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News Release
U.S. Department of Labor Announces Decision on April 1, 2018, Applicability of Final Rule Amending Claims Procedure for Disability Benefit Plans

WASHINGTON, DC – The U.S. Department of Labor announced today its decision for April 1, 2018, as the applicability date for employee benefit plans to comply with a final rule under the Employee Retirement Income Security Act (ERISA) that will give America’s workers new procedural protections when dealing with plan fiduciaries and insurance providers who deny their claims for disability benefits.

The new rule ensures, for example, that disability claimants receive a clear explanation of why their claim was denied as well as their rights to appeal a denial of a benefit claim, and to review and respond to new information developed by the plan during the course of an appeal. The rule also requires that a claims adjudicator could not be hired, promoted, terminated, or compensated based on the likelihood of denying claims.

The Department announced a 90-day delay of the applicability date of the final rule – from Jan. 1, 2018, through April 1, 2018 – to give stakeholders the opportunity to submit data and information on the costs and benefits of the final rule. The Department received approximately 200 comment letters from the insurance industry, employer groups, consumer advocates, and lawyers representing disability benefit claimants, all of which are posted on the Department’s website. Only a few comments responded substantively to the Department’s request for quantitative data to support assertions that the final rule would drive up disability benefit plan costs by more than the Department had predicted, cause an increase in litigation, and consequently reduce workers’ access to disability insurance protections.

The information provided in the comments did not establish that the final rule imposes unnecessary regulatory burdens or significantly impairs workers’ access to disability insurance benefits.
EBSA News Release:
01/05/2018
Contact Name:
Eric Holland
Email:
holland.eric.w@dol.gov
Phone Number:
(202) 693-4676
Release Number:
18-0044-NAT

Revisiting A Key First Circuit Decision

United States Court of Appeals,First Circuit.

Diahann L. GROSS, Plaintiff, Appellant, v. SUN LIFE ASSURANCE COMPANY OF CANADA, Defendant, Appellee.
No. 12–1175.
Decided: August 16, 2013
Before THOMPSON, SELYA, and LIPEZ, Circuit Judges.Michael D. Grabhorn, with whom Jonathan M. Feigenbaum and Grabhorn Law Office, PLLC were on brief, for appellant. Joshua Bachrach, with whom Wilson, Elser, Moskowitz, Edelman & Dicker LLP was on brief, for appellee.

This case requires us to determine, inter alia, whether the “safe harbor” exception to the Employee Retirement Income Security Act of 1974 (“ERISA”) applies to the long term disability insurance policy that covers appellant Diahann Gross. The district court found that it did not. The court therefore held that Gross’s state law claims were preempted. Furthermore, it concluded that her insurer was entitled to the highly deferential “arbitrary and capricious” review prescribed for certain ERISA benefits decisions. Using that standard, the court upheld the insurer’s denial of benefits to Gross.

On appeal, Gross asserts that the district court triply erred. She first argues that the safe harbor exception applies, removing her benefits claim from the ERISA scheme. She further maintains that, even accepting that ERISA governs, the court reviewed the insurer’s decision under the wrong standard and—even under that standard—reached the wrong result.

Each of appellant’s contentions raises a substantial question. Although we agree with the district court that the safe harbor exception is inapplicable, we hold that the benefits denial was subject to de novo review. Joining several other circuits, we conclude that language requiring proof of disability “satisfactory to us” is inadequate to confer the discretionary authority that would trigger deferential review. We also conclude that the administrative record is inadequate to allow a full and fair assessment of Gross’s entitlement to disability benefits. Hence, we vacate the judgment and remand the case to the district court so that it may return the matter to Sun Life for further development of the record as described below.

I.

In reciting the facts germane to resolution of this ERISA appeal, we draw on the record that was before the claims administrator. Buffonge v. Prudential Ins. Co. of Am., 426 F.3d 20, 22 (1st Cir.2005).

A. Background

Appellant Gross, an optician and office manager for Pinnacle Eye Care LLC in Lexington, Kentucky, was placed on disability leave in early August 2006, when she was 34 years old. She complained of severe pain, weakness and numbness in her legs and arms, and recurring headaches that had been worsening since early 2004. Gross’s treating physician concluded that she had reflex sympathetic dystrophy (“RSD”),1 fibromyalgia, migraines, and chronic fatigue. In a report signed in September 2006, the doctor wrote that Gross “cannot work.”

Gross is covered under a long term disability (“LTD”) policy that Pinnacle obtained from Medical Group Insurance Services, Inc. (“MGIS”), a company that sells employee benefit coverage provided by the United Health Services Employer’s Trust (“the Trust”). Pinnacle had obtained group policies from the Trust, through MGIS, since 2003,2 with the policies originally written by The Hartford Life & Accident Insurance Company (“Hartford”) and, beginning in 2006, by appellee Sun Life Assurance Company of Canada. Pinnacle paid 100 percent of its employees’ premiums for life and accidental dismemberment and death (“AD & D”) insurance, but the employees themselves paid for LTD coverage. Despite the payment differences, the policies were administered under the same group number, MGIS Group. No. 20178808, and all of the coverage was billed to Pinnacle in a single monthly statement.3

Shortly after leaving her job, Gross filed a claim with MGIS seeking long term disability benefits. The administrative record includes voluminous medical evidence, some submitted by Gross to support her application for benefits and some solicited by Sun Life to aid in its evaluation. Sun Life also hired an investigator to perform a background check and video surveillance on Gross. In April 2007, Sun Life notified Gross that it had denied her request for benefits because of “insufficient objective evidence to substantiate” a disability that precluded her from performing her duties at Pinnacle. In so concluding, the insurer relied, inter alia, on its video surveillance and the opinions of consulting physicians who reviewed Gross’s medical history but did not physically examine her. Gross filed an administrative appeal, which Sun Life rejected in January 2008 with the explanation that it had found “no basis on which to conclude that Ms. Gross would be unable to perform the Material and Substantial Duties of her Own Occupation .” Sun Life emphasized the discrepancy between Gross’s activities while under surveillance and her appearance and behavior during medical visits.

B. Procedural History

Gross initially filed a lawsuit against Sun Life in Kentucky state court challenging the insurer’s denial of benefits on state law grounds, but later dismissed that action without prejudice. In September 2009, she filed suit in Norfolk County Superior Court in Massachusetts, again alleging only state law causes of action.4 Sun Life removed the new action to federal district court and filed a motion to dismiss based on ERISA preemption. After the court ruled in Sun Life’s favor, Gross amended her complaint to add claims under 29 U.S.C. § 1132, which, among other things, provides a cause of action for an ERISA plan participant “to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.” 29 U.S.C. § 1132(a)(1)(B).

In February 2011, Gross filed a motion asking that the district court apply de novo review in its evaluation of her ERISA claims, based on the Supreme Court’s decision in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989). See id. at 115 (stating that the default standard for ERISA claims is de novo). The court denied the motion, and cross motions for summary judgment followed. On January 6, 2012, the district court granted summary judgment for Sun Life and denied Gross’s parallel motion. The court held that Sun Life’s decision to deny benefits was not arbitrary and capricious, and thus complied with ERISA’s requirements. In so ruling, the court noted that plan administrators “ ‘are not obligated to accord special deference to the opinions of treating physicians,’ “ Gross v. Sun Life Assurance Co. of Canada, No. 09–11678–RWZ, 2012 WL 29061, at *4 (D.Mass. Jan.6, 2012) (quoting Black & Decker Disability Plan v. Nord, 538 U.S. 822, 825, 123 S.Ct. 1965, 155 L.Ed.2d 1034 (2003)), and that “even ‘sporadic surveillance capturing limited activity’ may be used to uphold termination of benefits, particularly where videos show plaintiff engaging in activities that specifically contradict her claims as to ‘how she spent her time and what [actions] she could tolerate,’ “ id. at *5 (quoting Maher v. Mass. Gen. Hosp. Long Term Disability Plan, 665 F.3d 289, 295 (1st Cir.2011)).

On appeal, Gross asserts that the district court incorrectly found that: (1) her long term disability policy was part of an ERISA plan; (2) the plan gave Sun Life discretionary authority to make claims decisions, thus allowing only arbitrary and capricious review of the insurer’s rejection of benefits; and (3) Sun Life permissibly exercised its discretion in denying benefits to her. We begin as we must with Gross’s contention that her claims do not fall under ERISA.

II.

A finding that ERISA governs a benefits plan typically will impact a plaintiff’s appeal of her insurer’s denial of benefits in ways that will make that challenge more difficult. See Johnson v. Watts Regulator Co., 63 F.3d 1129, 1131–32 (1st Cir.1995). The application of ERISA triggers preemption of state-law principles, see 29 U.S.C. § 1144(a), which “may cause potential state-law remedies to vanish, or may change the standard of review, or may affect the admissibility of evidence, or may determine whether a jury trial is available.” Watts Regulator, 63 F.3d at 1131–32 (citations omitted); see also Aetna Health Inc. v. Davila, 542 U.S. 200, 215, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004) (“The limited remedies available under ERISA are an inherent part of the ‘careful balancing’ between ensuring fair and prompt enforcement of rights under a plan and the encouragement of the creation of such plans.” (quoting Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 55, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987)). Gross’s vigorous opposition to applying ERISA to her claim is therefore unsurprising.

With exceptions not pertinent here, ERISA applies to “any employee benefit plan if it is established or maintained ․ by any employer engaged in commerce or in any industry or activity affecting commerce.” 29 U.S.C. § 1003(a)(1).5 We have observed that “the existence of a plan turns on the nature and extent of an employer’s benefit obligations,” Belanger v. Wyman–Gordon Co., 71 F.3d 451, 454 (1st Cir.1995), and, accordingly, the two common ways to show that a benefits decision falls outside ERISA both involve inquiry into the employer’s relationship with the benefits under scrutiny. First, the regulatory “safe harbor” provision excludes “group or group-type insurance programs” from ERISA’s oversight if they satisfy four criteria:

(1) the employer makes no contributions on behalf of its employees;

(2) participation in the program is voluntary;

(3) the employer’s sole functions are to collect premiums and remit them to the insurer, and, without endorsing the program, to allow the insurer to publicize the program to its employees; and

(4) the employer receives no consideration for its efforts, other than reasonable compensation for administrative services necessary to collect premiums.

See 29 C.F.R. § 2510.3–1(j); see also Watts Regulator, 63 F.3d at 1133.

A benefits program that fails the safe harbor test will not necessarily be deemed an ERISA plan, however. Watts Regulator, 63 F.3d at 1133. Exemption also may result from application of “the conventional tests” for determining whether ERISA governs. Id. An ERISA welfare benefit plan has “five essential constituents”:

(1) a plan, fund or program (2) established or maintained (3) by an employer or by an employee organization, or by both (4) for the purpose of providing medical, surgical, hospital care, sickness, accident, disability, death, unemployment or vacation benefits, apprenticeship or other training programs, day care centers, scholarship funds, prepaid legal services or severance benefits (5) to participants or their beneficiaries.

Wickman v. Nw. Nat’l Ins. Co., 908 F.2d 1077, 1082 (1st Cir.1990) (quoting Donovan v. Dillingham, 688 F.2d 1367, 1370 (11th Cir.1982) (en banc)). We have observed that “[t]he crucial factor in determining if a ‘plan’ has been established is whether the purchase of the insurance policy constituted an expressed intention by the employer to provide benefits on a regular and long term basis .” Id. at 1083. The inquiry is performed from the perspective of a reasonable person: “[A] ‘plan, fund or program’ under ERISA is established if from the surrounding circumstances a reasonable person can ascertain the intended benefits, a class of beneficiaries, the source of financing, and procedures for receiving benefits.” Id. at 1082 (quoting Donovan, 688 F.2d at 1373).

Thus, even if the Sun Life policy does not fall within the regulatory safe harbor, we must separately determine if it was a “plan” or “program” that was “established or maintained” by Pinnacle. Although we often start with the safe harbor inquiry, we begin here by examining whether Pinnacle’s benefits arrangement is properly classified as an ERISA plan because that sequence better fits our analysis.

A. Standard of Review

Although the district court’s refusal to remand this case to state court was a ruling on subject-matter jurisdiction engendering de novo review, see Samaan v. St. Joseph Hosp., 670 F.3d 21, 27 (1st Cir.2012); BIW Deceived v. Local S6, Indus. Union of Marine & Shipbuilding Workers of Am., 132 F.3d 824, 830 (1st Cir.1997), the underlying jurisdictional issue—whether ERISA governs the Pinnacle plan—is a mixed question of fact and law triggering scrutiny “along a degree-of-deference continuum,” Watts Regulator, 63 F.3d at 1132. Where, as here, factual questions about the plan dominate the inquiry, the clear-error standard will be our primary tool. See id. We keep in mind, however, that “the removing party bears the burden of persuasion vis-à-vis the existence of federal jurisdiction.” BIW Deceived, 132 F.3d at 831.

B. Existence of an ERISA Plan

The record demonstrates beyond debate that the “crucial factor” we identified in Wickman is satisfied here, i.e., that Pinnacle undertook to provide benefits for its employees “on a regular and long term basis.” 908 F.2d at 1083; see also, e.g., Anderson v. UNUM Provident Corp., 369 F.3d 1257, 1263 (11th Cir.2004) (“[T]he ‘established or maintained’ requirement is designed to ensure that the plan is part of an employment relationship ․ “ (alteration in original) (internal quotation marks omitted)). Pinnacle has participated in the United Health Services Employer’s Trust since at least October 2003, when the company and MGIS representatives signed a one-page “Group Benefit Summary” issued by the Trust that described the life, accidental death, and LTD coverages available to Pinnacle’s employees and their beneficiaries.6 So far as the record shows, each of those benefits has been offered to employees or provided at no cost on an ongoing basis since that time.

Gross does not address ERISA’s applicability to Pinnacle’s insurance benefits generally, but focuses instead on the LTD policy. Emphasizing that the LTD policy is the only one the employees must pay for themselves,7 she seeks to divorce that policy from any benefit “program” and have us separately evaluate whether ERISA applies to it. The district court, however, viewed the LTD policy as one part of a “comprehensive employee benefit plan.” Gross v. Sun Life Assurance Co. of Can., No. 09–11678–RWZ, 2010 WL 817409, at *2 (D.Mass. March 4, 2010). We detect no clear error in that conclusion. As detailed below, the record provides ample support for the court’s finding that Pinnacle’s package of insurance benefits constituted a unitary ERISA program.8

Significantly, the Trust identifies all of the Pinnacle employee policies by a single group number. In addition, as noted above, the Group Benefit Summary issued by the Trust referred to all of those policies. Paul Wedge, the “owner-member” of Pinnacle who signed the Summary on behalf of the employer, is noted on the document as the administrative contact, without distinction among policies. Similarly, invoices sent to Pinnacle by MGIS in 2006 list the life, AD & D, LTD, and short-term disability policies with the amounts due for each. The record also contains an “Employer’s Participation Agreement,” signed by Wedge in 2006, requesting membership in the Trust “and coverage under the Group Policies issued to the Trustees of the Trust now in effect or later modified or replaced,” again without distinction among the different types of insurance offered by the Trust.

The Trust polices have thus consistently been treated as a unit, despite their different contribution requirements. Moreover, the information provided to employees was in keeping with that approach. The record contains single-page summary fliers for the life insurance and LTD coverages that are similar in appearance, both containing the Sun Life logo in the upper right corner and both offering “Highlights” of the particular policy “for Employees of Pinnacle Eye Care, LLC.” The disability flier contains instructions on how to enroll, directs employees to return the form to their employer, and tells them that they “must elect or refuse insurance coverage within 31 days of your date of eligibility”—creating an explicit link between that form of insurance and Pinnacle notwithstanding the employer’s lack of financial involvement. The link is reinforced by the requirement that an enrolling employee acknowledge the following understanding: “I am requesting LTD coverage under a Group Insurance policy offered by my employer. This coverage will end when my employment terminates.” Yet another indicator of Pinnacle’s role is the fine print at the bottom of the flier describing the LTD coverage as a “benefit[ ] available from your employer” and advising employees that Pinnacle will provide a copy of Sun Life’s LTD booklet with complete details “[w]hen you become eligible for benefits under the plan.”

In these circumstances, we see no justification for isolating the long-term disability policy from Pinnacle’s insurance package for purposes of our ERISA inquiry. A “plan” under ERISA may embrace one or more policies, see Donovan, 688 F.2d at 1373 (noting that a benefits plan or program may consist of “a group policy or multiple policies”), quoted in Wickman, 908 F.2d at 1083, and it strikes us as both impractical and illogical to segment insurance benefits that are treated as a single group and managed together, potentially placing some under ERISA and some outside the statute’s scope. In so concluding, we join several other courts that have declined to “unbundle [ ]” a set of policies or benefits offered by an employer to its employees when evaluating whether ERISA governs. Postma v. Paul Revere Life Ins. Co., 223 F.3d 533, 538 (7th Cir.2000); see also Gaylor v. John Hancock Mut. Life Ins. Co., 112 F.3d 460, 463 (10th Cir.1997) (rejecting plaintiff’s attempt to “sever her optional disability coverage from the rest of the benefits she received through her employer’s plan”);9 Peterson v. Am. Life & Health Ins. Co., 48 F.3d 404, 407 (9th Cir.1995) (concluding that policy that did not on its own comply with ERISA requirements nonetheless fell under the statute because it “was just one component of [the] employee benefit program and ․ the program, taken as a whole, constitutes an ERISA plan”);10 Pando v. Prudential Ins. Co. of Am., 511 F.Supp.2d 732, 736 (W.D.Tex.2007) (“[W]here the employer contributes to some, but not all, benefits which arise from the employment relationship, a court will separately evaluate whether a particular policy is an ERISA plan only when it is clearly separate from the benefits plan to which the employer does contribute.”); cf. Smith v. Jefferson Pilot Life Ins. Co., 14 F.3d 562, 567 (11th Cir.1994) (rejecting plaintiff’s attempt “to sever the dependent coverage feature from the benefits package provided ․ through the Plan”).11

Having concluded that the LTD policy must be treated as part of Pinnacle’s longstanding insurance benefits program, we also conclude that a reasonable person could readily ascertain the program’s specific elements—the benefits, the class of beneficiaries, the source of funding, and procedures for obtaining benefits. See Wickman, 908 F.2d at 1082. The one-page Highlights fliers for the LTD and the combined life and AD & D insurance policies generally describe the benefits, costs, and enrollment procedure, and they direct employees to Sun Life’s detailed booklets for “complete plan details.” The life insurance flier notes that eligible employees will need to designate beneficiaries using one of two identified forms, and the LTD flier states that the benefits are “[a]vailable to all full time employees working 30 or more hours per week.”

Also in the record is an individualized LTD “Benefit Highlights” form prepared for Gross that lists pertinent details of the Sun Life policy, among them the waiting period for eligibility (“1st of the month following full-time employment”); the benefit percentage of earnings (sixty percent); the maximum monthly benefit ($9,000); and the elimination period (180 days). Sun Life’s forty-seven page LTD booklet contains instructions on filing a claim and explains the appeals process, including “your right to bring a civil action under ERISA, § 502(a) following an adverse determination on review.” See Wickman, 908 F.2d at 1083 (noting that handbook detailing ERISA rights, distributed to employees, “is strong evidence that the employer has adopted an ERISA regulated plan”); cf. Thompson v. Am. Home Assurance Co., 95 F.3d 429, 437 (6th Cir.1996) (noting, among facts undermining finding of employer endorsement, that “[t]he policy documentation ․ nowhere mentions that the policy is subject to ERISA” nor describes employee’s ERISA rights).

In combination, the documents in the record associated with Pinnacle’s employee benefits program establish all five of the constituent elements of an ERISA plan listed in Wickman: (1) a plan, (2) established and maintained (3) by an employer (4) to provide multiple types of insurance benefits (5) to employees and, in some cases, their beneficiaries.12 The materials further show that a reasonable Pinnacle employee would understand the nature of the plan, including the scope of coverage, the costs for the plan’s different components, and the claims procedures. Inescapably, Pinnacle’s arrangement with MGIS and the Trust represented a “calculated commitment to qualified employees for similar benefits regularly in the future.” Wickman, 908 F.2d at 1083. We therefore conclude that Pinnacle offered LTD benefits to its employees under a “plan” or “program” that is subject to ERISA.

