the LTD Plan and to adjudicate claims. In 2007, an employee became eligible to receive benefits under both the LTD Plan and a Verizon pension plan due to disability, and the employee elected to take his full pension benefit as a lump sum and then roll it over into an IRA in a direct trustee-to-trustee transfer. The LTD Plan’s summary plan description (the “SPD”) contained language stating that a participant’s long-term disability benefits “may be reduced by other sources of disability income,” including “pension benefits from a Verizon pension plan, if the beneficiary elects to receive them.” MetLife offset the participant’s monthly disability benefit by the amount of the pension benefit he had rolled over into his IRA. The participant appealed countering that because he would not actually receive any of… Continue Reading
An employee wanted to file a claim for disability benefits before his termination of employment, but the employer did not provide him with the necessary paperwork to file a claim under its disability benefits plan for covered employees. This plan was subject to ERISA. After his employment terminated, the former employee submitted claims and appeals for disability benefits, which were denied by the plan’s insurer, Prudential. Prudential determined that the former employee had become disabled after his termination of employment and thus did not have plan coverage at that time. A U.S. District Court in Arizona found this denial of benefits should be reviewed de novo (i.e., without giving deference to the plan administrator’s prior decision to deny benefits) because the plan did not contain an unambiguous grant of discretion to the plan administrator to interpret the terms of the plan and to make final benefit determinations. This discretion was… Continue Reading
A former employee alleged that Aetna, as administrator of FedEx’s short-term disability plan, breached its fiduciary duty under ERISA when Aetna reported to FedEx that the employee filed a disability claim for substance abuse and Aetna later failed to correct this report. FedEx’s drug policy stated that the disability vendor (Aetna) would notify FedEx when an employee sought benefits for substance abuse. The U.S. Court of Appeals for the Tenth Circuit found that compliance with FedEx’s policy could not constitute a breach of fiduciary duty and Aetna had not provided inaccurate information to FedEx and thus the appeals court upheld the district court’s summary judgment on the claim. Williams v. FedEx Corp. Services and Aetna Life Ins. Co., No 16-4032 (10th Cir. Feb. 24, 2017)
Last December, we reported on the DOL’s release of final regulations revising ERISA’s claims procedures for disability benefits. A more in-depth review of the types of benefit plans affected by these final regulations is available on our companion blog, HB Health and Welfare.