View Rule

Section 503 of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1133, provides that, in accordance with regulations promulgated by the Secretary of Labor, each employee benefit plan must provide "adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied." The notice must set forth the specific reasons for the denial and must be written in a manner calculated to be understood by the claimant. Each plan must also afford "a reasonable opportunity" for any participant or beneficiary whose claim has been denied to obtain "full and fair review" of the denial by the "appropriate named fiduciary of the plan." The Department has issued a regulation pursuant to the above authority that establishes the minimum requirements for benefit claims procedures of employee benefit plans covered by title 1 of ERISA. See 29 CFR 2560.503-1. This rulemaking is intended to strengthen, improve, and update the current disability benefit claims and appeals process under the section 503 regulations. 

Statement of Need:

Because of the volume and constancy of disability benefits litigation, the Department recognizes a need to revisit, reexamine, and revise the current regulations to ensure that disability claimants receive a fair review of denied claims as provided by section 503 of ERISA. The rulemaking would revise and strengthen the current claims procedure rules primarily by adopting certain procedural protections and safeguards for disability benefit claims that are currently applicable to claims for group health benefits pursuant to the Affordable Care Act (ACA).

Summary of the Legal Basis:

Section 503 of ERISA, 29 USC 1133, requires every employee benefit plan to provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant and to afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim. Section 503 also provides the Secretary of Labor with broad authority to prescribe regulations governing a plan’s claims procedure.

Alternatives:

On November 18, 2015, the Department published in the Federal Register a proposed rule revising the claims procedure regulations for plans providing disability benefits under ERISA. The Department received 145 public comments in response to the proposed rule from plan participants, consumer groups representing disability benefit claimants, employer groups, individual insurers and trade groups representing disability insurance providers. In addition to the approach set forth in the proposal, the Department will consider all meaningful alternative rules and standards presented in these comment letters.

Anticipated Costs and Benefits:

The Department expects that these final regulations will improve the procedural protections for workers who become disabled and make claims for disability benefits from ERISA-covered employee benefit plans. This would result in some participants receiving benefits they might otherwise have been denied absent the fuller protections provided by the final regulations. In other circumstances, expenditures by plans may be reduced as a fuller and fairer disability claims processing helps facilitate participant acceptance of cost management efforts. Greater certainty and consistency in the handling of disability benefit claims and appeals and improved access to information about the manner in which claims and appeals are adjudicated may lead to efficiency gains in the system, both in terms of the allocation of spending at a macro-economic level as well as operational efficiencies among individual plans.

The Department believes that these requirements have modest costs associated with them, since many chiefly clarify provisions of the current claims procedure regulations or require provision of notices to plan participants.

Risks:

Undetermined.