C. The Safe Harbor Exception

Gross’s argument that the safe harbor exception applies depends on her assumption that the LTD policy may be examined independently from the rest of Pinnacle’s insurance benefits plan. Based on that assumption, she asserts that three of the four safe harbor requirements are clearly met: Pinnacle does not contribute to her LTD policy, her participation was voluntary, and Pinnacle did not receive any consideration in connection with the sale of the LTD policy to its employees. See Watts Regulator, 63 F.3d at 1133. She states that only the fourth requirement—that the employer’s sole functions are administrative and do not reflect endorsement of the policy—is “reasonably in dispute.”

Our rejection of Gross’s assumption that Pinnacle provided multiple, independent plans is fatal to her safe harbor argument. The exception does not apply unless all four requirements are met, id., and Pinnacle’s full funding of the life and AD & D insurance is thus sufficient to disqualify the Pinnacle plan. In addition, with respect to the “endorsement” criterion, the Pinnacle plan falls short as well. Our discussion above shows the close relationship between the LTD plan and the other Pinnacle insurance benefits, which were treated alike except for who paid the premiums. In an affidavit, Pinnacle’s Wedge stated that the employer “did not negotiate the terms of the voluntary long term disability insurance policy from Sun Life.” Although the employer did not specify the policy’s terms, MGIS’s benefits manager reported that Pinnacle did provide guidelines for eligibility, submitting “a list of eligible employees as well as class definitions, classes for each employee, plan waiting periods, and plan designs.”

Thus, eligibility for this LTD policy was not only tied to employment at Pinnacle, but Pinnacle also determined which employees had access to that benefit. Consequently, both in outward appearance and internally, Pinnacle played more than a bystander’s role concerning the LTD policy. See Watts Regulator, 63 F.3d at 1134 (linking endorsement to the employer’s “engagement in activities that would lead a worker reasonably to conclude that a particular group insurance program is part of a benefit arrangement backed by the company”); Thompson, 95 F.3d at 436 (holding that a finding of endorsement may be appropriate “where the employer plays an active role in ․ determining which employees will be eligible for coverage”); ERISA Op. Letter No. 94–26A, 1994 WL 369282, at *3 (July 11, 1994) (stating that endorsement occurs “if the [employer] engages in activities that would lead [an employee] reasonably to conclude that the program is part of a benefit arrangement established or maintained by the [employer]”).

In short, because Pinnacle’s insurance benefits program is an ERISA plan, and the safe harbor exception is inapplicable, we must determine the proper ERISA standard of review.

III.

A. Background

The question of what standard of review is applicable to a benefits decision governed by ERISA is an issue of law that we review de novo. Maher, 665 F.3d at 291. The default standard for reviewing benefits decisions also is de novo, and plenary review is displaced only if the benefit plan gives discretionary authority to the administrator or fiduciary to determine eligibility for benefits. See Firestone, 489 U.S. at 115; Maher, 665 F.3d at 291. If the plan affords such discretion, the court applies “a deferential ‘arbitrary and capricious’ or ‘abuse of discretion’ standard.” Maher, 665 F.3d at 291 (quoting Cusson v. Liberty Life Assurance Co. of Bos., 592 F.3d 215, 224 (1st Cir.2010)).13

The district court summarily denied Gross’s motion seeking application of de novo review. Sun Life urges us to affirm that ruling, arguing that the LTD policy contains sufficiently clear language granting discretionary authority to the insurer and that Pinnacle accepted that language, and the resulting deferential review of benefits decisions, when it signed the Employer’s Participation Agreement with the Trust.14 Sun Life points specifically to two statements in the policy: “Proof [of claim] must be satisfactory to Sun Life” and “Benefits are payable when Sun Life receives satisfactory Proof of Claim.” Sun Life relies on our decision in Brigham v. Sun Life of Canada, 317 F.3d 72 (1st Cir.2003), where we accepted the view that language in a different Sun Life policy comparable to the pertinent language here constituted “an indicator of subjective, discretionary authority on the part of the administrator.” Id. at 81.

Although Sun Life is correct that the language at issue in Brigham is similar to the language now before us,15 two factors important to our decision in Brigham are absent here. First, plaintiff Brigham advocated for de novo review for the first time on appeal, having assumed throughout the district court proceedings that the arbitrary and capricious standard applied. We saw no injustice in rejecting Brigham’s belated argument based on our well established raise or waive rule, and without “undertak[ing] a thorough exploration of the issue,” in light of the “widespread acceptance” by courts at that time that the phrase “satisfactory to us” triggers discretionary review. Id. at 82.

Since our decision in Brigham, however, the precedential landscape—the second important factor—has changed. In Brigham, decided more than a decade ago, we noted the split in the circuits on whether policy provisions containing a “satisfaction” requirement were sufficient to confer discretionary authority triggering deferential review. Id. at 81–82. We reported that some circuits considered the use of “to us” after “satisfactory” to be “an indicator of subjective, discretionary authority on the part of the administrator, distinguishing such phrasing from policies that simply require ‘satisfactory proof’ of disability, without specifying who must be satisfied.” Id. at 81 (citing, inter alia, Nance v. Sun Life Assurance Co. of Can., 294 F.3d 1263, 1267–68 (10th Cir.2002); Ferrari v. Teachers Ins. & Annuity Ass’n, 278 F.3d 801, 806 (8th Cir.2002)). Only the Sixth Circuit, in an 8–6 en banc decision, had held that discretionary review is triggered by a requirement of “ ‘satisfactory proof’ without specification of who must be satisfied.” Id. at 81–82 (citing Perez v. Aetna Life Ins. Co., 150 F.3d 550, 556–58 (6th Cir.1998) (en banc)). The Second Circuit, in dicta, stood alone in suggesting that the “satisfactory to us” language might not convey discretion. Id. at 82 (citing Kinstler v. First Reliance Standard Life Ins. Co., 181 F.3d 243, 252 (2d Cir.1999)).

Although the division of opinion remains, three circuits have in the interim adopted the Second Circuit’s suggestion that the “to us” amplification on “satisfactory” is inadequate in itself to confer discretion. See Viera v. Life Ins. Co. of N.A., 642 F.3d 407, 414–417 (3d Cir.2011) (describing cases); Feibusch v. Integrated Device Tech., Inc. Emp. Benefit Plan, 463 F.3d 880, 884 (9th Cir.2006); Diaz v. Prudential Ins. Co. of Am., 424 F.3d 635, 639–40 (7th Cir.2005). In reaching that conclusion, the Seventh Circuit panel departed from its own prior precedent and thus submitted its proposed decision to all active judges before it was published. No judge requested en banc review. See Diaz, 424 F.3d at 640. On the other hand, at least one circuit has reaffirmed its earlier view that a plan requiring submission of “ ‘satisfactory proof of Total Disability to [the plan administrator]’ “ granted discretion to the administrator. See Tippitt v. Reliance Standard Life Ins., 457 F.3d 1227, 1233–34 (11th Cir.2006) (quoting Levinson v. Reliance Standard Life Ins., 245 F.3d 1321, 1324–25 (11th Cir.2001)).

The procedural backdrop of Brigham and the intervening circuit court decisions mean that the standard of review issue in this case cannot be resolved, as Sun Life cursorily asserts, on the ground that it is governed by Brigham. That decision explicitly relied on the plaintiff’s procedural default, which we declined to sidestep because of the then-current state of the law: “[W]ith the possible exception of the Second Circuit in dicta, no federal appeals court has viewed the type of language at issue in this case as inadequate to confer discretion on the plan administrator.” 317 F.3d at 82. Here, where we do not have procedural default and we do have out-of-circuit precedent rejecting the adequacy of “satisfactory to us,” our acceptance of the language in Brigham is not binding. Rather, the time is now appropriate for the “thorough exploration of the issue” that we put off in Brigham, 317 F.3d at 82.

B. The Pursuit of Clarity

We have long recognized that the threshold question in determining the standard of review is whether the provisions of the benefit plan at issue “reflect a clear grant of discretionary authority to determine eligibility for benefits.” Leahy v. Raytheon Co., 315 F.3d 11, 15 (1st Cir.2002) (emphasis added). In Leahy, for example, we observed that the “discretionary grant hardly could be clearer” where the plan documents gave the insurer “ ‘the exclusive right, in [its] sole discretion, to interpret the Plan and decide all matters arising thereunder,’ “ and further provided that the insurer’s decision “in the exercise of that authority ‘shall be conclusive and binding on all persons unless it can be shown that the ․ determination was arbitrary and capricious.’ “ Id. (alteration and omission in original); see also, e.g., Twomey v. Delta Airlines Pilots Pension Plan, 328 F.3d 27, 31 (1st Cir.2003) (giving administrative committee “ ‘such duties and powers as may be necessary to discharge its responsibilities under the Plan, including ․ decid [ing] all questions of eligibility of any Employee ․ to receive benefits,’ “ with such decisions, assuming good faith, “ ‘to be final and conclusive’ “ (first omission and alteration in original)).

The wording at issue here is obviously a far cry from the explicit provisions in Leahy and Twomey. There are no required “magic words,” however, to confer discretion, and “language that falls short of th[e] ideal” can suffice. Brigham, 317 F.3d at 81. Here, the two pertinent sentences appear in a section of the LTD insurance booklet in which a series of questions about claims procedures are asked and answered. The first three questions address how a claim is submitted. The next question asks “What is considered Proof of Claim?” The response includes one of the sentences under scrutiny:

Proof of Claim must consist of at least the following information:

-a description of the disability;

-the date the disability occurred; and

-the cause of the disability.

Proof of claim may include, but is not limited to, police accident reports, autopsy reports, laboratory results, toxicology results, hospital records, x-rays, narrative reports, or other diagnostic testing materials as required.

Proof of Claim for disability must include evidence demonstrating the disability including, but not limited to, hospital records, Physician records, Psychiatric records, x-rays, narrative reports, or other diagnostic testing materials as appropriate for the disabling condition.

Sun Life may require as part of the Proof, authorizations to obtain medical and non-medial information.

Proof of your continued disability and regular and continuous care by a Physician must be given to Sun Life within 30 days of the request for proof.

Proof must be satisfactory to Sun Life.

App. at 250 (emphasis added). The next question in sequence asks when benefits will be received, with this response: “Benefits are payable when Sun Life receives satisfactory Proof of Claim.” Id. (emphasis added).

We note initially that the second reference to satisfactory proof lacks the “to us” modifying phrase and is thus used in a way that, as we noted in Brigham, most courts consider inadequate to signify discretionary authority. See 317 F.3d at 81; see also Viera, 642 F.3d at 414. We agree, and we therefore focus on the “satisfactory to us” (here, “satisfactory to Sun Life”) formulation.

The courts deeming even the “to us” wording insufficiently explicit have offered several justifications for their conclusions. The Second Circuit observed that specifying the need to satisfy the administrator adds nothing to the obvious point that “[n]o plan provides benefits when the administrator thinks that benefits should not be paid.” Kintsler, 181 F.3d at 252. That assessment was echoed in Diaz: “All plans require an administrator first to determine whether a participant is entitled to benefits before paying them; the alternative would be to hand money out every time someone knocked on the door, which is obviously out of the question.” 424 F.3d at 637. According to these courts, there must be language that “unambiguously indicate[s] that the plan administrator has authority, power, or discretion to determine eligibility or to construe the terms of the Plan.” Feibusch, 463 F.3d at 884 (internal quotation marks omitted); see also Viera, 642 F.3d at 417 (stating that in order for a plan to be insulated from de novo review, it must reveal that the administrator “ ‘has the power to interpret the rules, to implement the rules, and even to change them entirely’ “ (quoting Diaz, 424 F.3d at 639)); Diaz, 424 F.3d at 639–40 (“[T]he critical question is whether the plan gives the employee adequate notice that the plan administrator is to make a judgment within the confines of pre-set standards, or if it has the latitude to shape the application, interpretation, and content of the rules in each case.”).

Both the Ninth and Seventh Circuits emphasized that the “satisfactory to us” construct fails to alert plan participants to the administrator’s discretion because it is ambiguous as to what must be satisfactory to Sun Life. When faced with language and context virtually identical to that before us—also in a Sun Life policy—the Ninth Circuit easily dismissed the wording as inadequate:

[T]he Sun Life policy language simply does not clearly indicate that Sun Life has discretion to grant or deny benefits. Indeed, the language makes no reference whatsoever to granting or denying benefits, and is included under the policy heading “What is considered proof of claim?” We construe ERISA policy ambiguities in favor of the insured.

Feibusch, 463 F.3d at 884. The Seventh Circuit likewise found the “satisfactory to us” phrase ambiguous, observing that,

[f]airly read, it suggests only that the plan participant must submit reliable proof of two things: continuing disability and treatment by a doctor. In short, under [the policy], the only discretion reserved is the inevitable prerogative to determine what forms of proof must be submitted with a claim—something that an administrator in even the most tightly restricted plan would have to do.

Diaz, 424 F.3d at 639; see also Viera, 642 F.3d at 417 (observing that “the only discretion reserved by this single phrase, nested within a section wholly regarding the procedural requirements for submission of a claim, is ‘the inevitable prerogative to determine what forms of proof must be submitted with a claim’ “ (quoting Diaz, supra )).16

All four courts rejecting the adequacy of “satisfactory to us” recommended the use of language that either explicitly “stat[es] that the award of benefits is within the discretion of the plan administrator or ․ is plainly the functional equivalent of such wording,” and three of the courts proposed specific language. Kinstler, 181 F.3d at 252; see also Viera, 642 F.3d at 417 (“ ‘Benefits under this plan will be paid only if the plan administrator decides in [its] discretion that the applicant is entitled to them.’ “ (quoting Herzberger v. Standard Ins. Co., 205 F.3d 327, 331 (7th Cir.2000)); Feibusch, 463 F.3d at 883 (“The plan administrator has discretionary authority to grant or deny benefits under this plan.” (internal quotation marks omitted)); Diaz, 424 F.3d at 637 (stating that “the surest way” for a plan to insulate its benefits denial from de novo review is to “includ[e] language that either mimics or is functionally equivalent” to the Herzberger language).

C. Our Conclusion

Our acknowledgment in Brigham of “an increasing recognition of the need for the clearest signals of administrative discretion” foreshadowed the insistence on “greater precision” that has surfaced in the later cases. 317 F.3d at 82. Although we refrained there from entering the discussion in light of the appellant’s procedural default, we did “wholly endorse” the Herzberger model language that the Third and Seventh Circuits have since expressly recommended. Id. at 81. Having now fully considered the issue, we agree with those courts holding that the “satisfactory to us” wording, without more, will ordinarily fail to meet the “requisite if minimum clarity” necessary to shift from de novo to deferential review. Herzberger, 205 F.3d at 331. We are persuaded primarily by the ambiguity of the phrase, which reasonably may be understood to state Sun Life’s right to insist on certain forms of proof rather than conferring discretionary authority over benefits claims. Indeed, in the present context, the language more naturally supports the former reading, as the phrase appears following a listing of the required information and appropriate types of evidence to prove a claim.17 We reiterate that no precise words are required. Yet, to secure discretionary review, a plan administrator must offer more than subtle inferences drawn from such unrevealing language. To conclude otherwise would negate our requirement of a clear grant of discretion. See Brigham, 317 F.3d at 80 (“We have ‘steadfastly applied Firestone to mandate de novo review of benefits determinations unless “a benefits plan ․ clearly grant[s] discretionary authority to the administrator.” ‘ “ (alterations in original) (quoting Terry v. Bayer Corp., 145 F.3d 28, 37 (1st Cir.1998)); Feibusch, 463 F.3d at 883 (“ ‘Neither the parties nor the courts should have to divine whether discretion is conferred. It either is, in so many words, or it isn’t.” (quoting Sandy v. Reliance Standard Life Ins. Co., 222 F.3d 1202, 1207 (9th Cir.2000)).

Two additional factors contribute to our decision. First, it is not difficult to craft clear language. The model text offered by other courts—including the wording endorsed in Brigham—demonstrates that “clear language can be readily drafted and included in policies.” Kinstler, 181 F.3d at 252; see also Feibusch, 463 F.3d at 883–84 (“[I]t is easy enough to confer discretion unambiguously if plan sponsors, administrators, or fiduciaries want benefits decisions to be reviewed for abuse of discretion.” (internal quotation marks omitted) (alteration in original)). Second, the drafters of ERISA plans have had ample time to take heed of the developing precedent rejecting the adequacy of the “satisfactory to us” language.

Indeed, Sun Life had every opportunity to avoid an adverse ruling on this issue. Our decision in Brigham, which indicated discomfort with the clarity of the “satisfactory to us” wording, made reliance on that language a risky strategy for securing discretionary review of benefits decisions. Sun Life’s relationship with the Trust began in 2006—three years after Brigham and a year after Diaz. Sun Life was also the insurer in Brigham. We see no reason why it could not have inserted more explicit language in either its policy or the summary policy booklet that it provided to Gross and the other employees covered by the Trust’s group policies.

In sum, the “satisfactory to us” language as used in the Sun Life policy insuring Gross does not state with sufficient clarity “that the plan administrator is to make a judgment largely insulated from judicial review by reason of being discretionary.” Herzberger, 205 F.3d at 332. Hence, Sun Life’s rejection of Gross’s claim for benefits is subject to de novo review.

IV.

A. Standards of Review

As with any summary judgment appeal, we review a district court’s decision on the merits of an ERISA benefits case de novo. See Kansky v. Coca–Cola Bottling Co. of New Eng., 492 F.3d 54, 57 (1st Cir.2007). Given that we play the same role as the district court in evaluating Sun Life’s denial of benefits, we have chosen not to remand to that court for application of the correct, de novo, standard for reviewing Sun Life’s decision.

Both in the district court and on appeal, however, the summary judgment analysis in ERISA benefits cases differs from the ordinary summary judgment inquiry “in one important aspect.” Orndorf v. Paul Revere Life Ins. Co., 404 F.3d 510, 517 (1st Cir.2005). In these cases, “where review is based only on the administrative record before the plan administrator and is an ultimate conclusion as to disability to be drawn from the facts, summary judgment is simply a vehicle for deciding the issue.” Id. The non-moving party in an ERISA benefits case is thus not entitled to the usual inferences in its favor. Id.; see also Cusson, 592 F.3d at 223–24.

Where, as here, a challenged denial of benefits is subject to de novo review under ERISA because there has been no grant of discretionary authority, “our task on appeal ‘is to independently weigh the facts and opinions in the administrative record to determine whether the claimant has met [her] burden of showing that [she] is disabled within the meaning of the policy.’ “ Scibelli v. Prudential Ins. Co. of Am., 666 F.3d 32, 40 (1st Cir.2012) (quoting Richards v. Hewlett–Packard Corp., 592 F.3d 232, 239 (1st Cir.2010)). In so doing, we give no deference to the administrator’s opinions or conclusions. Id.

We begin by summarizing both the evidence in the administrative record and Sun Life’s decisions rejecting Gross’s claim for benefits.

B. Gross’s Medical Evidence

1. Dr. Rita Egan

The physician who recommended that Gross stop working, Dr. Rita Egan, a rheumatologist, began treating Gross in February 2006. The doctor ordered a triple-phase bone scan to look for evidence of RSD, but the results were negative. Dr. Egan nonetheless concluded that Gross probably had the disease in her right arm, as well as other conditions that were contributing to her difficulties. For the first of three insurance-related assessments that Dr. Egan subsequently completed, the doctor prepared an Attending Physician’s Statement dated September 23, 2006, classifying Gross’s impairment level from her combination of medical problems as a “[s]evere limitation of functional capacity; incapable of minimum (sedentary[ ] ) activity.” On the line asking for “objective findings,” Dr. Egan wrote that Gross experienced “[p]ain to touch all over but [right] arm is untouchable.” The doctor did not note any mental impairment, although she had prescribed an anti-depressant to Gross in April 2006 and stated at that time that, if the drug did not work, Gross would “need[ ] to see a psychiatrist to help us with her medication.”18

In the second such statement, completed in October 2006, Dr. Egan stated that Gross’s pain had worsened over time, despite treatment, and that Gross could not sit in one place or drive for more than ninety minutes, use her right hand, or firmly grasp with her left hand. She reiterated her findings that Gross suffered from RSD, fibromyalgia, widespread pain, and fatigue. Two months later, in the third report (“Attending Physician’s Supplemental Statement”), Dr. Egan confirmed Gross’s limitations,19 adding that she could not lift more than ten pounds. The doctor described Gross’s diseases as “chronic” and stated that her condition was expected to last for her lifetime.

