If your client does not have their Plan Documents and SPDs in place and up to date, they are not just vulnerable to high penalties, such as $110 per day. If taken to court the employer could be brought to their knees. The reason is the Plan Documents and SPDs are deemed as Legal documents and are used as the foundation for decisions of the courts.
Plan Documents and SPD migrate front and center when a participant is faced with a disability and brings the employer/Plan Sponsor to court. If your clients’ Plan Documents and SPDs have not addressed disabilities, now is the time to do so as the result of a Final Rule on disabilities that came into effect on April 1, 2018. [Note that the documents Wrangle’s ERISA Desk prepares were updated before January 1, 2018 to include the new language.]
Here are the top seven key details to know about the Final Rule:
- The rules are based on the ACA claims and appeals regulations for group health plans.
- A plan subject to ERISA that provides benefits or rights that are contingent on whether the plan determines an individual to be disabled (e.g. short- or long-term disability plans) are subject to the Final Rule.
- The goal is to strengthen consumer protections for employees who make claims for benefits through their employer-sponsored disability plans by giving them the opportunity to experience a full and fair review of each disability claim.
- Benefit denial notices must contain a complete discussion regarding why the plan denied a claim and the standards applied in reaching the decision. The notice also must include a statement of the claimant’s right to review the entire claim file and other relevant documents.
- Claimants must be given notice and a fair opportunity to respond before a plan denies a claim on appeal based on new or additional evidence or rationales.
- Plans must ensure that disability benefit claims and appeals are adjudicated in a manner designed to ensure the independence and impartiality of the persons involved in making the decision.
- The Final Rule does not apply to self-insured short-term disability benefits that are paid pursuant to an employer’s payroll practices, short-term disability benefits that are maintained solely to comply with a state-mandated disability law, or plans that rely on other entities, such as the Social Security Administration, to make a disability determination.
Plan sponsors of disability plans subject to the Final Rule may want to:
- Identify which benefit plans it sponsors are subject to the Final Rule;
- Amend applicable plan documents accordingly to bring them into compliance with the Final Rule;
- Update participant communications, such as the SPD and claims/appeal notices to bring them into compliance with the Final Rule;
- Review and update disability claims and appeal procedures to ensure the Final Rule is followed; and,
- Contact each disability plan insurance carrier and/or third party administrator to ensure they intend to administer the applicable plan in compliance with the Final Rule.
For additional assistance or questions on this matter, or for any questions about or plan document services, feel free to reach out to Emily Marr at Wrangle’s ERISA Desk: firstname.lastname@example.org.