QUESTION: The claims administrator for our company’s long-term disability plan (which is subject to ERISA) sent us updated versions of its standard initial and final benefit denial notices. As the ERISA plan administrator, we want to make sure the notices meet applicable requirements—what should we look for?
ANSWER: As you may know, the DOL has revised the regulations that apply to claims involving a determination of disability (see our Checkpoint article). In general, the revised regulations, which apply to disability claims filed after April 1, 2018 (see our Checkpoint article), subject these claims to enhanced procedural requirements similar to those for group health plan claims. This includes, among other things, expanded content requirements for notices of adverse benefit determination (initial denial notices) and notices of adverse benefit determination on review (final denial notices). Here is a summary of the content requirements for initial and final disability denial notices:
Specific Reasons, Plan Provisions, and Additional Information. Both initial and final denial notices must state the specific reason for the denial and refer to specific plan provisions on which the denial is based. Initial denial notices must describe any additional information needed from the claimant to “perfect” (complete) the claim.
Discussion of the Decision. Both notices must include a “discussion of the decision” explaining (as applicable) the basis for disagreeing with or not following (a) the views presented to the plan of health care or vocational professionals who treated or evaluated the claimant; (b) the views of medical or vocational experts whose advice was obtained on behalf of the plan, whether or not relied on in making the benefit determination; or (c) a Social Security Administration (SSA) disability determination presented by the claimant.
Scientific or Clinical Judgment. If the denial is based on a medical necessity, experimental treatment, or similar exclusion or limit, the notice (whether initial or final) must include either an explanation of the scientific or clinical judgment for the determination that applies the plan’s terms to the claimant’s medical circumstances, or a statement that such explanation will be provided free of charge upon request.
Internal Rules and Guidelines. Both notices must specify any internal rule, guideline, protocol, standard, or other similar criterion the plan relied on in making the adverse determination, or state that such rules, guidelines, etc. do not exist.
Right to Obtain Documents. Both notices must include a statement regarding the claimant’s right, on request and free of charge, to access and receive copies of relevant documents, records, and other information.
Appeals and Right to Sue. Initial denial notices must describe the plan’s appeal procedure (including applicable time limits) and include a statement of the claimant’s right, following a final denial, to sue under ERISA. Final denial notices must describe any available voluntary appeals, include the statement regarding the right to sue under ERISA, and specify any plan-imposed limitations period (deadline for filing a lawsuit)—including the calendar date on which the period will expire.
In general, notices must be calculated to be understandable to participants and provided in a “culturally and linguistically appropriate” manner. Notices furnished in counties where at least 10% of the population is literate only in the same non-English language must include a one-sentence statement, in the applicable language, explaining how to access language-assistance services. Note that the “full and fair review” element of the regulations may require additional disclosures—namely, providing a claimant with any new evidence or rationale relating to an appeal as soon as possible and sufficiently in advance of the final denial notice deadline to allow the claimant time to respond. Also, claimants must have the opportunity to submit written comments, documents, records, and other information relating to the claim. It seems advisable to explain this right in the initial denial notice, even though the regulations do not expressly require it.
For more information, see EBIA’s ERISA Compliance manual at Section XXXV.D (“Documentation for Disability and Other Non-Health Claims Procedures). See also EBIA’s 401(k) Plans manual at Section XXX.B (“ERISA Claims Procedure Requirements”). You may also be interested in our recorded webinar, “Claims and Appeals Rules for Group Health and Disability Plans” (recorded on 4/18/18).
Contributing Editors: EBIA Staff.