2. Other Medical Evaluations

In addition to her ongoing treatment with Dr. Egan, Gross consulted with several other medical practitioners. In October 2005, before she began seeing Dr. Egan, Gross was evaluated by Dr. Tarvez Tucker for complaints of headaches, neck pain, and scoliosis. Diagnostic tests showed no abnormalities, but Dr. Tucker noted her pain and weakness symptoms:

[Gross] has intractable transformed migraine, chronic daily headache, which has not been responsive to a variety of preventatives․ She also has ․ a lot of radicular upper extremity and cervical pain associated with tingling and numbness of the right arm and hand, which is worse at the end of the day. She has on examination a drift of the outstretched right upper extremity without pronation, weakness of the intrinsic hand muscles, and diminished perception of primary sensory modalities in the right arm and face.

In December, Dr. Tucker noted that her headaches had improved, but Gross reported worsening joint and muscle pain.

Dr. Egan twice referred Gross to pain management specialists. In April and May 2006, she saw Dr. William Witt, who diagnosed her with fibromyaligia, CRPS, and “probable post traumatic stress disorder” related to a history of sexual abuse.20 In May, Dr. Witt observed that “[h]er right hand continues to be reddened, somewhat swollen, and she is holding in a claw position.” He deferred medical intervention until after a scheduled evaluation and treatment by a psychologist,21 but there is no indication in the record that such an evaluation took place.22 The following year, in March 2007, Gross saw Dr. Fred Coates, who joined the chorus of doctors who diagnosed her with fibromyalgia and either RSD or CRPS. Dr. Coates observed that she was “showing signs of severe pain while seated,” and further noted that her right arm hung “limply at her side.” He described her right hand as “red, slightly swollen, cool to the touch and sweating.” He also recommended psychiatric or psychological counseling and treatment.

Meanwhile, in January 2007, Gross underwent a functional capacity evaluation (“FCE”) to determine her physical capabilities. The physical therapist who performed the evaluation offered a “[p]rimary” diagnosis of CRPS or RSD, and a “[s]econdary” diagnosis of fibromyalgia. He reported swelling of her right hand, as well as a “shiny” appearance, perspiration, and “increased temperature to touch vs. the left.” The report identifies a number of “key limitations” in Gross’s physical abilities, including lack of functional use of her right arm, poor standing balance, inability to perform sustained overhead activity, need for assistance or a handrail to negotiate stairs, and inability to crouch, kneel, squat or crawl. The document also lists numerous medications that Gross reported using on a daily basis: Wellbutrin, Duragesic patches, Klonipin, Tizanadine, Lortab, Ambien CR, Valtrex, Estrostep FE, Senokot, Tylenol Rapid Release, Excedrin Tension Headache, and Phaxyme. The FCE concludes that Gross

does not present at a functional level that could maintain sustained work activity. Her overall level of physical activity is well below the sedentary level category based upon the frequent position change requirement, lack of bilateral activity ability, and short length of time able to perform activity. Unless there is a significant change in her current level of activity, it is not known what form of employment this client would be able to obtain.

C. Surveillance Evidence

Sun Life supplemented the medical evidence by arranging for nine days of video surveillance of Gross during November 2006 and in January and February 2007. The investigator’s written reports reveal little activity by Gross during most of the surveillance days, with three exceptions. First, on November 9, 2006, shortly after dropping off a teenager believed to be her stepdaughter at school, Gross was observed driving for about an hour and a half to her mother’s home, with a brief stop at a rest area along the way. Second, during the evening of January 11, 2007, Gross drove a short distance with her stepdaughter to a Kmart, where she was observed bending down toward lower-level shelves, extending her arms above her head to retrieve items, and kneeling to examine other items. Third, on February 21, after receiving a phone call that her mother had been admitted to the hospital with chest pain, Gross drove to a gas station, pumped gas using her right hand, and then drove for two hours to the hospital, with a brief stop halfway through the trip. About two hours later, she left the hospital and drove home.23

The surveillance reports showed inconsistencies in Gross’s stamina and physical abilities. On multiple occasions, she was seen limping, but also was twice described as “jogging” a few steps. On November 7, for example, Gross left home with her husband at 7:17 AM to vote at a local elementary school, returned home at 7:34 AM, and then departed again with her stepdaughter at 8:21 AM for an apparent appointment at a nearby office building. When they returned home at 9:27 AM, Gross appeared to be limping. The investigator remained on the scene, but observed no further activity before his departure at about 4 PM. Two days later, the investigator reported that Gross “jogged down the sidewalk” to her car before driving her stepdaughter to school.

D. The Independent Medical Examination (“IME”)

On February 22, 2007, the last day of video surveillance and the day after Gross had driven to the hospital to see her mother, an IME was conducted at Sun Life’s request by a neurologist, Dr. Rukmaiah Bhupalam.24 The investigator observed Gross walk with a limp as she left home that morning for the appointment and, when she emerged from the doctor’s office more than four hours later, she was seated in a wheelchair pushed by her husband. Once they reached home, Gross’s husband opened the car door for her, though she stood up without assistance. The couple embraced before walking arm-in-arm up the driveway toward the house. About halfway to the front door, Gross’s husband held on to her right arm as she walked, with a slight limp, the remaining distance.

In his initial report of the IME, dated March 19, Dr. Bhupalam stated that Gross’s husband had “to assist her to move from [a] chair to the bed as she appeared to be in significant pain and she could not use her right hand.” Gross told Dr. Bhupalam that “she is usually able to walk 6 hours after she changes her Duragesic patch [pain medication delivered through the skin], and she can function better for approximately 10 to 12 hours after that and again she goes downhill.” The doctor stated that Gross’s “main difficulty is ambulating because of pain and also use of her right hand.” He diagnosed Gross with, inter alia, chronic fibromyalgia and “probably complex regional pain syndrome,” but speculated that “emotional factors ․ could be contributing to her pain symptomatology,” and recommended that she be seen by a behavioral specialist or mental health professional. In conclusion, Dr. Bhupalam stated that Gross is “unable to return to [her] prior occupation and is totally disabled even for sedentary work even on a part time basis.”

Immediately after receiving Dr. Bhupalam’s report, Sun Life sent him copies of the video surveillance. After viewing the recordings, the physician changed his assessment:

[I]t does appear that she can function very well without any difficulty and appears neurologically normal even the day before my examination. On the day of examination she was limping even in the videotape however, this appears to be a functional component. Based on the observation in the video tape, especially on the day before, and also to previous videotapes in January and November, I do feel that she can function quite well and probably will be able to return to her previous occupation as a manager in a multi physician opthalmology and optometric office. However, a re-evaluation might be beneficial. It does appear that she can use both upper and lower extremities quite well and her gait also appears to be normal, and she does not appear to be in any pain or discomfort in the video recorded on February 21, 2007 just a day before my evaluation in the office. Even on the videos that were done in November and January, it appears that she can function quite well, based on my review of the video.

Following Dr. Bhupalam’s examination, Sun Life obtained a paper review of Gross’s medical records from another medical consultant, Dr. William Hall, who likewise noted that the surveillance videos undermined Gross’s subjective reports of pain and functional limitations.

E. Sun Life’s Benefits Decisions

In a seven-page letter dated April 23, 2007, Sun Life notified Gross that it had denied her benefits claim because of “insufficient objective evidence to substantiate” a disability that precluded her from performing her duties at Pinnacle. The letter cited to the surveillance evidence, which in Sun Life’s view demonstrated “a capacity for activity that far exceeds” the limits described in Gross’s claim forms. The insurer specifically referred to Dr. Bhupalam’s reports, and it quoted from Dr. Hall’s file review. Dr. Hall’s evaluation highlighted the absence of “[c]onsistent and abnormal objective physical and neurological findings,” other than the doctors’ reports of swelling, temperature variation, perspiration, and discoloration of her right arm. He further noted that, while Gross’s medical records “provisionally support diagnosis of RSD right arm and hand,” the surveillance video “compellingly weighs against” that diagnosis and corresponding activity restrictions.

Gross filed an appeal of Sun Life’s decision, which she supported with results of a fourth functional capacity evaluation by Dr. Egan.25 In that November 2007 report, the doctor again diagnosed CRPS in the right arm, fibromyalgia, severe migraines, and chronic fatigue, as well as depression. She observed that Gross’s right arm was colder and discolored, “as is seen in complex regional pain syndrome,” and that Gross “can hardly raise her arm.” She further reported that Gross spends most of her day in bed or on a recliner and that “[a]ctivity leads to worsening pain.” Predicting that Gross was “unlikely to improve,” the doctor summarized her conclusions as follows:

She has had symptoms for many years. No medication or other modality has made her able to function well enough to have a life at home much less at work. With these diagnoses, she is unlikely to get to the point she will be able to work.

Dr. Egan stated that Gross was limited to sitting and standing for no more than one hour per day, and that she could neither push nor lift any weight. The physician also noted that Gross’s work capacity was further limited by the effects of four prescription medications, which left her tired or with trouble thinking, or both.

Sun Life rejected the appeal on January 23, 2008. Its letter of explanation relied heavily on a report from a third-party medical consultant, who had performed a paper review of Gross’s medical file earlier that month. The physician, Dr. Alan Neuren, noted “the marked dichotomy between [Gross’s] reported appearance, behavior, and findings when seen by healthcare providers ․ compared with her appearance under surveillance,” and asserted that “[t]he only reasonable conclusion” to be drawn “is that she has deliberately embellished her symptoms to her providers for secondary gain.” Invoking the multiple medical reports that had questioned the medical support for, and thus the veracity of, Gross’s complaints, Sun Life stated that “[t]he severe restrictions and limitations, as noted by Dr. Egan on ․ September 23, 2006, are clearly not credible when viewed in light of Ms. Gross’ demonstrated functional capacity on the surveillance video.” The insurer thus found “no basis on which to conclude that Ms. Gross would be unable to perform the Material and Substantial Duties of her Own Occupation.”

F. Discussion

Gross argues primarily that Sun Life gave unjustified weight to the surveillance videotapes. She asserts that the insurer wrongly depicted the activity seen during the surveillance as inconsistent with the physical limitations determined by the physicians and physical therapist who examined her, and she emphasizes that the episodes highlighted by Sun Life constituted a small percentage of the time she was observed. With respect to the long-distance driving in particular, she objects to Sun Life’s failure to take into account—and inform its medical consultants about—her mother’s poor health and medical emergency. Sun Life, meanwhile, insists that the surveillance videotapes provide substantial evidence in support of its denial of Gross’s claim, and it highlights the absence of objective evidence in support of her proffered diagnoses and limitations.

In considering these arguments, we initially put to one side the video surveillance, considering its impact only after examining the medical evidence.

1. Medical Analysis

We have no difficulty concluding that the medical evidence in the record, if credited, is adequate to prove Gross’s entitlement to disability benefits. Her long history of migraines, extreme fatigue, and widespread muscular pain is well documented, and the progressive weakness and numbness affecting her right arm and hand are also supported by numerous medical reports. Without exception, the doctors who examined her viewed her symptoms to be consistent with RSD, CRPS, fibromyalgia, or more than one of those illnesses. Although many of Gross’s physical complaints may not be readily susceptible to objective confirmation, findings of chronic pain may not automatically be dismissed by a benefits administrator for lack of confirmable symptoms. See, e.g., Maher, 665 F.3d at 304 (Lipez, J., dissenting) (“Our court has emphasized before that in dealing with hard-to-diagnose, pain-related conditions, it is not reasonable to expect or require objective evidence supporting the beneficiary’s claimed diagnosis.”); Cusson, 592 F.3d at 227 (recognizing that “fibromyalgia is a disease that is diagnosed primarily based on a patient’s self-reported pain symptoms”); Denmark v. Liberty Life Assurance Co. of Bos., 481 F.3d 16, 37 (1st Cir.2007), vacated on other grounds, 566 F.3d 1 (1st Cir.2009) (“We have previously found it unreasonable for an insurer to require objective evidence to support a diagnosis of a condition that is not subject to verification through laboratory testing.”).

Importantly, however, the record here includes objective evidence, as well as the recognition by Sun Life’s own medical consultant, Dr. Hall, that Gross’s “musculoskeletal symptoms, as presented by her, are credible to treating and consulting physicians .” Indeed, Dr. Hall wrote that the medical records he had reviewed “support her reported subjective symptoms, and provisionally support diagnosis of RSD right arm and hand.” For example, each of the medical professionals who examined Gross found her right arm to be visibly abnormal in one or more ways, including: reddened, blue or purplish, swollen, “profuse sweating,” shiny, cool to the touch, or with “increased temperature to touch vs. the left.” Multiple doctors viewed these distortions as symptomatic of RSD or CRPS.26 In addition, the physical therapist who performed her FCE, Chris Kaczmarek, noted that the “[g]eneral muscle tone of the right upper extremity and bilateral lower extremities was ․ hypotonic.”27

Moreover, not only did the examining doctors uniformly perceive her complaints of pain and limited capacity to be credible, but Kaczmarek also reported that, when undertaking tasks for the FCE, Gross was cooperative and “willing to work to maximum abilities in all test items.” He further observed that Gross’s “perceived abilities ․ are consistent with client’s functional abilities objectively identified during the FCE.” His assessment that she “gave maximal effort on all test items” was based on his observations of “predictable patterns of movement including increased accessory muscle recruitment, counterbalancing and use of momentum, and physiological responses such as increased heart rate.” These objective indicators of effort diminish the possibility that Gross was deliberately “failing” the capacity test and lend weight to Kaczmarek’s report that Gross was “physically unable to perform” a range of tasks. Medical notes from various doctors show that her weight dropped by about thirty pounds between October 2005 and March 2007.

Gross’s good faith in describing her limitations is also reinforced by letters from her co-workers and employers—not mentioned in either of Sun Life’s denial letters—describing her persistence in continuing to work despite obvious pain and compromised physical capacity. Indeed, contrary to Sun Life’s assertion in its initial denial letter that Gross chose to stop working,28 Pinnacle’s Paul Wedge told the insurer that “[w]e stopped her from working when we received her doctor orders that she was not fit to work.” In a “To Whom It May Concern Letter” written in February 2007, the general manager of the optometry practice where Gross worked described the “steady decline in the use of her arms and legs for nearly nine months.”29 Simply put, this does not seem to be the history of a person seeking to exaggerate her illnesses to avoid working and obtain disability pay. Cf. Gannon v. Metro. Life Ins. Co., 360 F.3d 211, 213 (1st Cir.2004) (observing that claimant’s performance during FCE was inconsistent and she “did not put forth her maximum effort during the tests”).

Of course, the medical evidence is not entirely favorable to Gross. All of her diagnostic tests, including a bone scan that is sometimes used to diagnose RSD, were negative, and Dr. Bhupalam noted that “there is no definitive evidence” for that syndrome. Dr. Hall noted that neither Gross’s “symptoms nor varying right arm or hand findings explained by appropriate MRI, CT, radioisotope or electrophysiologic findings or by hematologic, metabolic, endocrinologic or renal testing.” Dr. Coates pointed, inter alia, to Gross’s report that her Fentanyl pain-relief patch inexplicably wore off “in what would normally be the middle of the dosing.” The doctors who performed physical examinations speculated that the severity of her symptoms might be attributable in part to psychological factors and recommended that she obtain counseling or behavioral treatment. See, e.g., App. at 416 (Dr. Egan, in September 2006, stating that she believes “a lot of the problem is depression” and that Gross “needs to see a psychiatrist”); id. at 394 (Dr. Coates in March 2007); id. at 448 (Dr. Witt); id. at 459 (Dr. Bhupalam). She did not do so.

Nonetheless, even with negative tests and some puzzlement over the extent of her reported pain, doctors continued to diagnose her with RSD and fibromyalgia. The negative bone scan—emphasized by Sun Life—is not decisive. A CRPS fact sheet prepared by the National Institute of Neurological Disorders and Stroke (“NINDS”), a 2007 version of which is contained in the record, reported that “CRPS is diagnosed primarily through observation of the signs and symptoms” and stated that “there is no specific diagnostic test for CRPS.” R. 03359. The NINDS fact sheet further explained:

[T]he most important role for testing is to help rule out other conditions. Some clinicians apply a stimulus (such as touch, pinprick, heat, or cold) to the area to see if it causes pain. Doctors may also use triple-phase bone scans to identify changes in the bone and in blood circulation.

Id.30 The repeated referrals to counseling also reflect common practice in treating CRPS.31

In sum, the sustained and progressive nature of Gross’s complaints, their facial credibility to the medical practitioners who personally examined her, and the objective symptoms consistent with RSD—given the absence of any method for reaching a conclusive diagnosis—support a finding of total disability. Cf. Maher, 665 F.3d at 293 n. 4 (observing that the claimant arguably would be unable “to fool so many doctors over so many years if there were little or no serious pain”). The narrative changes, however, with the addition of the surveillance evidence.

2. Surveillance Videotapes

The immediate about-face of Dr. Bhupalam, an independent medical consultant whose April 2007 report was the final medical evaluation before the initial rejection of Gross’s claim, reveals the impact of the surveillance evidence on Sun Life’s decision to deny benefits. Although Dr. Bhupalam’s examination of Gross and her medical history had led him to conclude that Gross “is totally disabled even for sedentary work even on a part time basis,” the videotapes led him to the opposite conclusion: “I do feel that she can function quite well and probably will be able to return to her previous occupation as a manager in a multi physician ophthalmology and optometric office.”

Dr. Neuren, whose paper review of Gross’s file was the final medical assessment before Sun Life’s second rejection of her claim, similarly placed substantial weight on the videotapes. He noted “the marked dichotomy between her reported appearance, behavior, and findings when seen by healthcare providers (her own treating physicians, along with Dr. Bhupalam and therapist Kaczmarek) compared with her appearance under surveillance.” Addressing the one objectively manifested symptom noted by all examiners, Dr. Neuren stated that “[t]he reported sweating, redness, etc. can be self induced and may have been in this instance.” Dr. Neuren opined that the inconsistencies between Gross’s “observed activities while under surveillance and her appearance in the physicians’ offices are ․ indicative of symptom embellishment,” and he concluded that “[i]t is obvious that there has been no loss of function.”

We have long recognized that even limited surveillance is a useful way to check the credibility of individuals who claim disability based on symptoms that are difficult to evaluate through objective tests. See, e.g., Cusson, 592 F.3d at 229 (“We have permitted ERISA plan administrators to use this type of sporadic evidence in the past.”); Denmark, 481 F.3d at 38 (recognizing that insurer could properly use an investigator’s report and photographs in making the benefits determination); Tsoulas v. Liberty Life Assurance Co., 454 F.3d 69, 80 (1st Cir.2006) (approving insurer’s reliance on both surveillance evidence and medical advice). Where the activities captured on video directly contradict a claimant’s asserted limitations, and there is no definitive evidence of a disabling condition, the surveillance alone could provide adequate support for a denial of benefits. See, e.g., Cusson, 592 F.3d at 229–30 (noting that the insurer “reached its decision not because it failed to consider the evidence in [claimant’s] favor, but because it determined that the surveillance results undermined the credibility of important portions of that evidence”); Tsoulas, 454 F.3d at 74–75 (affirming denial of benefits where claimant stated, inter alia, that she could not walk or stand without assistance and spent fourteen to eighteen hours in bed each day and surveillance showed her walking without assistance and “traveling to a hotel, a parking garage, a restaurant, a comedy club, a night club, and back to the hotel on a single day”).

Sun Life maintains that this is such a case. On this record, under a de novo standard of review, we cannot agree. In our view, the most significant incompatibilities between Gross’s reports and her observed functional capacity arise in three episodes recorded by the investigator: the two lengthy drives to see her mother, and the evening shopping excursion to Kmart in which Gross was seen in a short span of time reaching over her head, bending, and kneeling, with “no signs of guarded motion.” Without these more ambitious activities, the remainder of the observations cited by Sun Life—Gross’s jogging a few steps on two occasions, driving short distances for errands or appointments, and walking without limping or other signs of pain—could be dismissed as day-to-day variations in physical ability related, inter alia, to fluctuations in her level of fatigue and the timing of pain medications. Indeed, even the ninety-minute drive to her mother’s home on the morning of November 9, 2006 was within the limitations specified by Dr. Egan, who reported that Gross could not sit or drive for more than that amount of time. Notably, Gross stopped at a rest area one hour into the trip, and it is not known when she drove home. The investigator left while Gross was still at her mother’s home, and no surveillance took place the next day.

