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Action Needed Before Year-End: Retirement and Executive Compensation Plans May Need Updates to Comply with New DOL Disability Claims Procedures
Employers who sponsor benefit plans — including qualified retirement plans [401(k) plans, ESOPs, profit sharing plans, 403(b) plans, 457 plans and the like] and non-qualified deferred compensation plans [SERPs, split dollar plans, non-qualified deferral plans and the like] — may need to act before January 1, 2018 to ensure their plans comply with the Department of Labor's (DOL's) newly expanded disability benefits claims procedures.
The DOL adopted a final rule, effective January 1, 2018, under which it will require ERISA plans that provide benefits conditioned upon a finding of disability to:
- Take additional steps to ensure the fairness and impartiality of the disability claims procedure,
- Provide more detail in initial notices of claim denial,
- Provide the claimant with any new information or additional rationales for denying the claim that are considered or generated during the claims appeal process, and an opportunity to respond to the same, prior to deciding the appeal;
- Treat rescissions of coverage as adverse benefit determinations that trigger the plan's claims procedures,
- Provide benefit denial notices in a culturally and linguistically appropriate manner in certain situations, and
- Strictly comply with the expanded disability claims procedure, or the claimant may seek court review of the claim with no deference paid to the plan's claim decision.
For a complete list of requirements of the new claim procedures, review the DOL's final rule here.
The DOL just signed a proposed rule on October 6, 2017 (published October 12), which if approved will delay the effective date of these new rules for 90 days — applicable to claims for disability benefits filed after April 1, 2018, instead of after January 1, 2018. However, until this proposed rule is finalized, the effective date remains January 1, 2018. Employers with early board meetings may need to proceed on the assumption of the January 1, 2018 effective date in order to be in compliance if the newly proposed delay of the effective date to April 1, 2018 does not become final.
Plan sponsors should consult with experienced benefits counsel to determine whether their plans — including retirement plans and non-qualified deferred compensation plans — are subject to the DOL's disability claims procedures, and, if so, how late their governing boards will be able to act to ensure compliance with them.