The trip to Kmart on January 11, which spanned an hour door-to-door in the early evening, is more at odds with Gross’s reported limitations. Though accompanied by her stepdaughter, Gross was seen reaching for an item above her head, bending down to the lower level of the shelves, and kneeling to examine other items. Once at home, Gross carried two plastic bags as well as her purse from the car to the house. All of these movements occurred with no reported hesitancy or instability. According to physical therapist Kaczmarek, however, Gross reported a week later that “she tolerates short bouts of activity for less than a few minutes,” and that she has “difficulty walking with frequent falls.” Based on his testing, Kaczmarek concluded that Gross had “[p]oor standing balance,” “[u]nstable gait pattern requiring assistance of device or hand held assistance,” and “[i]nability to get into and out of positions such as crouching, kneeling, squatting, crawling.”

The 120–mile round-trip drive on February 21 from her home to the medical center in Ashland, Kentucky, is particularly troubling. Before setting off on the trip, Gross pumped gas, “us[ing] her right hand to hold the gas nozzle in her gas tank.” She then drove for an hour before stopping at a rest area, where she was observed “walk[ing] quickly and show[ing] no signs of guarded motion.” When she exited the restroom, she was seen walking quickly to her vehicle and taking two jogging steps before entering the car. She drove for another hour to the medical center, arriving at about 1:30 PM, and two hours later made the return trip home—possibly without a rest stop along the way. Gross’s activity on this day was singled out by Dr. Bhupalam in his revised assessment of her ability to work. Her manipulation of the gas pump is especially noteworthy given her reports of pain and numbness and “little functional usage” of her right hand.

Dr. Bhupalam also noted, however, that “a re-evaluation might be beneficial”—an observation we understand to suggest that the video surveillance, while damaging to Gross, did not necessarily undermine her claim. Indeed, the record does not show that either Dr. Bhupalam or Dr. Neuren knew that Gross’s travel to the medical center in Ashland was in response to a phone call reporting that her mother had experienced a medical emergency, possibly a heart attack. Dr. Neuren, in fact, commented in his report that “[i]t is unclear who the claimant was seeing [at the medical building in Ashland] or why she would need to travel so far to be seen.” We consider knowledge of the reason for Gross’s unusual travel that day essential for any reliable appraisal of her medical condition. Individuals often rise to the occasion in the event of an emergency. Hence, on the current record, we are unable to judge whether Gross’s condition and physical limitations, as she reports them, are necessarily inconsistent with her activities that day. In context, the extra driving, the hurried movements, the pumping of gas may have been at the far edge of what she could manage with the aid of medication in the face of a family crisis.32 In addition, the pain and functional limitations observed by Dr. Bhupalam during his examination of Gross the next day might possibly have been the price she paid for those actions, supporting her claim that she could not handle such activities on a daily basis. It is also noteworthy that on February 23, two days after the trip and the day after the doctor’s visit, the investigator observed no activity by Gross.

Sun Life’s handling of the inconsistencies between the medical reports and the video surveillance—specifically its apparent failure to provide important context to Dr. Bhupalam and its internal reviewers—raises a legitimate question about whether Sun Life has made a bona fide effort to determine Gross’s capabilities. On de novo review, we have no choice but to remand. As the record now stands, we are unable to resolve the debate between the parties on the significance of the surveillance evidence. Although the medical evidence in Gross’s favor is impressive, it is not monolithic and the surveillance results diminish its force. The capabilities documented on video, particularly on January 11 and February 21, require us to look more skeptically at Gross’s self-reported complaints of constant pain, fatigue, and limited function. Yet, we are unwilling to disregard the evidence in her favor without any contextualized assessment of the most significant departures from her professed limitations. See Marantz v. Permanente Med. Grp., Inc. Long Term Disability Plan, 687 F.3d 320, 329 (7th Cir.2012) (“[T]he weight given to surveillance evidence of this type depends both on the amount and nature of the activity observed.”); Maher, 665 F.3d at 295 (same).

We recognize that Gross bears the burden to prove disability. Moreover, as Sun Life pointed out in rejecting her appeal, she did not submit a statement from her own doctor refuting Sun Life’s assertion in its original denial letter that the surveillance “show[ed] a capacity for activity that far exceeds” the limitations she claims. This omission highlights what we regard as the open question: the effect that the surveillance evidence, when viewed in context, may have on other evidence indicating disability.33

Hence, as in Maher, we cannot “say with assurance that [Sun Life] denied [Gross] benefits to which she was entitled,” but we also have doubts about Sun Life’s justification for its decision. 665 F.3d at 295. We will remand this case so that the parties can further address both the significance of the video evidence in assessing Gross’s limitations and the veracity of her self-reported and observed symptoms, particularly concerning the condition of her right arm. Cf., e.g., Buffonge, 426 F.3d at 22 (ordering remand to the claims administrator for a new review); Quinn v. Blue Cross & Blue Shield Ass’n, 161 F.3d 472, 477 (7th Cir.1998).

V.

To recap, we hold that Pinnacle’s disability policy was a component of a benefits plan governed by ERISA and that the applicable standard of review for benefits claims under the plan is de novo. Applying that standard to the evidence currently in the record, we cannot determine whether Sun Life justifiably rejected Gross’s disability claim on the basis of the surveillance video and the likelihood of symptom embellishment, particularly relating to her right arm.

We therefore vacate the judgment appealed from and remand the case to the district court, with directions that it remand the matter to Sun Life for proceedings consistent with this opinion. The insurer, as plan administrator, will have the opportunity to address the concerns that we have identified, i.e., the significance of the video evidence in assessing Gross’s limitations and the veracity of her self-reported and observed symptoms. Gross, in turn, must be given the opportunity to respond. Before the district court enters its remand order, it should hear from the parties on whether to allow the record to be supplemented beyond those specific inquiries. We leave to the district court’s discretion whether to retain jurisdiction while the supplemental administrative process goes forward. We take no view as to the outcome of the further proceedings to be held on remand.

So ordered. Each party to bear its own costs.

FOOTNOTES

1. RSD is apparently considered equivalent to complex regional pain syndrome, or “CRPS,” and we thus refer to the two conditions interchangeably.

2. The Trust provides group life, accidental death, and disability insurance.

3. The monthly statements indicate that Pinnacle arranged for short term, as well as long term, disability coverage. We are unable to determine from the record who pays for the short term coverage.

4. Gross evidently chose to file her original lawsuit in Kentucky because she lives there. After Sun Life removed that action to federal court, Gross dismissed it and filed a new complaint in the Massachusetts county where Sun Life maintains its principal United States place of business.

5. ERISA also applies to plans established or maintained by employee organizations or “organizations representing employees engaged in commerce or in any industry or activity affecting commerce.” 29 U.S.C. § 1003(a)(2).

6. The Trust also provided short-term disability coverage for Pinnacle. The “Remarks” section of the Group Benefit Summary directs the reader to “[s]ee [the] attached addendum for Short Term Disability benefits.” The addendum is not in the record.

7. As noted earlier, the record does not reveal whether Pinnacle funded its employees’ short-term disability coverage, although the district court stated that, while Gross paid her own LTD premium, Pinnacle funded “all the others.” Gross v. Sun Life Assurance Co. of Can., No. 09–11678–RWZ, 2010 WL 817409, at *1 (D.Mass. March 4, 2010).

8. Gross points to a statement by Paul Wedge of Pinnacle that the company did not intend to create an ERISA welfare benefits plan. The question, however, is not the employer’s intent vis-à-vis ERISA, but whether the employer “intended to establish or maintain a plan to provide benefits to its employees as part of the employment relationship.” Anderson, 369 F.3d at 1264; see also, e.g., Watts Regulator, 63 F.3d at 1136 n. 5 (discussing the Safe Harbor elements and noting that “this case turns on the employer’s activities, not its intentions”).

9. Gross asserts that Postma and Gaylor are distinguishable because the companies in each instance paid the premiums for all of the policies. She is correct that, in Postma, the employer took over paying the LTD premium from the employees. See 223 F.3d at 537–38. The circumstances in Gaylor are less clear. The opinion states in one place that the employer contributed part of the LTD premium “for certain employees,” 112 F.3d at 462, but elsewhere indicates that the plaintiff paid the full cost of her coverage, see id. at 463. Regardless of these distinctions, the pertinent point is that “the disability policy was part of a broader benefits package maintained by [the employer] for its employees.” Postma, 223 F.3d at 538.

10. In Peterson, the policy at issue would not on its own have qualified as an ERISA plan because coverage was provided only to a partner in a business partnership and not to any employees. See 48 F.3d at 407 (citing 29 C.F.R. § 2510.3–3(b)). We offer no view on the Peterson court’s conclusion that a policy ineligible for ERISA coverage may nevertheless be governed by the statute if it is part of an ERISA-covered employee benefit program. In a somewhat similar context—where the benefit at issue (reimbursement for educational expenses) is not among those protected by ERISA—the Eleventh Circuit held that the benefit’s inclusion in a plan providing ERISA-covered employee benefits did not bring the non-ERISA benefit within the statute’s scope. See Kemp v. IBM Corp., 109 F.3d 708, 713 (11th Cir.1997).

11. As the Eleventh Circuit noted in Smith, 14 F.3d at 567 n. 3, the Supreme Court, in a different context, has recognized the importance of treating benefits plans holistically. See Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 107–108, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983) (“The administrative impracticality of permitting mutually exclusive pockets of federal and state jurisdiction within a plan is apparent.”); see also Smith, 14 F.3d at 567 n. 3 (stating that, based on Shaw, “we may infer that, generally, ERISA plans may not be severed so that portions of them may be excluded from regulation under ERISA”).

12. An ERISA plan may be created without formal documentation. See Donovan, 688 F.2d at 1372 (noting that “[t]here is no requirement of a formal, written plan in either ERISA’s coverage section ․ or its definitions section”); see also N.E. Mut. Life Ins. Co. v. Baig, 166 F.3d 1, 5 n. 6 (1st Cir.1999) (citing Donovan ).

13. The parties’ arguments on this issue rely on the language contained in a booklet that is described therein as “intended to provide a summarized explanation of the current Group Policy Benefits.” The booklet warns that “the Group Policy is the document which forms Sun Life’s contract to provide benefits.” Because the parties do not assert otherwise, we presume that the language in the booklet and the language in the policy are the same for our purposes.

14. The Agreement states, inter alia, that “upon acceptance for participation under the policies, Participant will be bound by the terms of this Request form and Policies.”

15. To the extent it differs, the Brigham language is more expansive. The Sun Life policy there stated that the insurer “ ‘may require proof in connection with the terms or benefits of [the] Policy’ “ and further declared: “ ‘If proof is required, we must be provided with such evidence satisfactory to us as we may reasonably require under the circumstances.’ “ Brigham, 317 F.3d at 81 (alteration in original) (emphasis removed).

16. The policy at issue in Viera covered accidental death and dismemberment. The pertinent language appeared in a section labeled “Proof of Loss” and stated: “ ‘Written or authorized electronic proof of loss satisfactory to Us must be given to Us at Our office, within 90 days of the loss for which claim is made.’ “ 642 F.3d at 411. The court explained the ambiguity in the language as follows: “In other words, it is not clear whether ‘satisfactory to Us’ means ‘electronic proof of loss [in a form] satisfactory to Us’ or ‘electronic proof of loss [substantively and subjectively] satisfactory to Us.’ “ Id. at 417.

17. Although the language as used here is unquestionably ambiguous, we do not foreclose the possibility that the same phrase may be clear if used in a context where the only plausible meaning would link it to the administrator’s discretion to make eligibility determinations.

18. In notes dated September 20, 2006, Dr. Egan reported:1. Chronic migraines—a little improved with present regimen of medications.2. Widespread pain and right arm reflex sympathetic dystrophy—she is doing a little better with the medications we have her on, but I think a lot of the problem is depression. It certainly is contributing to her pain. She also is not sleeping well. At this point, I am going to look into another neurosurgeon or anesthesiologist who may be able to put an implantable stimulator or consider cranial stimulation therapy, which I have been reading about with fibromyalgia, and also the patient needs to see a psychiatrist to help with a lot of issues.

19. This report varied slightly from the previous one, stating that Gross could not stand or walk for more than an hour, drive for more than ninety minutes, or sit in one place for more than two hours.

20. Among his written findings were the following:She has multiple health-related problems, various aches and pains throughout her body․․ She has definite swelling of the right hand as compared with the left. There is obviously differential sweating as well․ [Her gait] is slow and purposeful․ She has multiple tender points in all of the classic sites for fibromyalgia.

21. Dr. Witt noted that he was “very hesitant to engage in any interventional treatment or any further medical treatment ․ until we have had a chance to work with her from a behavioral standpoint which may serve several purposes ․ as this is clearly a sympathetically maintained pain.”

22. As reported in another doctor’s notes, Gross apparently explained to Dr. Egan that she could not afford to see the psychiatrist to whom she originally was referred and was to investigate other options. Dr. Egan stated in August 2006 that her scheduled appointments with a psychologist “did not work out ․ because they cancelled.” Gross was, however, treated with anti-depressants.

23. Sun Life states in its brief that Gross made the return trip without stopping. Although that may be a fair inference from the record, Gross correctly notes that the investigator did not explicitly say that she did not stop. Despite stating that he “followed [Gross] approximately the same distance back towards her residence,” he evidently lost sight of her at some point because, when he arrived at her residence, her car was already parked and she had entered her home.

24. This independent evaluation was recommended by Dr. James Sarni, a Sun Life medical consultant who had reviewed the information in Gross’s chart. Dr. Sarni noted thatthe documentation does not strongly support a diagnosis of reflex sympathetic dystrophy or complex regional pain syndrome․Therefore, it would be helpful if this patient were to be evaluated by a neurologist who would have experience in treating migraine headaches. Any neurologist should be able to comment intelligently upon the right upper extremity and whether or not they believe it is consistent with complex regional pain syndrome or RSD and what steps could be taken to both diagnose and treat it.

25. Gross submitted a forty-seven page letter to Sun Life in December 2007, which, inter alia, reviewed evidence that she previously had submitted and described the results of Dr. Egan’s most recent assessment.

26. The Mayo Clinic’s list of indicators of CRPS, which is defined as “an uncommon form of chronic pain that usually affects an arm or leg,” includes many of these qualities, including swelling of the affected area, changes in skin temperature, discoloration, and a shiny skin appearance. See Complex Regional Pain Syndrome, MayoClinic.com, www.mayoclin ic.com/health/complex-regional-pain-syndrome/DS00265 (last visited Aug. 7, 2013).

27. “Hypotonic,” in the physiological sense, is defined as “[h]aving less than the normal tone.” Random House Dictionary of the English Language (2d ed.1987) 945.

28. The pertinent paragraph in the denial letter was as follows:Therefore, it does not appear that you would be eligible for Total Disability benefits, Partial Disability benefits or benefits under the rider attached to your policy based on our thorough review of all of the medical, occupational and other information in the claim file. Rather, any loss of income appears to be as a result of a choice to stop working for your Employer and not as a result of any change in restrictions and limitations that would prevent you from performing a light occupation.

29. Gross’s boss, Mike Feeney, elaborated in his letter as follows:Countless times I spoke with Diahann about the need to take time off, to take care of herself before the job responsibilities. Stubborn is not a strong enough term each time she told me to mind my own business. She wasn’t going to give in until she absolutely had to. She never lacked in doing a great job in the office. It wasn’t until early May of 2006 when I witnessed her fall in the office, that I felt I could do something to try and help. That day after falling, she couldn’t use her legs and get up. Dr. Baier (staff Optometrist) and myself assisted her up into a chair, and I refused to take no for an answer. The two of us drove her home, helping her into her home. I did not allow her back into the office until she obtained a doctor’s note releasing her for work. She gave me that on May 10, 2006 and returned.Another letter, from Dr. Baier, noted that, in August 2006, “Ms. Gross finally succumbed to the advice of her physicians, family, friends and co-workers and terminated her employment.”

30. The current version of the fact sheet appears at http:// www.ninds.nih. gov/di sorders/reflex_sympathetic_dystrophy/detail_reflex_ sympathetic_ dystrophy.htm# 241003282 (“NINDS Fact Sheet”) (last visited Aug. 7, 2013).

31. The current NINDS fact sheet lists psychotherapy as one form of treatment for relieving the symptoms of CRPS. It states:CRPS and other painful and disabling conditions often are associated with profound psychological symptoms for affected individuals and their families. People with CRPS may develop depression, anxiety, or post-traumatic stress disorder, all of which heighten the perception of pain and make rehabilitation efforts more difficult. Treating these secondary conditions is important for helping people cope and recover from CRPS.NINDS Fact Sheet, supra.

32. Gross reported to two different doctors in March 2007 that she retained at least some use of her right arm. She told Dr. Coates that she could lift her arm slightly after changing her pain medication patch, and she told Dr. Bhupalam that she felt the “right upper extremity” is “almost useless almost 95% of the time .”

33. Relatedly, we note that Dr. Neuren’s assertion that the physical abnormalities affecting Gross’s right arm could have been self-induced is unexplained and thus provides dubious support for his conclusion that Gross likely exaggerated her symptoms. This gap, too, can be explored in future proceedings.

LIPEZ, Circuit Judge.

A Great Federal Register Article / New Regulations

AGENCY:

Employee Benefits Security Administration, Department of Labor.
ACTION:

Final rule.
SUMMARY:

This document contains a final regulation revising the claims procedure regulations under the Employee Retirement Income Security Act of 1974 (ERISA) for employee benefit plans providing disability benefits. The final rule revises and strengthens the current 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. This rule affects plan administrators and participants and beneficiaries of plans providing disability benefits, and others who assist in the provision of these benefits, such as third-party benefits administrators and other service providers.
DATES:

Effective Date: This rule is effective January 18, 2017.

Applicability Date: This regulation applies to all claims for disability benefits filed on or after January 1, 2018.
FOR FURTHER INFORMATION CONTACT:

Frances P. Steen, Office of Regulations and Interpretations, Employee Benefits Security Administration, (202) 693-8500. This is not a toll free number.
SUPPLEMENTARY INFORMATION:

I. Background

Section 503 of ERISA requires every employee benefit plan, in accordance with regulations of the Department, 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 “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.”

In 1977, the Department published a regulation pursuant to section 503, at 29 CFR 2560.503-1, establishing minimum requirements for benefit claims procedures for employee benefit plans covered by title I of ERISA (hereinafter “Section 503 Regulation”).[1] The Department revised and updated the Section 503 Regulation in 2000 by improving and strengthening the minimum requirements for employee benefit plan claims procedures.[2] As revised in 2000, the Section 503 Regulation provided new time frames and enhanced requirements for notices and disclosure with respect to decisions at both the initial claims decision stage and on review for group health and disability benefits. The regulations were designed to help reduce lawsuits over benefit disputes, promote consistency in handling benefit claims, and provide participants and beneficiaries a non-adversarial method of having a plan fiduciary review and settle claims disputes. Although the Section 503 Regulation applies to all covered employee benefit plans, including pension plans, group health plans, and plans that provide disability benefits, the more stringent procedural protections under the Section 503 Regulation apply to claims for group health benefits and disability benefits.[3]

The Department’s experience since 2000 with the Section 503 Regulation and related changes in the governing law for group health benefits led the Department to conclude that it was appropriate to re-examine the rules governing disability benefit claims. Even though fewer private-sector employees participate in disability plans than in group health and other types of plans,[4] disability cases dominate the ERISA litigation landscape today. An empirical study of ERISA employee benefits litigation from 2006 to 2010 concluded that cases involving long-term disability claims accounted for 64.5% of benefits litigation whereas lawsuits involving health care plans and pension plans accounted for only 14.4% and 9.3%, respectively.[5] Insurers and plans looking to contain disability benefit costs may be motivated to aggressively dispute disability claims.[6] Concerns exist regarding conflicts of interest impairing the objectivity and fairness of the process for deciding claims for group health benefits. Those concerns resulted in the Affordable Care Act recognizing the need to enhance the Section 503 Regulation with added procedural protections and consumer safeguards for claims for group health benefits.[7] The Departments of Health and Human Services, Labor, and the Department of the Treasury issued regulations improving the internal claims and appeals process and establishing rules for the external review processes required under the Affordable Care Act (“ACA”).[8] These additional protections for a fair process include the right of claimants to respond to new and additional evidence and rationales and the requirement for independence and impartiality of the persons involved in making benefit determinations.

The Department’s independent ERISA advisory group also urged the Start Printed Page 92317Department to re-examine the disability claims process. Specifically, in 2012, the ERISA Advisory Council undertook a study on issues relating to managing disability in an environment of individual responsibility. The Council concluded based on the public input it received that “[n]ot all results have been positive for the participant under ERISA-covered plans and the implementing claim procedures regulations, even though these rules were intended to protect participants” and noted that “[t]he Council was made aware of reoccurring issues and administrative practices that participants and beneficiaries face when appealing a claim that may be inconsistent with the existing regulations.” The Advisory Council’s report included the following recommendation for the Department:

Review current claims regulations to determine updates and modifications, drawing upon analogous processes described in health care regulations where appropriate, for disability benefit claims including: (a) Content for denials of such claims; (b) rule regarding full and fair review, addressing what is an adequate opportunity to develop the record and address retroactive rescission of an approved benefit; (c) alternatives that would resolve any conflict between the administrative claims and appeals process and the participants’ ability to timely bring suit; (d) the applicability of the ERISA claim procedures to offsets and eligibility determinations.

2012 ERISA Advisory Council Report, Managing Disability Risks in an Environment of Individual Responsibility, available at www.dol.gov/​sites/​default/​files/​ebsa/​about-ebsa/​about-us/​erisa-advisory-council/​2012ACreport2.pdf.

The Department agreed that the amendments to the claims regulation for group health plans could serve as an appropriate model for improvements to the claims process for disability claims. Those amendments aimed to ensure full and fair consideration of health benefit claims by giving claimants ready access to the relevant evidence and standards; ensuring the impartiality of persons involved in benefit determinations; giving claimants notice and a fair opportunity to respond to the evidence, rationales, and guidelines for decision; and making sure that the bases for decisions are fully and fairly communicated to the claimant. In the Department’s view, these basic safeguards are just as necessary for a full and fair process in the disability context as in the health context. Moreover, as in the group health plan context, disability claims are often reviewed by a court under an abuse of discretion standard based on the administrative record. Because the claimant may have limited opportunities to supplement the record, the Department concluded that it is particularly important that the claimant be given a full opportunity to develop the record that will serve as the basis for review and to respond to the evidence, rationales, and guidelines relevant to the decision.

The Department’s determination to revise the claims procedures was additionally affected by the aggressive posture insurers and plans can take to disability claims as described above coupled with the judicially recognized conflicts of interest insurers and plans often have in deciding benefit claims.[9] In light of these concerns, the Department concluded that enhancements in procedural safeguards and protections similar to those required for group health plans under the Affordable Care Act were as important, if not more important, in the case of claims for disability benefits.

The Department decided to start by proposing to amend the current standards applicable to the processing of claims and appeals for disability benefits so that they included improvements to certain basic procedural protections in the current Section 503 Regulation, many of which already apply to ERISA-covered group health plans pursuant to the Department’s regulations implementing the requirements of the Affordable Care Act.

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.[10] 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. The comments were posted on the Department’s Web site at www.dol.gov/​agencies/​ebsa/​laws-and-regulations/​rules-and-regulations/​public-comments/​1210-AB39. After careful consideration of the issues raised by the written public comments, the Department decided to adopt the improvements in procedural protections and other safeguards largely as set forth in the November 2015 proposal. The Department revised some of the requirements in response to public comments as part of its overall effort to strike a balance between improving a claimant’s reasonable opportunity to pursue a full and fair review and the attendant costs and administrative burdens on plans providing disability benefits.

The Department believes that this action is necessary to ensure that disability claimants receive a full and fair review of their claims, as required by ERISA section 503, under the more stringent procedural protections that Congress established for group health care claimants under the ACA and the Department’s implementing regulation at 29 CFR 2590.715-2719 (“ACA Claims and Appeals Final Rule”).[11] This final rule will promote fairness and accuracy in the claims review process and protect participants and beneficiaries in ERISA-covered disability plans by ensuring they receive benefits that otherwise might have been denied by plan administrators in the absence of the fuller protections provided by this final regulation. The final rule also will help alleviate the financial and emotional hardship suffered by many individuals when they are unable to work after becoming disabled and their claims are denied.
II. Overview of Final Rule
A. Comments on Overall Need To Improve Claims Procedure Rules for Disability Benefits

Numerous disabled claimants and their representatives submitted comments stating general support for the proposed rule. For example, some commenters described the proposal as reinforcing the integrity of disability benefit plan administration and markedly improving the claims process by strengthening notice and disclosure protections, prescribing more exacting standards of conduct for review of denied claims, ensuring claimants’ more effective access to the claims process, and providing safeguards to ensure full court review of adverse benefit determinations. Some commenters supported the proposed amendments as “good first steps” towards providing more transparency and accountability, but advocated additional steps to strengthen, improve, and update the current rules. Some commenters emphasized that disability and lost earnings impose severe hardship on many individuals, arguing that disability claimants have a “poor” prospect of fair review under the current Start Printed Page 92318regulation primarily because of the economic incentive for insurance companies to deny otherwise valid claims and because plans are often able to secure a deferential standard of review in court.

Commenters, primarily disability insurers and benefit providers, commented that the disability claims regulation should not mirror Affordable Care Act requirements because unlike disability claims: (i) The vast majority of medical claims are determined electronically with little or no human involvement, i.e., no reviewers studying materials and consulting with varied professionals; (ii) medical claims typically involve only a limited treatment over a relatively short period of time, whereas disability claims require a series of determinations over a period of several years; (iii) medical claims rarely involve a need to consult with outside professionals; (iv) medical claims involve an isolated issue, whereas disability claims involve a more complex, multi-layered analysis; and (v) medical claim files may consist of only a few pages of materials, whereas disability claim files can consist of hundreds, sometimes thousands of pages of information. As a result of these factors, the commenters stressed that it can take significant time to review and render a decision. Some of those commenters argued that applying ACA protections to disability benefit claims was contrary to Congressional intent because disability plans were not subject to the ACA’s group health plan provisions. Some claimed that the proposed rules in their current form will have unintended consequences (undue delay and increased costs and litigation), and will result in expenses and burdens that will increase the cost of coverage and discourage employers from sponsoring disability benefit plans. Finally, some claimed that the increased protections and transparency that would be required under the proposal would weaken protection against disability fraud and were unnecessary because the current regulations provide ample protections for claimants, are written to benefit the insured, and have worked well for more than a decade as evidenced by the asserted fact that the vast majority of disability claims incurred by insurers are paid, and, of the claims denied, only a very small percentage are ultimately litigated. Some argued that technological advances that have expedited processing of health care claims do not apply to disability claims adjudication, contended that the Department had not properly quantified or qualified the benefits associated with the proposed regulations or provided a sufficient cost analysis associated with the proposed regulations, and commented that the Department should withdraw the proposal until better data is collected.

After careful consideration of the issues raised by the written comments, the Department does not agree with the commenters’ assertion that the ACA changes for group health plans are not an appropriate model for improving claims procedures for disability benefits. The enactment of the ACA, and the issuance of the implementing regulations, has resulted in disability benefit claimants receiving fewer procedural protections than group health plan participants even though litigation regarding disability benefit claims is prevalent today. As noted above, the Department’s Section 503 Regulation imposes more stringent procedural protections on claims for group health and disability benefits than on claims for other types of benefits. The Department believes that disability benefit claimants should continue to receive procedural protections similar to those that apply to group health plans, and that it makes sense to model the final rule on the procedural protections and consumer safeguards that Congress and the President established for group health care claimants under the ACA. These protections and safeguards will allow some participants to receive benefits that might have been incorrectly denied in the absence of the fuller protections provided by the regulation. It will also help alleviate the financial and emotional hardship suffered by many individuals when they lose earnings due to their becoming disabled.

Moreover, the Department carefully selected among the ACA amendments to the claims procedures for group health plans, and incorporated into the proposal only certain of the basic improvements in procedural protections and consumer safeguards. The proposal, and final rule, also include several adjustments to the ACA requirements to account for the different features and characteristics of disability benefit claims.

The Department agrees with the commenters who supported the proposed changes who emphasized that disability and lost earnings impose severe hardship on many individuals. Under those circumstances, and considering the judicially recognized economic incentive for insurance companies to deny otherwise valid claims, the Department views enhancements in procedural safeguards and protections similar to those required for group health plans under the Affordable Care Act as being just as important, if not more important, in the case of claims for disability benefits. This view was supported by the assertions by some plans and disability insurance providers that disability claims processing involves more human involvement, with reviewers studying pages of materials and consulting with varied professionals on claims that involve a more complex, multi-layered analysis. Even assuming the characteristics cited by the commenter fairly describe a percentage of processed disability claims, the Department does not believe those characteristics support a decision to treat the processing of disability benefits more leniently than group health benefits. The Department believes there is potential for error and opportunity for the insurer’s conflict of interest to inappropriately influence a benefit determination under highly automated claims processing, as well as claims processing with more human involvement.[12] Increased transparency and accountability in all claims processes is important if claimants of disability benefits are to have a reasonable opportunity to pursue a full and fair review of a benefit denial, as required by ERISA section 503. Also, and as more fully discussed in the Regulatory Impact Analysis section of this document, the Department does not agree that the adoption of these basic procedural protections will cause excessive increases in costs and litigation, or result in expenses and burdens that will discourage employers from sponsoring plans providing disability benefits. In fact, comments from some industry groups support the conclusion that the protections adopted in the final rule reflect best practices that many insurers and benefit providers already follow on a voluntary basis.

Thus, while the Department has made some changes and clarifications in response to comments, the final rule, described below, is substantially the same as the proposal. Specifically, the major provisions in the final rule Start Printed Page 92319require that: (1) Claims and appeals must be adjudicated in a manner designed to ensure independence and impartiality of the persons involved in making the benefit determination; (2) benefit denial notices must contain a complete discussion of why the plan denied the claim and the standards applied in reaching the decision, including the basis for disagreeing with the views of health care professionals, vocational professionals, or with disability benefit determinations by the Social Security Administration (SSA); (3) claimants must be given timely notice of their right to access to their entire claim file and other relevant documents and be guaranteed the right to present evidence and testimony in support of their claim during the review process; (4) claimants must be given notice and a fair opportunity to respond before denials at the appeals stage are based on new or additional evidence or rationales; (5) plans cannot prohibit a claimant from seeking court review of a claim denial based on a failure to exhaust administrative remedies under the plan if the plan failed to comply with the claims procedure requirements unless the violation was the result of a minor error; (6) certain rescissions of coverage are to be treated as adverse benefit determinations triggering the plan’s appeals procedures; and (7) required notices and disclosures issued under the claims procedure regulation must be written in a culturally and linguistically appropriate manner.
B. Comments on Major Provisions of Final Rule
1. Independence and Impartiality—Avoiding Conflicts of Interest

Consistent with the ACA Claims and Appeals Final Rule governing group health plans, paragraph (b)(7) of this final rule explicitly provides that plans providing disability benefits “must ensure that all claims and appeals for disability benefits are adjudicated in a manner designed to ensure the independence and impartiality of the persons involved in making the decision.” Therefore, this final rule requires that decisions regarding hiring, compensation, termination, promotion, or similar matters with respect to any individual must not be made based upon the likelihood that the individual will support the denial of disability benefits. For example, a plan cannot provide bonuses based on the number of denials made by a claims adjudicator. Similarly, a plan cannot contract with a medical expert based on the expert’s reputation for outcomes in contested cases, rather than based on the expert’s professional qualifications. These added criteria for disability benefit claims address practices and behavior which cannot be reconciled with the “full and fair review” guarantee in section 503 of ERISA, and with the basic fiduciary standards that must be followed in implementing the plan’s claims procedures. For the reasons described below, paragraph (b)(7) of the final rule therefore remains largely unchanged from the proposal.

The Department received numerous comments either generally supporting or not objecting to the idea that the independence and impartiality requirements for claims procedures for disability claims should be consistent with the ACA’s claims procedures requirements for group health plans. Several commenters pointed out that even prior to the proposal, many disability plans had already taken affirmative steps to ensure the independence and impartiality of the persons involved in the decision-making process. Other commenters who opposed the provision as unnecessary similarly cited the fact that the proposed amendments reflect current industry practice and argued that issues regarding the independence and impartiality of the appeal process is already the subject of the well-developed body of case law. Although the Department agrees that the proposal was intended to be consistent with industry best practice trends and developing case law in the area, the Department does not believe that industry trends or court decisions are an acceptable substitute for including these provisions in a generally applicable regulation.

Several commenters suggested that the examples of individuals covered by this provision should include vocational experts. The commenters pointed out that vocational experts are often actively involved in the decision-making process for disability claims and play a role in the claims process similar to the role of a medical or health care professional. They noted that opinions of vocational experts are often relied on in making determinations on eligibility for and the amount of disability benefits. Although the list in the proposed provision was intended to merely reflect examples, not be an exhaustive list, the Department nonetheless agrees that it would be appropriate to add vocational experts to avoid disputes regarding their status under this provision of the final rule. This clarification of the provision from its proposed form is also consistent with the current regulation’s express acknowledgement of the important role of vocational experts in the disability claims process. Specifically, paragraph (h)(3)(iv) of the current regulation already requires that the claims procedure for disability benefit claims must provide for the identification of medical or vocational experts whose advice was obtained on behalf of the plan in connection with a claimant’s adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination. Accordingly, the final rule adds “vocational expert” to the examples of persons involved in the decision-making process who must be insulated from the plan’s or issuer’s conflicts of interest. Decisions regarding hiring, compensation, termination, promotion, or other similar matters must not be based upon the likelihood that the individual will support the denial of benefits.

Commenters also asked the Department to clarify whether “consulting experts” are “involved in making the decision” for purposes of the independence and impartiality requirements. Some commenters were concerned that consulting experts would fall outside of these requirements because plans or claims administrators might assert that consulting experts merely supply information and do not decide claims. In the Department’s view, the text of paragraph (b)(7) is clear that the independence and impartiality requirements are not limited to persons responsible for making the decision. For example, paragraph (b)(7) of the final rule, as in the proposal, refers to a “medical expert” as an example of a person covered by the provision. The text also refers to individuals who may “support the denial of benefits.” Thus, in the Department’s view, the independence and impartiality requirements apply to plans’ decisions regarding hiring, compensation, termination, promotion, or other similar matters with respect to consulting experts. Although some commenters suggested that the Department expand the regulatory text to expressly include “consulting experts,” in the Department’s view, the regulatory text is sufficiently clear to address commenters’ concerns especially with the inclusion of “vocational experts” in this provision of the final rule as described above. The Department also believes that it should avoid creating differences in the text of parallel provisions in the rules for group health benefits under the ACA Claims and Appeals Final Rule and disability benefits absent a reason that addresses a specific issue for disability claims Start Printed Page 92320(like the vocational expert issue discussed above).

Several commenters asked the Department to clarify that the independence and impartiality requirements apply even where the plan does not directly hire or compensate the individuals “involved in making the decision” on a claim. The text of the rule does not limit its scope to individuals that the plan directly hires. Rather, the rule’s coverage extends to individuals hired or compensated by third parties engaged by the plan with respect to claims. Thus, for example, if a plan’s service provider is responsible for hiring, compensating, terminating, or promoting an individual involved in making a decision, this final rule requires the plan to take steps (e.g., in the terms of its service contract and ongoing monitoring) to ensure that the service provider’s policies, practices, and decisions regarding hiring, compensating, terminating, or promoting covered individuals are not based upon the likelihood that the individual will support the denial of benefits.

One commenter, who supported applying independence and impartiality requirements, expressed concern about a statement in the preamble to the proposed rule that a plan cannot contract with a medical expert based on the expert’s reputation for outcomes in contested cases rather than based on the expert’s professional qualifications. The commenter did not object to the prohibition on hiring a medical expert based on a reputation for denying claims, but expressed concern that the statement in the preamble might result in claimants requesting statistics and other information on cases in which the medical expert expressed opinions in support of denying rather than granting a disability benefit claims. Another commenter who opposed the provision also expressed concern about court litigation and discovery regarding “reputation” issues arising from the text in the preamble. In the Department’s view, the preamble statement accurately describes one way that the independence and impartiality standard could be violated. That said, the independence and impartiality requirements in the rule do not modify the scope of “relevant documents” subject to the disclosure requirements in paragraphs (g)(1(vii)(C) and (h)(2)(iii) of the Section 503 Regulation, as amended by this rule. Nor do the independence and impartiality requirements in the rule prescribe limits on the extent to which information about consulting experts would be discoverable in a court proceeding as part of an evaluation of the extent to which the claims administrator or insurer was acting under a conflict of interest that should be considered in evaluating an adverse benefit determination.

Several commenters urged the Department to implement the independence and impartiality requirements with specific quantifiable limitations on the relationship between plans and consultants. For example, one commenter suggested a medical consultant be required to certify that no more than 20% of the consultant’s income is derived from reviewing files for insurance companies and/or self-funded disability benefit plans. Several commenters recommended that plans be required to disclose to claimants a range of quantifiable information regarding its relationship with certain consultants (e.g., number of times a plan has relied upon the third-party vendor who hired the expert in the past year). A few commenters suggested that the Department establish rules on the qualifications, credentials, or licensing of an expert and the nature and type of such expert’s professional practice. For example, one commenter suggested that the rule provide that when a fiduciary relies on a physician or psychologist or other professional, such as a vocational specialist, the person must be licensed in the same jurisdiction where the plan beneficiary resides. Although the Department agrees that more specific quantifiable or other standards relating to the nature and type of an expert’s professional practice might provide additional protections against conflicts of interest, the parallel provisions in the claims procedure rule for group health plans under the ACA Claims and Appeals Final Rule do not contain such provisions. Moreover, an attempt to establish specific measures or other standards would benefit from a further proposal and public input. Accordingly, the final rule does not adopt the commenters’ suggestions.
2. Improvements to Disclosure Requirements

The Department proposed to improve the disclosure requirements for disability benefit claims in three respects. First, the proposal included a provision that expressly required adverse benefit determinations on disability benefit claims to contain a “discussion of the decision,” including the basis for disagreeing with any disability determination by the SSA or other third party disability payer, or any views of health care professionals treating a claimant to the extent the determination or views were presented by the claimant to the plan. Second, notices of adverse benefit determinations must contain the internal rules, guidelines, protocols, standards or other similar criteria of the plan that were relied upon in denying the claim (or a statement that such criteria do not exist). Third, consistent with the current rule applicable to notices of adverse benefit determinations at the review stage, a notice of adverse benefit determination at the initial claims stage must contain a statement that the claimant is entitled to receive, upon request, relevant documents.

In the Department’s view, the existing claims procedure regulation for disability claims already imposes a requirement that denial notices include a reasoned explanation for the denial.[13] For example, the rule requires that the notice must be written in a manner calculated to be understood by the claimant, must include any specific reasons for the adverse determination, must reference the specific provision in governing plan documents on which the determination is based, must include a description of any additional information required to perfect the claim, must include a description of the internal appeal process, and must include the plan’s rules, if any, that were used in denying the claim (or a statement that such rules are available upon request).

The Department’s experience in enforcing the claims procedure requirements and its review of litigation activity, however, leads it to conclude that some plans are providing disability claim notices that are not consistent with the letter or spirit of the Section 503 Regulation. Accordingly, the Department believes that expressly setting forth additional requirements in the regulation, even if some may already apply under the current rule, is an appropriate way of reinforcing the need for plan fiduciaries to administer the plan’s claims procedure in a way that is transparent and that encourages an appropriate dialogue between a claimant and the plan regarding adverse benefit determinations that ERISA and the current claims procedure regulation contemplate.

Commenters generally either supported or did not object to the requirement to explain a disagreement with a treating health care professional in adverse benefit determinations. The Start Printed Page 92321Department, accordingly, is adopting this provision from the proposal. This provision in the final rule would not be satisfied merely by stating that the plan or a reviewing physician disagrees with the treating physician or health care professional. Rather, the rule requires that the adverse benefit determination must include a discussion of the basis for disagreeing with the health care professional’s views. Several commenters suggested, similar to their comments described above on the need to subject vocational experts to the independence and impartiality requirements, that this disclosure provision should also apply to vocational professionals. As noted above, the commenters pointed out that vocational experts have a role somewhat similar to the role of a medical or health care professional in the claims determination process. The Department agrees, and, accordingly, added “vocational professional” to this provision.

An issue raised in the comments related to whether the plan is required to address only third party views presented to the plan by the claimant. The concern was that plans may not know whether other third party views even exist so that any requirement to address third party views should be limited to third party findings where they are presented by the claimant. Although the Department does not believe it would be appropriate to require plans to address views that they were not aware of and had no obligation to discover, the Department’s consideration of this comment led it to conclude that the provision needed to be revised to include medical or vocational experts whose advice was obtained on behalf of the plan in connection with a claimant’s adverse benefit determination. The Department’s experience enforcing the current regulation has revealed circumstances where claims adjudicators may consult several experts and deny a claim based on the view of one expert when advice from other experts who were consulted supported a decision to grant the claim. Some of these cases may have involved intentional “expert shopping.” Requiring plans to explain the basis for disagreeing with experts whose advice the plan sought would not present the problem raised in the comments of addressing third party views the plan does not know even exist, but it would be consistent with and enhance the requirement in paragraph (h)(3)(iv) of the current regulation which already requires that the claims procedure for disability benefit claims must provide for the identification of medical or vocational experts whose advice was obtained on behalf of the plan in connection with a claimant’s adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination. In fact, the Department believes that a request for relevant documents under the current regulation would require the plan to disclose materials related to such a consultation. The plan would also be required under the current regulation to explain its basis for not adopting views of an expert the plan consulted who supported granting the claim if the claimant raised the expert’s views as part of an appeal of an adverse benefit determination. In the Department’s view, this is not a new substantive element of the requirement that plans explain the reasons for a denial, but rather is a process enhancement that removes unnecessary procedural steps for claimants to get an explanation of the reasons the plan disagrees with the views of its own consulting experts.

Accordingly, the final rule revises paragraphs (g)(1)(vii)(A) and (j)(6)(i) to require that adverse benefit determinations on disability benefit claims contain a discussion of the basis for disagreeing with the views of health care professionals who treated the claimant or vocational professionals who evaluated the claimant, when the claimant presents those views to the plan. The final rule also revises paragraphs (g)(1)(vii)(A) and (j)(6)(i) to clarify that adverse benefit determinations on disability benefit claims must contain a discussion of the basis for disagreeing with the views of medical or vocational experts whose advice was obtained on behalf of the plan in connection with a claimant’s adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination.

One commenter suggested that references to the “views” of treating health care professionals is very broad and that it is not clear what is intended to be covered by this reference. The commenter argued that “views” is not synonymous with an opinion or conclusion about whether a claimant is disabled, and that, in many cases, health care professionals do not provide an opinion on the claimant’s disability at all, and if they do, they are not providing an opinion on disability as defined by the plan. Another commenter asserted that a health care professional’s focus is on the patient’s diagnosis and treatment and that the claims adjudicator considers the long-term effect of the individual’s condition on their ability to work. These commenters argued that claims adjudicators are not necessarily agreeing or disagreeing with medical findings by a treating health care provider, rather they are considering if the claimant’s disease or illness significantly impairs their work skills. The commenters said that to require a plan to discuss why it did not agree with the views expressed by a myriad of health care professionals does nothing to help explain why a claims administrator found that the claimant was not disabled under the terms of the plan.

The Department does not believe it is appropriate to limit the scope of the final rule to opinions or conclusions about whether a claimant is disabled. Medical and vocational professionals provide views that may be important to the ultimate determination of whether a person is disabled. In the Department’s view, to the extent the claims adjudicator disagrees with foundational information in denying a claim, the claimant has a right to know that fact to the same extent the claimant should be made aware that the claims adjudicator disagrees with an opinion from a medical or vocational expert that the claimant is disabled. Further, it is part of the fiduciary role of the ERISA claims adjudicator to weigh input from medical and vocational experts in reaching a conclusion on a benefit claim. When the claims adjudicator acting in a fiduciary capacity disagrees with the judgments of medical and vocational professionals in denying a claim, the claims adjudicator as a matter of basic fiduciary accountability should be able to identify those circumstances and explain the basis for that decision. The Department also notes that the final rule requires this explanation in cases where the plan or claims adjudicator disagrees with the views of the medical or vocational expert. There is no disagreement to explain if, as the commenter posed, a treating health care consultant expresses a view only on a diagnosis or treatment which the plan fully accepts in evaluating the question of whether the claimant meets the definition of a disability under the plan. Rather, in such a case, the plan would be under the same obligation that exists under the current regulation to explain why it reached the conclusion that the diagnosed illness or treatment did not impair the claimant’s work skills or ability to work or otherwise failed to satisfy the plan’s definition of disability. In summary, the Department believes that an explanation of the basis for disagreement with the judgments of Start Printed Page 92322health care and vocational professionals is required in order to be responsive to the information submitted by the claimant or developed during evaluation of the claim, and is also necessary for a reasoned explanation of a denial.

With respect to the requirement to explain the basis for disagreeing with or not following disability determinations by the SSA and other payers of disability benefits, several commenters who supported the requirement pointed out that reviewing courts in evaluating whether a plan’s adverse benefit determination was arbitrary and capricious have found an SSA determination to award benefits to be a factor that the plan fiduciary deciding a benefit should consider. Courts have criticized the failure to consider the SSA determination, especially if a plan’s administrator operates under a conflict of interest and if the plan requires or encourages claimants to pursue SSA decisions in order to offset any SSA award against the amount they pay in disability benefits. See, e.g., Montour v. Hartford Life and Accident Ins. Co., 588 F.3d 623, 637 (9th Cir. 2009) (“failure to explain why it reached a different conclusion than the SSA is yet another factor to consider in reviewing the administrator’s decision for abuse of discretion, particularly where, as here, a plan administrator operating with a conflict of interest requires a claimant to apply and then benefits financially from the SSA’s disability finding.”); Brown v. Hartford Life Ins. Co., 301 F. App’x 772, 776 (10th Cir. 2008) (insurer’s discussion was “conclusory” and “provided no specific discussion of how the rationale for the SSA’s decision, or the evidence the SSA considered, differed from its own policy criteria or the medical documentation it considered”). Other commenters, however, urged the Department to remove the requirement to discuss the basis for disagreeing with the disability determinations of the SSA or other payers of benefits. Those commenters argued that it would not be reasonable to require an ERISA plan fiduciary to go outside the plan’s governing document and make a judgment about a disability determination made by some other party that is based upon another plan or program’s definition of disability, which may have entirely different or inconsistent definitions of disability or conditions. The commenters further argued that the plan fiduciary might not be able to get from the SSA or other payer of benefits the documents, case file or other information necessary even to try to conduct such an evaluation. Those commenters also requested that, if such a requirement was to be included in the final rule, then the rule should allow plans to take into account in the discussion of its decision the extent to which the claimant provided the plan, or gave the plan a way to obtain, sufficient documentation from the SSA or other third party to allow a meaningful review of such third-party findings.

The Department is persuaded that the final rule should limit the category of “other payers of benefits” to disability benefit determinations by the SSA. The Department accepts for purposes of this final rule that claims adjudicators generally are trained to understand their own plan or insurance policy requirements and apply those standards to claims in accordance with the internal rules, guidelines, policies, and procedures governing the plan. The Department also agrees that a determination that an individual is entitled to benefits under another employee benefit plan or other insurance coverage may not be governed by the same definitions or criteria, and that it may be difficult for the adjudicator to obtain a comprehensive explanation of the determination or relevant underlying information that was relied on by the other payer in making its determination.

The Department does not believe, however, that those same difficulties are involved in the case of SSA determinations. SSA determinations may include a written decision from an ALJ, and the definitions and presumptions are set forth in publicly available regulations and SSA guidance. Accordingly, the final rule revises paragraphs (g)(1)(vii)(A) and (j)(6)(i) to require that adverse benefit determinations on disability benefit claims contain a discussion of the basis for disagreeing with an SSA disability determination regarding the claimant presented by the claimant to the plan. Although the plan’s claims procedures may place the burden on the claimant to submit any SSA determination that the claimant wants the plan to consider, claims administrators working with an apparently deficient administrative record must inform claimants of the alleged deficiency and provide them with an opportunity to resolve the stated problem by furnishing missing information. It also would not be sufficient for the benefit determination merely to include boilerplate text about possible differences in applicable definitions, presumptions, or evidence. A discussion of the actual differences would be necessary. Further, although the final rule does not, as some commenters requested, require that plans defer to a favorable SSA determination, a more detailed justification would be required in a case where the SSA definitions were functionally equivalent to those under the plan.

Several commenters requested that the Department adopt a rule requiring deference to a treating physician’s opinion for disability determinations, with some commenters suggesting a rule identical to the one applied under the SSA disability program. Nothing in ERISA or the Department’s regulations mandates that a plan administrator give special weight to the opinions of a claimant’s treating physician when rendering a benefit determination. The Department also does not believe the public record on this rulemaking supports the Department imposing such a rule. In the Department’s view, a treating physician rule is not necessary to guard against arbitrary decision-making by plan administrators. In addition to the various improvements in safeguards and procedural protections being adopted as part of this final rule, courts can review adverse benefit determinations to determine whether the claims adjudicator acted unreasonably in disregarding evidence of a claimant’s disability, including the opinions of treating physicians. Nor does the Department believe it would be appropriate to adopt the treating physician rule applicable under the Social Security disability program. That rule was adopted by the Commissioner of Social Security in regulations issued in 1991, to bring nationwide uniformity to a vast statutory benefits program and to address varying decisions by courts of appeals addressing the question. ERISA, by contrast, governs a broad range of private benefit plans to which both the statute and implementing regulations issued by the Secretary of Labor permit significant flexibility in the processing of claims. Moreover, the SSA’s treating physician rule has not been uniformly or generally applied even under statutory disability programs other than Social Security. See Brief for the United States as amicus curiae supporting petitioner, Black & Decker Disability Plan v. Nord, 538 U.S. 822 (2003).

Under the current Section 503 Regulation, if a claim is denied based on a medical necessity, experimental treatment, or similar exclusion or limit, the adverse benefit determination must include either an explanation of the scientific or clinical judgment for the determination, applying the terms of the plan to the claimant’s medical circumstances, or a statement that such Start Printed Page 92323explanation will be provided free of charge upon request. These requirements in paragraphs (g)(1)(v)(B) and (j)(5)(ii) apply to notices of adverse benefit determinations for both group health and disability claims. In proposing new paragraphs (g)(1)(vii) and (j)(6) applicable to disability claims, these requirements were intended to be subsumed in the general requirement in the proposal that adverse benefit determinations include a “discussion of the decision.” The Department is concerned, however, that removing the explicit requirement in the disability claims procedure to explain a denial based on medical necessity, experimental treatment, or similar exclusion may be misinterpreted by some as eliminating that requirement (especially with the group health plan claims procedures continuing to have that explicit requirement). That clearly was not the Department’s intention, and, accordingly, the final rule expressly sets forth in paragraphs (g)(1)(vii)(B) and (j)(6)(ii) the requirement of an explanation of the scientific or clinical judgment for such denials.[14]

The Department received numerous comments in favor of the disclosure requirement in paragraphs (g)(1)(vii)(B) and (j)(6)(ii) of the proposal that notices of adverse benefit determinations include the internal rules, guidelines, protocols, standards or other similar criteria of the plan that were relied upon in denying the claim (or a statement that such criteria do not exist). Commenters who supported the proposal noted that the proposed requirement should not be onerous given that adverse benefit determinations are already required to include the reasons for the denial and the applicable plan terms, and also argued that this further level of transparency would promote the dialogue between claimant and plan regarding adverse benefit determinations that ERISA contemplates. These commenters also pointed out that this requirement would address a problem confronted by some claimants where a plan or claims adjudicator says it is relying on an internal rule in denying a claim, and then refuses to disclose it to the claimant based on an assertion that the internal rule is confidential or proprietary. Commenters who opposed the provision argued that the proposal would be overly burdensome for plans and insurers. They read the provision as requiring disclosure of “details of internal processes that are irrelevant to the claim decision and that would provide little in the way of useful information to claimants.” The comments included concerns about the time and cost to review claims manuals and other internal documents that may include rules, guidelines, protocols, standards or other similar criteria to determine that no provision has any application to a claim in order to make the statement that such internal rules, etc. do not exist.

The final rule, like the proposal, provides that internal rules, guidelines, protocols, standards or other similar criteria of the plan relied upon in making an adverse benefit determination must be provided with the adverse benefit determination. The Department does not agree with commenters who asserted that the requirement will be overly burdensome to plans. Even under the existing claims procedure regulation, internal rules, guidelines, protocols, standards or similar criteria relied upon in denying the claim already must be provided to the claimant upon request. Although the additional requirement to affirmatively include them in the adverse benefit determination adds an incremental paperwork burden, where a plan utilizes a specific internal rule or protocol, understanding the terms of the specific protocol may be crucial to a claimant’s ability to successfully contest the denial on review. With respect to the comments about disclosing an internal process that is irrelevant to the claim decision, it is hard to see how something that is in fact “irrelevant” can be something that was “relied upon” in denying the claim. Furthermore, the Department does not agree that it should change the proposed text based on expressed concerns about the time and cost to review claims manuals and other internal documents to determine that nothing in those materials have application to a claim. Aside from the fact that this provision of the final rule requires the plan to affirmatively include only rules, guidelines, protocols, standards or other similar criteria that were relied on in denying the claim, in the Department’s view, it would present substantial questions about whether the plan or claims adjudicator complied with ERISA’s fiduciary standards if a claim was denied without the claims adjudicator having considered a rule, guideline, protocol or standard that was intended to govern the determination of the claim. Moreover, the current Section 503 regulation for disability plans gives claimants the right to reasonable access to and copies of documents, records, and other information “relevant” to the claimant’s claim for benefits. In addition to capturing documents, records, and other information “relied upon” in making the benefit determination, the definition of “relevant” also captures information submitted, considered or generated in the course of making the benefit determination or that demonstrates compliance with the administrative processes and safeguards designed to ensure and verify that benefit claim determinations have been made in accordance with governing plan documents and that those provisions have been applied consistently with respect to similarly situated claimants. In the case of plans providing group health or disability benefits, “relevant” also includes documents, records, or other information that constitutes a statement of policy or guidance with respect to the plan concerning the denied treatment option or benefit, without regard to whether such advice or statement was relied upon in making the benefit determination. Such a statement of policy or guidance would include any policy or guidance generated or commissioned by the plan or issuer concerning the denied benefit that would or should contribute to deciding generally whether to pay the claim (e.g., studies, surveys or assessments generated or commissioned by the plan or issuer that implicate a denied treatment option or benefit but do not relate specifically to the plan itself). Thus, in the Department’s view, even under the current rule, plans would be required, on request, to verify that the plan has produced all the internal rules, guidelines, protocols, standards or other similar criteria concerning the denied claim that were or should have been considered in deciding the claim.

Another commenter argued that it did not make sense to require plans to Start Printed Page 92324affirmatively state in an adverse benefit determination that plans did not rely on any rule or guideline. They argued that, if the adverse benefit determination failed to cite reliance on such a rule or guideline, the claimant could ask and the plan would respond with a statement that none were relied on. They argued that such a process gives the claimant the ability to obtain that information in cases where the claimant believes that information is important to understanding or contesting the basis for the denial. It is the Department’s view, however, that an affirmative statement would be helpful to the claimant by providing certainty about the existence of any applicable rule or guideline. The Department also does not believe the absence of a statement of reliance in an adverse benefit statement fairly puts a claimant on notice to request confirmation that no rule or guideline was relied upon. Further, the Department does not believe merely requiring such an affirmative statement is burdensome on plans because the plan should know whether it relied on a rule or guideline in denying a claim.

Finally, the existing Section 503 regulation already requires that rules, guidelines, protocols, standards or other similar criteria that were relied on in denying the claim must be disclosed to claimants on request. Nothing in the current regulation allows a plan fiduciary to decline to comply with that requirement based on an assertion that the information is proprietary or confidential. Indeed, the Department has taken the position that internal rules, guidelines, protocols, or similar criteria would constitute instruments under which a plan is established or operated within the meaning of section 104(b)(4) of ERISA and, as such, must be disclosed to participants and beneficiaries. See FAQs About The Benefit Claims Procedure Regulation, C-17 (www.dol.gov/​sites/​default/​files/​ebsa/​about-ebsa/​our-activities/​programs-and-initiatives/​outreach-and-education/​hbec/​CAGHDP.pdf).[15] Similarly, this final rule does not permit a plan to conceal such information from the claimant under an assertion that the information is proprietary or constitutes confidential business information.

The third new disclosure requirement, set forth in paragraph (g)(1)(vii)(C) of the proposal, adds a requirement that an adverse benefit determination at the initial claims stage must include a statement that the claimant is entitled to receive, upon request, documents relevant to the claim for benefits. Although the current Section 503 Regulation provides that claimants challenging an initial denial of a claim have a right to request relevant documents, a statement advising claimants of their right to relevant documents currently is required only in notices of an adverse benefit determination on appeal. No commenters objected to the addition of this statement to the adverse benefit determination at the initial claims stage. The Department believes such a statement in the initial denial notice simply confirms rights claimants already have under the current claims regulation and will help ensure claimants understand their right of access to the information needed to understand the reasons for the denial and decide whether and how they may challenge the denial on appeal. Accordingly, this provision was adopted without change in the final rule.
3. Right To Review and Respond to New Information Before Final Decision

The Department continues to believe that a full and fair review requires that claimants have a right to review and respond to new evidence or rationales developed by the plan during the pendency of the appeal and have the opportunity to fully and fairly present his or her case at the administrative appeal level, as opposed merely to having a right to review such information on request only after the claim has already been denied on appeal. Accordingly, the final rule adopts those provisions of the proposal with certain modifications described below.

Paragraph (h)(4) of the final rule, consistent with the proposal, requires that plans provide claimants, free of charge, with new or additional evidence considered, relied upon, or generated by the plan, insurer, or other person making the benefit determination (or at the direction of the plan, insurer or such other person) during the pendency of the appeal in connection with the claim. Consistent with the proposal, paragraph (h)(4) also provides a similar disclosure requirement for an adverse benefit determination based on a new or additional rationale. The evidence or rationale must be provided as soon as possible and sufficiently in advance of the date on which the notice of adverse benefit determination on review is required to be provided to give the claimant a reasonable opportunity to address the evidence or rationale prior to that date. These requirements already apply to claims involving group health benefits under the ACA Claims and Appeals Final Rule. Further, the Department has interpreted ERISA section 503 and the current Section 503 Regulation as already requiring that plans provide claimants with new or additional evidence or rationales upon request and provide them an opportunity to respond in at least certain circumstances.[16]

The objective of these provisions is to ensure the claimant’s ability to obtain a full and fair review of denied disability claims by explicitly providing that claimants have a right to review and respond to new or additional evidence or rationales developed by the plan during the pendency of the appeal, as opposed merely to having a right to such information on request only after the claim has already been denied on appeal, as some courts have held under the Section 503 Regulation. These protections are direct imports from the ACA Claims and Appeals Final Rule, and they would correct procedural problems evidenced in litigation even predating the ACA.[17] It was and continues to be the view of the Department that claimants are deprived of a full and fair review, as required by Start Printed Page 92325section 503 of ERISA, when they are prevented from responding, at the administrative stage level, to all evidence and rationales.[18]

As an example of how these new provisions would work, assume the plan denies a claim at the initial stage based on a medical report generated by the plan administrator. Also assume the claimant appeals the adverse benefit determination and, during the 45-day period the plan has to make its decision on appeal, the plan administrator causes a new medical report to be generated. The proposal and the final rule would require the plan to automatically furnish to the claimant any new or additional evidence in the second report. The obligation applies to any new or additional evidence, including, in particular, evidence that may support granting the claim. The plan would have to furnish the new or additional evidence to the claimant before the expiration of the 45-day period. The evidence would have to be furnished as soon as possible and sufficiently in advance of the applicable deadline (including an extension if available) in order to give the claimant a reasonable opportunity to address the new or additional evidence. The plan would be required to consider any response from the claimant. If the claimant’s response happened to cause the plan to generate a third medical report containing new or additional evidence, the plan would have to automatically furnish to the claimant any new or additional evidence in the third report. The new or additional evidence would have to be furnished as soon as possible and sufficiently in advance of the applicable deadline to allow the claimant a reasonable opportunity to respond to the new or additional evidence in the third report.

Several commenters asked for clarification regarding the application of the rights in paragraph (h)(4)(i) of the proposal which would have required that the plan’s claims procedures must allow a claimant to review the claim file and to present evidence and testimony as part of the “disability benefit claims and appeals process.” The commenters noted that, although subsection (h) deals with the appeals portion of the claim process, use of the phrase “claims and appeals process” could cause confusion as to whether the requirements of that subsection are intended to apply only to the appeals portion of the process or also to the initial stage of the claim process. Those commenters also suggested that this provision be deleted in its entirety because it was redundant and unnecessary. They pointed out that paragraph (g)(1)(vii)(C) of the proposal already added a requirement that claimants be notified as part of a denial at the initial claims stage of their right to review copies of documents and other information relevant to the claim for benefits. They pointed to the definition of “relevant” in the current regulation at paragraph (m)(8), which includes documents, records or other information that were relied upon in making the benefit determination, submitted, considered or generated in the course of making the benefit determination, demonstrates compliance with the certain administrative safeguards and requirements required under the regulation, or constitutes a statement of policy or guidance with respect to the plan concerning a denied treatment option or benefit or the claimant’s diagnosis. The commenters also noted that paragraph (h)(2)(ii) of the regulation currently gives claimants the right to “submit written comments, documents, records, and other information” as part of an initial claim. Consequently, they asserted that a provision stating that they can also submit “evidence” and “testimony” does not appear to add to the current requirements.

The text in paragraph (h)(4)(i) was intended to parallel text in the regulation for group health plans under the ACA Claims and Appeals Final Rule. The ACA Claims and Appeals Final Rule specifically addressed rights to review and respond to new or additional evidence or rationales during the appeal stage. The Department agrees with the commenters that the provision is intended to be limited to the appeal stage. The Department also agrees that the new text in proposed paragraph (h)(4)(i) on rights to review the claims file and to present evidence is unnecessary in the disability claims procedure regulation because those rights already exist under the current Section 503 regulation. Accordingly, because that provision in the proposal would not have added new substantive requirements, the Department has deleted the provision from the final rule. In light of the deletion of proposed paragraph (h)(4)(i) from the final rule, the definition in the proposal of “claim file” is also unnecessary, and, accordingly, the Department is not including that definitional provision in the final rule. The changes from the proposal should not be viewed, however, as in any way restricting claimant’s rights to documents, records, or other information under the regulation, or to restrict claimant’s rights to present evidence. For example, in the Department’s view, if the plan or claims adjudicator maintains a claims file or other similar compilation of documents, records, and other information, such a file by definition would constitute relevant materials and be subject to mandatory disclosure under the final rule.

In response to the paragraph (h)(4)(i) as drafted in the proposal, several commenters expressed concern that some plans would have read the language as imposing courtroom evidentiary standards for claimants submitting proof of their claim. Others expressed concern about a statement in the proposal’s preamble that referenced “written” testimony because they thought some plans might rely on that reference to prohibit claimants from submitting audio or video evidence. The Department did not intend that the provision be read to limit the types of evidence that claimants can submit or otherwise put claimants in a worse position than they face under the current regulation. For example, the Department does not believe that plans could refuse to accept evidence submitted in the form of video, audio or other electronic media. Further, in the Department’s view, even under the current regulation, it would not be permissible for a plan to impose courtroom evidentiary standards in determining whether the plan will accept or consider information or materials submitted by a claimant.

Several commenters argued that giving claimants new or additional evidence or rationales developed during the pendency of the appeal and requiring plans to consider and address claimant submissions regarding the new or additional evidence or rationale would set up an unnecessary cycle of review and re-review leading to delay and increased costs. The Department is not persuaded by this argument. The requirement conforms the disability claims regulation to the group health plan claims process requirements under the ACA Claims and Appeals Final Rule. Granting both parties (the claimant and the plan) the opportunity to address the other side’s evidence has not resulted in an endless loop of submissions in group health claims under the ACA Claims and Appeals Final Rule, and there is no reason to believe that this would occur in the disability claims administrative process. The Department also has previously stated its view that the supposed “endless loop” is necessarily limited by claimants’ ability to generate new or Start Printed Page 92326additional evidence requiring further review by the plan. Such submissions ordinarily become repetitive in short order, and are further circumscribed by the limited financial resources of most claimants. If a claimant’s assertions do not include new factual information or medical diagnoses, a plan need not generate report after report rather than relying on the reports it already has in hand merely because a claimant objects to or disagrees with the evidence or rationale. The process also necessarily resolves itself when the plan decides it has enough evidence to properly decide the claim and does not generate new or additional evidence or rationales to support its decision.[19] The fiduciary obligation to pay benefits in accordance with the terms of the plan does not require a fiduciary to endlessly rebut credible evidence supplied by a claimant that, if accepted, would be sufficient to justify granting the claim. In fact, an aggressive claims processing practice of routinely rejecting or seeking to undermine credible evidence supplied by a claimant raises questions about whether a fiduciary, especially one operating under a conflict of interest, is violating the fiduciary’s loyalty obligation under ERISA to act solely in the interest of the plan’s participants and beneficiaries.

Several commenters complained about the possibility of claimants arguing that plans failed to comply with the claims procedure whenever any additional evidence was relied on to support a rationale that was already used as a basis for denying a claim. They expressed similar concerns about determining whether a rationale relied on in denying a claim on review was a “new” or “additional” rationale. They asked the Department to include in the final rule a definition of what constitutes “new or additional” evidence or a “new or additional” rationale. They asserted that the rule might be read to permit a claimant to receive and rebut medical opinion reports generated in the course of an administrative appeal, even when those reports contain no new factual information and deny benefits on the same basis as the initial decision.

The Department does not believe it is necessary or appropriate to include definitions of the terms “new evidence” or “new rationale” in the final rule. Those same terms exist in the parallel claims procedure requirement applicable to group health plans under the ACA Claims and Appeals Final Rule, and have been part of the claims procedure requirements for those plans for several years. The Department does, however, intend that the terms be applied broadly so that claimants have the opportunity to respond at the administrative stage level to all evidence and rationales. Many federal courts have held that in reviewing a plan administrator’s decision for abuse of discretion, the courts are limited to the “administrative record”—the materials compiled by the administrator in the course of making his or her decision. See Miller v. United Welfare Fund, 72 F.3d 1066, 1071 (2d Cir.1995) (compiling cases and stating that “[m]ost circuits have declared that, in reviewing decisions of plan fiduciaries under the arbitrary and capricious standard, district courts may consider only the evidence that the fiduciaries themselves considered”). While some courts have held that when conducting a de novo review, any party may be free to submit additional evidence outside the administrative record,[20] most circuits have adopted rules allowing the admission of additional evidence in de novo cases only in limited circumstances. In addition to requiring the deciding fiduciary to consider the claimant’s response to new or additional evidence or rationales, the Department believes it is important that the claimant have the right and opportunity to ensure that a full administrative record is before a reviewing court when new or additional evidence or rationales are introduced into the record by the plan or deciding fiduciary.[21]

The Department requested comments on whether, and to what extent, modifications to the existing timing rules are needed to ensure that disability benefit claimants and plans will have ample time to engage in the back-and-forth dialogue that is contemplated by these new review and response rights. The current Section 503 Regulation requires that the plan must decide claims and appeals within a reasonable period, taking into account all circumstances. The following timeframes reflect the maximum period by which a plan must make a determination: (1) Initial claim: 45 days after submission; additional 30 days with prior notice for circumstances beyond control of the plan; and (2) Appeal: 45 days after receipt of appeal; additional 45 days with prior notice for “special circumstances.” A special deadline for deciding appeals applies when the named fiduciary is a board or committee of a multiemployer plan that meets at least quarterly. The Department received several comments with suggestions on possible new timing requirements for the claimant to respond to the new evidence and a time deadline for the claims administrator to make its final decision. Other commenters asserted that the current regulations are sufficient for the needs of consumers covered under this final regulation and provide “ample” time for plans and claimants to engage in the necessary dialogue. One commenter raised an issue concerning this rule and its impact on the prompt administration of disability claims. The commenter described, by way of example, that the plan would have to send claimants new or additional evidence before the plan may have determined whether and how the evidence may contribute to an adverse appeal decision, claimants would receive new or additional evidence piecemeal as the appeals process continues and claimants could be required to provide comments back without necessarily knowing how that information may, if at all, affect the decision. The Department does not believe that the rule envisions this kind of process. This provision by its terms does not apply if a plan grants the claim on appeal. Instead, when the plan has decided that it is going to deny the claim on appeal, that is the point at which the rule requires new or additional evidence must be provided to the claimant, sufficiently in advance of final decision so that the claimant can address such evidence. The provision does not require that the plan provide the claimant with information in a piecemeal fashion without knowing whether, and if so how, that information may affect the decision.

The Department noted in the preamble to the proposal that the group health plan claims regulation provides that if the new or additional evidence or rationale is received by a plan so late that it would be impossible to provide it to the claimant in time for the Start Printed Page 92327claimant to have a reasonable opportunity to respond, the period for providing a notice of final internal adverse benefit determination is tolled until such time as the claimant has a reasonable opportunity to respond. The Department did not include this special tolling provision in the proposed amendments because the current disability claims regulation, as described above, already permits plans to take extensions at the appeals stage. In the Department’s view, the current disability claims regulation “special circumstances” provision permits the extension and tolling expressly added to the group health plan rule under the ACA Claims and Appeals Final Rule.[22] Although the Department is not including special timing provisions in the final rule, the Department is open to considering comments on whether sub-regulatory guidance regarding the current provisions on extensions and tolling would be helpful in the context of the new review and response rights.

Commenters asked the Department to confirm that a plan could satisfy the new review and response requirements through a current procedure, which was described as “universal and a result of established case law.” Specifically the commenters stated that some plans currently provide claimants with a voluntary opportunity to appeal any rationale raised for the first time in an appeal denial letter. They contended that this process works well because it gives the claimant a choice of whether to appeal and supplement the administrative record based on a challenge to the new evidence or rationale. They also asserted that the procedure would address commenters’ concern that this requirement may conflict with claims administrator’s obligation to meet the requisite time requirements for deciding claims and appeals. In fact, a few other commenters specifically asked that the new requirement not apply to plans that currently offer a voluntary additional level of appeal. The Department does not agree that a voluntary additional level of appeal provides the same rights to claimants because the additional level of appeal is not subject to the rule’s provisions on timing of notification of benefit determinations on appeal. In the Department’s view, it would not be appropriate to condition a claimant’s right to review and respond to new evidence on the claimant effectively being required to give up rights to a timely review and decision at the appeal stage.

Finally, the Department’s experience enforcing the current regulation for group health plans has revealed circumstances where claims adjudicators assert that they are satisfying this requirement by providing claimants with a notice informing them that the plan relied on new or additional evidence or a new or additional rationale in denying the claim, and offering to provide the new evidence or rationale on request. As the Department explained in the preamble to the ACA Claims and Appeals Final Rule for group health plans,[23] in order to comply with this requirement, a plan or issuer must send the new or additional evidence or rationale automatically to the claimant as soon as it becomes available to the plan. Merely sending a notice informing claimants of the availability of such information fails to satisfy the requirement, and if a plan’s claims procedure says the plan will send a notice of the availability of such information, the responsible plan fiduciary similarly would fail to have met the requirement under ERISA section 503 for the plan to establish and maintain a reasonable procedure governing the filing of benefit claims, notification of benefit determinations, and appeal of adverse benefit determinations.
4. Deemed Exhaustion of Claims and Appeals Processes

The final rule tracks the proposal and provides that if a plan fails to adhere to all the requirements in the claims procedure regulation, the claimant would be deemed to have exhausted administrative remedies, with a limited exception where the violation was (i) de minimis; (ii) non-prejudicial; (iii) attributable to good cause or matters beyond the plan’s control; (iv) in the context of an ongoing good-faith exchange of information; and (v) not reflective of a pattern or practice of non-compliance. The rule thus mirrors the existing standard applicable to group health plans under the ACA Claims and Appeals Final Rule and is stricter than a mere “substantial compliance” requirement.

The Department received a number of generally favorable comments regarding the deemed exhaustion provisions in paragraphs (l)(1) and (2) of the proposal. Those commenters argued that claimants should not have to follow a claims and appeals process that is less than full, fair, and timely. Some of those commenters expressed concern that the language in proposed paragraph (l)(2)(i) was potentially inconsistent with language in the preamble. The commenters noted that the preamble stated that “in those situations when the minor errors exception does not apply, the proposal clarifies that the reviewing tribunal should not give special deference to the plan’s decision, but rather should review the dispute de novo.” By contrast, they point out that proposed paragraph (l)(2)(i) provides that “[i]f a claimant chooses to pursue remedies under section 502(a) of ERISA under such circumstances, the claim or appeal is deemed denied on review without the exercise of discretion by an appropriate fiduciary.” According to the commenters, plans could argue that the language in proposed paragraph (l)(2)(i) does not go far enough and suggested that the regulation should expressly require de novo review.

The Department does not intend to establish a general rule regarding the level of deference that a reviewing court may choose to give a fiduciary’s decision interpreting benefit provisions in the plan’s governing documents. However, the cases reviewing a plan fiduciary’s decision under a deferential arbitrary or capricious standard are based on the idea that the plan Start Printed Page 92328documents give the fiduciary discretionary authority to interpret the plan documents. By providing that the claim is deemed denied without the exercise of fiduciary discretion, the regulation relies on the regulatory authority granted the Department in ERISA sections 503 and 505 and is intended to define what constitutes a denial of a claim. The legal effect of the definition may be that a court would conclude that de novo review is appropriate because of the regulation that determines as a matter of law that no fiduciary discretion was exercised in denying the claim.

A number of commenters expressed concern with proposed paragraph (l)(2)(i), arguing that the proposal encourages claimants to circumvent a plan’s claims and appeals process, to seek remedies in court in the case of insignificant missteps in claims management practices that have no impact on claim outcomes, and, therefore, will result in increased litigation. One commenter asked that the proposal be deleted. A few commenters suggested alternative approaches to the proposal. For example, they suggested that the Department consider a rule which first requires claimants to notify the plan that they intend to pursue judicial review based upon the plan’s procedural error, and provide plans with a reasonable period of time to cure the error before the claimant can dispense with further administrative review. The Department does not believe that the typical participant pursuing a disability benefit claim in the context of a fair and timely review process will, as the commenters claimed, seek remedies in court in the case of insignificant missteps in claims management processes that have no impact on the ultimate decision on the claim. Further, the Department does not believe it would be appropriate to create a rule that could create incentives for plans and insurers to violate procedural requirements designed to protect claimants and ensure transparency in the decision-making process knowing that before the claimant could seek redress that the claimant would have to identify the violation, notify the plan of the violation, and give the plan time to cure the error. Rather, after careful consideration of these comments, the Department continues to believe that claimants should not have to follow a claims and appeals process that is less than full, fair, and timely. Accordingly, the Department decided to retain the deemed exhaustion provisions as proposed, including the exception to the strict compliance standard for errors that are minor and that meet certain other specified conditions.[24]
5. Coverage Rescissions—Adverse Benefit Determinations

Paragraph (m)(4) of the final rule amends the definition of an adverse benefit determination to include, for plans providing disability benefits, a rescission of disability benefit coverage that has a retroactive effect, except to the extent it is attributable to a failure to timely pay required premiums or contributions towards the cost of coverage. The Department did not receive any comments objecting to this provision in the proposed rule, and, accordingly, the provision is adopted without change in the final rule.

Several commenters suggested that the provision be expanded to expressly include situations, particularly in cases involving mental health and substance use disorder claims, where a plan approves treatment for a period less than that requested, but defers the right to appeal until the date the approved benefits end. The Department did not make such a modification to paragraph (m)(4) in the final rule because the Department does not agree that such cases should be addressed as rescissions.

Rather, it appears that the commenters were making a more general point that the claims procedure regulation should expressly define an adverse benefit determination to include instances in which such a limitation is invoked. In that regard, the current regulation provides that the term “adverse benefit determination” includes any denial, reduction, or termination of, or a failure to provide or make payment (in whole or in part) for, a benefit. The Department issued a set of FAQs under the current regulation explaining the application of that definition to various situations. One FAQ stated that if a plan provides for the payment of disability benefits for a pre-determined, fixed period (e.g., a specified number of weeks or months or until a specified date), the termination of benefits at the end of the specified period would not constitute an adverse benefit determination under the regulation. Rather, the Department concluded that any request by a claimant for payment of disability benefits beyond the specified period would constitute a new claim.[25] Another FAQ, however, addressed the different situation where the plan pays less than the total amount of expenses submitted with regard to a post-service claim. We explained that, while the plan is paying out the benefits to which the claimant is entitled under its terms, the claimant is nonetheless receiving less than full reimbursement of the submitted expenses. Therefore, in order to permit the claimant to challenge the plan’s calculation of how much it is required to pay, that decision is required to be treated as an adverse benefit determination under the regulation.[26] Whether the situation presented by the commenters should be treated more like the former or latter FAQ will depend on the terms of the plan and the particular facts and circumstances.

One commenter asked whether the proposed rule regarding rescissions of coverage applies to adjustments or suspensions of benefits that reduce or eliminate a disability pension benefit under section 305 of ERISA, which corresponds to section 432 of the Internal Revenue Code of 1986 (Code). It is the Department’s view that a retroactive reduction or elimination of disability pension benefits pursuant to section 305 of ERISA is not a rescission of coverage under paragraph (m)(4)(ii) of the final rule. However, a retroactive reduction or elimination of disability pension benefits, that results from a finding by the plan that the claimant was not disabled within the meaning of the plan when the disability pension benefits were reduced or eliminated under ERISA section 305, would be an adverse benefit determination under the claims procedure regulation. If the claims adjudicator must make a determination of disability in order to decide a claim, the claim must be treated as a disability claim for purposes of the Section 503 Regulation.[27]
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6. Culturally & Linguistically Appropriate Notices

Paragraphs (g)(1)(vii)(C), (j)(7) and (o) of the final rule require plans to provide notice to claimants in a culturally and linguistically appropriate manner. The final rule adopts the standards already applicable to group health plans under the ACA Claims and Appeals Final Rule. Specifically, if a claimant’s address is in a county where ten percent or more of the population residing in that county are literate only in the same non-English language as determined in guidance based on American Community Survey data published by the United States Census Bureau, notices of adverse benefit determinations to the claimant would have to include a statement prominently displayed in the applicable non-English language clearly indicating how to access language services provided by the plan. In addition, plans must provide a customer assistance process (such as a telephone hotline) with oral language services in the non-English language and provide written notices in the non-English language upon request.[28]

A few commenters requested clarification that the culturally and linguistically appropriate standards (CLAS) requirements in the regulation apply only to notices of adverse benefit determinations and not to other communications regarding disability claims. In the Department’s view, the text of paragraphs (g)(1)(vii)(C) and (j)(7) is clear that the CLAS requirements are applicable to notices of adverse benefit determinations. The final rule does not address whether, and under what circumstances, the fiduciary duty or other provisions in ERISA would require plans to provide plan participants and beneficiaries with access to language services (see, for example, the discussion below regarding summary plan description (SPD) requirements).

A few commenters requested that the Department remove the CLAS standards. Other commenters supported the CLAS requirements but requested that the Department provide a reasonable time for compliance with this provision, citing operational changes and costs associated with the CLAS requirements. Other commenters requested that the threshold percentage that triggers the CLAS requirements be reduced to a lower percentage to capture a greater number of counties or to reflect a percentage of plan participants as opposed to the population of a relevant county. One commenter suggested that the Department may have unintentionally reduced protections for non-English speaking participants. The commenter pointed out that although a particular county may not meet the threshold under this rule, particular workforces may meet the Department’s thresholds under section § 2520.102-2(c).

In light of all the comments received, this final rule retains the CLAS requirements as set forth in the proposal. The Department believes that the CLAS requirements impose reasonable language access requirements on plans and appropriately balance the objective of protecting claimants by providing reasonable language assistance to individuals who communicate in languages other than English with the goal of mitigating administrative burdens on plans. The Department continues to believe that it is important to provide claims denial notices in a culturally and linguistically appropriate manner to ensure that individuals get the important information needed to properly evaluate the decision denying a claim and to allow for an informed decision on options for seeking review of a denial. Therefore, the final rule adopts the requirements in the proposal without change.

The Department does not agree that the final rule supersedes the summary plan description foreign language rules in § 2520.102-2(c) which include a requirement to offer assistance (which could include language services) calculated to provide participants with a reasonable opportunity to become informed as to their rights and obligations under the plan. Non-English speaking participants could be eligible for language services under either this final rule or § 2520.102-2(c), depending on the circumstances.

Finally, one commenter asked that the Department clarify that the English version of the notices takes precedence in the event of any conflict with the translated documents. Another commenter asked for clarification that the requirement to provide “assistance with filing claims and appeals in any applicable non-English language” is limited to procedural, not substantive, assistance. The Department was not persuaded that including such provisions in the final rule is necessary or appropriate. Notices provided to participants or beneficiaries should be complete and accurate notwithstanding the language used. Further, a “substantive versus procedural” distinction between the type of assistance required is not, in the Department’s view, particularly meaningful or helpful. Rather, the final rule requires plan fiduciaries to provide disability benefit claimants with the requisite level and amount of assistance necessary to assist the claimants in understanding their rights and obligations so that they can effectively file claims and appeals in pursuing a claim for disability benefits.
7. Miscellaneous
a. Technical Correction

The Department determined that a minor technical fix to the Section 503 Regulation is required with respect to disability claims. The Department proposed to clarify that the extended time frames for deciding disability claims, provided by the quarterly meeting rule found in the current regulation at 29 CFR 2560.503-1(i)(1)(ii), are applicable only to multiemployer plans. The Department did not receive any adverse comments on the proposed technical fix, and, accordingly, the final rule amends paragraph (i)(3) to correctly refer to the appropriate subparagraph in (i)(1) of the Section 503 Regulation.
b. Contractual Limitations Periods for Challenging Benefit Denials

In the proposal, the Department asked for comments on whether the claims procedure rule should address limitations periods in plans that govern the period after a final adverse benefit determination within which a civil action may be filed under section 502(a)(1)(B) of ERISA. We pointed out that ERISA does not specify that period and noted that the federal courts have generally looked to analogous state laws to determine an appropriate limitations period. Analogous state law limitations periods vary, but they generally start with the same event, the plan’s final benefit determination. We acknowledged that the Supreme Court recently upheld the use of contractual limitations periods in plan documents and insurance contracts which may override analogous state laws so long as they are reasonable. See Heimeshoff v. Hartford Life & Accident Ins. Co., 134 S.Ct. 604, 611 (2013). We pointed out that contractual limitations periods are not uniform, the events that trigger the clock vary, and the documents in which the limitations periods are embedded may be difficult for claimants to obtain and understand. We also highlighted a Start Printed Page 92330separate issue, not before the Supreme Court in Heimeshoff, of whether plans must provide participants notice with respect to contractual limitations periods in adverse benefit determinations on review. Although many federal courts have held that plans should provide such notice under the Section 503 Regulation, the court decisions are not uniform.[29] Accordingly, the Department solicited comments on whether the final regulation should require plans to provide claimants with a clear and prominent statement of any applicable contractual limitations period and its expiration date for the claim at issue in the final notice of adverse benefit determination on appeal and with an updated notice of that expiration date if tolling or some other event causes that date to change.

In response, the Department received many comments from claimants and participant advocates supporting a contractual limitations period notice requirement. Numerous commenters further requested that any required notice include the date on which the relevant contractual limitations period expires. They also asked the Department to include a definition of a “reasonable limitations period.” One commenter argued to the contrary that a rule requiring inclusion of a specific date would create confusion for claimants and carries a risk that the insurer or other administrative entity is seen as providing legal advice. Another commenter urged that such a rule should not be adopted because the date by which suit must be filed may be subject to dispute in litigation. A commenter expressed concern that such a notice requirement is largely unnecessary as the information is generally already included in plan documents, (e.g., the summary plan description), and that it could impose significant administrative burden. The commenter suggested that a more appropriate rule would be to require that the notice of adverse benefit determination on review include a statement alerting participants that they should review the terms of the applicable plan documents to determine any deadline by which they must file a civil action. Finally, a number of commenters asked the Department to specifically address whether it is allowable for a contractual limitations period to be structured so that it could actually expire before the plan’s appeals process is completed.

In light of the issues identified regarding contractual limitations periods, the Department concluded that it was appropriate in this final rule to address certain basic points.

First, section 503 of ERISA requires that a plan afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review of that decision by an appropriate named fiduciary. The Department does not believe that a claims procedure would satisfy the statutory requirement if the plan included a contractual limitations period that expired before the review was concluded. In the Department’s view, this is clear from the Supreme Court’s holding in Heimeshoff. In that case, the Supreme Court held that an ERISA disability plan’s three-year limitations period, running from the date of proof of loss, was enforceable even though the statute of limitations began to run before the participant’s cause of action accrued. The Court pointed out that there was nothing to suggest the 3-year contractual limitations period was not “reasonable” in light of the Department’s regulation that would require the internal claims and appeals process to be completed well inside a three-year period. Heimeshoff, 134 S.Ct. at 612 (citing Order of United Commercial Travelers of America v. Wolfe, 67 S.Ct. 1355 (1947)). A limitations period that expires before the conclusion of the plan’s internal appeals process on its face violates ERISA section 503’s requirement of a full and fair review process. A process that effectively requires the claimant to forego the right to judicial review and thereby insulates the administrator from impartial judicial review falls far short of the statutory fairness standard and undermines the claims administrator’s incentives to decide claims correctly.

Further, in rejecting the challenge to the contractual limitations period at issue in Heimeshoff, the Court emphasized that the claimant was allowed a year or more to bring suit after the close of the internal claims review process.[30] A contractual limitations period that does not allow such a reasonable period after the conclusion of the appeal in which to bring a lawsuit is unenforceable.[31] Moreover, as the Start Printed Page 92331Supreme Court also recognized in Heimeshoff, even in cases with an otherwise enforceable contractual limitations period, traditional doctrines, such as waiver and estoppel, may apply if a plan’s internal review prevents a claimant from bringing section 502(a)(1)(B) actions within the contractual period. Heimeshoff, 134 S.Ct. at 615. In addition to such traditional remedies, plans that offer appeals or dispute resolution beyond what is contemplated in the claims procedure regulations must agree to toll the limitations provision during that time. See 29 CFR 2560.503-1(c)(3)(ii).

Second, the Department agrees with the conclusion of those federal courts that have found that the current regulation fairly read requires some basic disclosure of contractual limitations periods in adverse benefit determinations. In fact, in the Department’s view, the statement of the claimant’s right to bring a civil action under section 502(a) of ERISA following an adverse benefit determination on review would be incomplete and potentially misleading if it failed to include limitations or restrictions in the documents governing the plan on the right to bring such a civil action. Accordingly, this final rule includes in new paragraph (j)(4)(ii) a requirement that the notice of an adverse benefit determination on review must include a description of any applicable contractual limitations period and its expiration date.

The Department is not persuaded that inclusion in the notice of adverse benefit determination on review of any applicable contractual limitations period and its expiration date will result in confusion. The Department also does not agree that a statement of the plan’s view as to the exact date the limitations period expires will somehow inappropriately foreclose or otherwise prejudice legitimate arguments about application of the limitations period in individual cases. Nor does the Department believe that disclosure of a contractual limitations period requires the plan to provide legal advice. Additionally, as described below, the Department does not believe that including a description of any contractual limitations period, including the date by which the claimant must bring a lawsuit, would impose more than a minimal additional burden. Although the final rule provision is technically applicable only to disability benefit claims, as explained above, the Department believes that notices of adverse benefit determinations on review for other benefit types would be required to include some disclosure about any applicable contractual limitations period. What would be sufficient will depend on the controlling judicial precedent and the individual facts and circumstances, but the Department would consider the inclusion of the information in paragraph (j)(4)(ii) to be an appropriate disclosure for all plan types.

Several comments raised other issues pertaining to the disclosure of contractual and statutory limitations on a claimant’s right to bring a civil action under section 502(a) of ERISA. Issues beyond this final rule may be addressed in a future regulatory action or other guidance by the Department.
c. Comments Beyond the Scope of the Rulemaking

Some commenters raised disability claims procedure issues pertaining to matters that the Department considers to be beyond the scope of this rulemaking. For example, one commenter suggested that the Department amend its Model Statement of ERISA Rights for SPDs for disability plans to include notification of eligibility for language services. Other commenters requested that the Department propose a rule requiring that adverse benefit determinations on review notify disability benefit claimants of the ERISA venue provisions. Other issues raised by some commenters relate to substantive limitations on recoupment of benefit overpayments, rights to supplement the administrative record for court review, and the validity of discretionary clauses in plans that are used as a basis for seeking a deferential “arbitrary or capricious” standard for court review of benefit denials. Although the Department agrees that the issues raised by the commenters may merit an evaluation of additional regulatory actions on procedural safeguards and protections, those subjects are beyond the scope of this rulemaking. As the Department noted in the preamble to the proposal, this rulemaking was a start to improving the current standards applicable to the processing of claims and appeals for disability benefits so that they include improvements to certain basic procedural protections in the current Section 503 Regulation. Issues beyond this final rule may be addressed in a future regulatory action or other guidance by the Department.
III. Economic Impact and Paperwork Burden
A. Background and Need for Regulatory Action

As discussed in Section I of this preamble, the final amendments would revise and strengthen the current rules regarding claims and appeals applicable to ERISA-covered plans providing disability benefits primarily by adopting several of the new procedural protections and safeguards made applicable to ERISA-covered group health plans by the Affordable Care Act. Before the enactment of the ACA, group health plan sponsors and sponsors of ERISA-covered plans providing disability benefits were required to implement claims and appeal processes that complied with the Department’s regulation establishing minimum requirements for benefit claims procedures for employee benefit plans covered by Title I of ERISA.[32] The enactment of the ACA and the issuance of the implementing interim final regulations in 2010 resulted in disability benefit claimants receiving fewer procedural protections than group health plan participants even though disputes and litigation regarding disability benefit claims are more prevalent than health care benefit claims.[33] In order to ensure fundamental fairness in the claim and appeals procedure process, health and disability plan claimants are entitled to receive the same procedural protections as they did when the 2000 regulation was issued.

The Department believes this action is necessary to ensure that disability claimants receive a full and fair review of their claims under the more stringent procedural protections that Congress established for group health care claimants under the ACA. The final rule will promote fairness and accuracy in the claims review process and protect participants and beneficiaries in ERISA-covered disability plans by ensuring they receive benefits that otherwise might have been denied by plan administrators in the absence of the fuller protections provided by this final regulation. The final rule also will help alleviate the financial and emotional hardship suffered by many individuals when they are unable to work after becoming disabled and their claims are denied.

As stated earlier in this preamble, this action also is necessary to correct Start Printed Page 92332procedural problems evidenced in litigation under the 2000 regulation predating the ACA, which in the Department’s view, resulted in claimants not receiving a full and fair review as required by ERISA section 503. Specifically, some courts held that under the 2000 regulation, claimants only have the right to review and respond to new evidence or rationales developed during the pendency of an appeal after the claim has been denied on appeal. The final rule levels the playing field by explicitly requiring plan administrators to provide claimants, free of charge, with any new evidence or rationale relied upon, considered, or generated by the plan in connection with the claim and a reasonable opportunity for the claimant to respond.

The Department disagrees with commenters’ assertion that disability plan claim procedures should not mirror the ACA group health plan amendments because of the difference between health and disability claims. For reasons discussed earlier in this preamble, after careful consideration, the Department incorporated into the final rule only certain of the ACA group health plan claims procedure amendments to ensure that disability plan claimants receive the same opportunity to pursue a full and fair review of their claims as required by ERISA section 503 with the procedural safeguards and consumer protections that are aligned with those required by group health plans under the ACA and the Department’s implementing regulation at 29 CFR 2590.715-2719. This final rule aligns the disability claims procedures with the ACA procedural safeguards and consumer protections for group health plans. The Department did not amend other provisions of the 2000 regulation that affect how disability plan claims are processed or the timing requirements. Therefore, as discussed more fully below, the Department does not expect that the final rule will lead to delays and significant increased cost for disability claims and appeals processes. The Department considered comments asserting that some of its cost estimates in the proposed Regulatory Impact Analysis (“RIA”) were underestimated and made adjustments where appropriate.

The Department has crafted these final regulations to secure the protections of those submitting disability benefit claims. In accordance with OMB Circular A-4, the Department has quantified the costs where possible and provided a qualitative discussion of the benefits that are associated with these final regulations.
B. Executive Order 12866 and 13563

Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects; distributive impacts; and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility.

Under Executive Order 12866 (58 FR 51735), “significant” regulatory actions are subject to review by the Office of Management and Budget (OMB). Section 3(f) of the Executive Order defines a “significant regulatory action” as an action that is likely to result in a rule (1) having an annual effect on the economy of $100 million or more in any one year, or adversely and materially affecting a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local or tribal governments or communities (also referred to as “economically significant”); (2) creating a serious inconsistency or otherwise interfering with an action taken or planned by another agency; (3) materially altering the budgetary impacts of entitlement grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) raising novel legal or policy issues arising out of legal mandates, the President’s priorities, or the principles set forth in the Executive Order. It has been determined that this rule is significant within the meaning of section 3(f) (4) of the Executive Order. Therefore, OMB has reviewed the final rule pursuant to the Executive Order. The Department provides an assessment of the potential costs and benefits of the final rule below, as summarized in Table 1, below. The Department concludes that the economic benefits of these final regulations justify their costs.

Table 1—Accounting Table
Category Estimate Year dollar Discount rate Period covered
Benefits—Qualitative 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 regulation. 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 will be achieved. Fairness and accuracy will increase as fuller and fairer disability claims processes provide claimants with sufficient information to evaluate the claims process and defend their rights under their plan.
Costs:
Annualized $15,806,000 2016 7% 2018-2027
Monetized 15,806,000 2016 3% 2018-2027
Qualitative The Department believes that these requirements have modest costs associated with them, since many chiefly clarify provisions of the current DOL claims procedure regulation. As discussed in detail in the cost section below, the Department quantified the costs associated with two provisions of the final regulations for which it had sufficient data: The requirements to provide (1) additional information to claimants in the appeals process and (2) information in a culturally and linguistically appropriate manner.
1. Estimated Number of Affected Entities

The Department does not have complete data on the number of plans providing disability benefits or the total number of participants covered by such plans. ERISA-covered welfare benefit plans with more than 100 participants generally are required to file the Form 5500 Annual Return/Report. Currently, only a small number of ERISA-covered welfare benefit plans with less than 100 participants are required to file the form. Based on current trends in the establishment of pension and health plans, there are many more small plans than large plans, but the majority of participants are covered by the large plans.

Data from the 2014 Form 5500 Schedule A indicates that there are 39,135 plans reporting a code indicating they provide temporary disability benefits covering 40.1 million participants, and 26,171 plans reporting a code indicating they provide long-term disability benefits covering 22.4 million participants.[34] To put the number of large and small plans in perspective, the Department estimates that there are 150,000 large group health plans and 2.1 million small group health plans using 2016 Medical Expenditure Panel Survey-Insurance Component. While most plans are small plans most participants are in large plans.
2. Benefits

In developing these final regulations, the Department closely considered their potential economic effects, including both benefits and costs. The Department does not have sufficient data to quantify the benefits associated with these final regulations due to data limitations and a lack of effective measures. Therefore, the Department provides a qualitative discussion of the benefits below.

These final regulations implement a more uniform, rigorous, and fair disability claims and appeals process as required by ERISA section 503 that conforms to a carefully selected set of the requirements applicable to group health plans under the ACA Claims and Appeals Final Rule. In general, the Department expects that these final regulations will improve the procedural protections for disabled workers who make claims for disability benefits from ERISA-covered employee benefit plans. This will cause some participants to receive benefits that, absent the fuller protections of the regulation, they might otherwise have been incorrectly denied. In other circumstances, expenditures in the claims process incurred by plans may be reduced as a fuller and fairer system of claims and appeals processing helps facilitate participant acceptance of cost management efforts. The Department expects that 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 will 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. This certainty and consistency also are expected to benefit, to varying degrees, all parties within the system and lead to broader social welfare gains, particularly for disability benefit plan claimants.

The Department expects that these final regulations also will improve the efficiency of disability benefit plans by improving their transparency and fostering participants’ confidence in their fairness. The enhanced disclosure and notice requirements contained in these final regulations will help ensure that benefit participants and beneficiaries have a clear understanding of the reasons underlying adverse benefit determinations and their appeal rights.

For example, the final regulations require all adverse benefit determinations to contain a discussion of the decision, including an explanation of the basis for disagreeing with the views of a treating health care professional or vocational professional who evaluated the claimant or any disability determination regarding the claimant made by the Social Security Administration and presented to the plan by the claimant. This provision would address the confusion often experienced by claimants when there is little or no explanation provided for their plan’s determination and/or their plan’s determination is contrary to their treating professional’s opinion or their SSA award of disability benefits.

The final rule also requires adverse benefit determinations to contain the internal rules, guidelines, protocols, standards or other similar criteria of the plan that were relied upon in denying the claim (or a statement that these do not exist), and a notice of adverse benefit determination at the claims stage must contain a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s benefit claim. These provisions will benefit claimants by ensuring that they fully understand the reasons why their claim was denied so they are able to meaningfully evaluate the merits of pursuing an appeal or litigation.

The requirement to include a discussion of the decision, as well as the requirement to include specific internal rules, guideline, protocols, standards, or similar criteria relied upon by the plan will improve the accuracy of claims determinations. The process of documenting and explaining the reasoning of the decision will help ensure that plans’ terms are followed and accurate information is used, and will enable plan participants to challenge inadequate or faulty evidence or reasoning.

Under the final rule, adverse benefit determinations must be provided in a culturally and linguistically appropriate manner for certain participants and beneficiaries that are not fluent in Start Printed Page 92334English. Specifically, if a claimant’s address is in a county where 10 percent or more of the population residing in that county, as determined based on American Community Survey (ACS) data published by the United States Census Bureau, are literate only in the same non-English language, notices of adverse benefit determinations to the claimant would have to include a prominent one-sentence statement in the relevant non-English language about the availability of language services. This provision will ensure that certain disability claimants that are not fluent in English understand the notices received from the plan regarding their disability claims and their right to appeal denied claims.

These important protections would benefit participants and beneficiaries by correcting procedural wrongs evidenced in the litigation even predating the ACA.

The voluntary nature of the employment-based benefit system in conjunction with the open and dynamic character of labor markets make explicit as well as implicit negotiations on compensation a key determinant of the prevalence of employee benefits coverage. The prevalence of benefits is therefore largely dependent on the efficacy of this exchange. If workers perceive that there is the potential for inappropriate denial of benefits or handling of appeals, they will discount the value of such benefits to adjust for this risk. This discount drives a wedge in compensation negotiation, limiting its efficiency. If workers undervalue the full benefit of disability coverage, fewer employers will provide such coverage or fewer participants will enroll. To the extent that workers perceive that the final rule, supported by the Department’s enforcement authority, will reduce the risk of inappropriate denials of disability benefits, the differential between the employers’ costs and workers’ willingness to accept wage offsets is minimized.

These final regulations would reduce the likelihood of inappropriate benefit denials by requiring all disability claims and appeals to be adjudicated by persons that are independent and impartial. Specifically, the final rule would prohibit hiring, compensation, termination, promotion, or other similar decisions with respect to any individual (such as a claims adjudicator or a medical or vocational expert) to be made based upon the likelihood that the individual will support the plan’s benefits denial. This will ensure that all disability benefit plan claims and appeals processes are adjudicated in a manner designed to ensure the independence and impartiality of persons involved in making the decisions and enhance participants’ perception that their disability plan’s claims and appeals processes are operated in a fair manner.

As stated above, the final rule requires claimants to have the right to review and respond to new evidence or rationales developed by the plan during the pendency of an appeal, as opposed merely to having a right to such information upon request only after the claim has already been denied on appeal, as some courts have held under the Section 503 Regulation. These provisions will benefit claimants by correcting certain procedural flaws that currently occur when disability benefit claims are litigated and ensuring that they have a right to review and respond to new evidence or rationales developed by the plan during the pendency of the appeal.

In summary, the final rules provide more uniform standards for handling disability benefit claims and appeals that are comparable to the rules applicable to group health plans under the ACA Claims and Appeals Final Rule. These rules will reduce the incidence of inappropriate denials, averting serious financial hardship and emotional distress for participants and beneficiaries that are impacted by a disability. They also would enhance participants’ confidence in the fairness of their plans’ claims and appeals processes. Finally, by improving the transparency and flow of information between plans and claimants, the final regulations will enhance the efficiency of labor and insurance markets.
3. Costs and Transfers

The Department has quantified the costs related to the final regulations’ requirements to (1) provide the claimant free of charge with any new or additional evidence considered, and (2) to providing notices of adverse benefit determinations in a culturally and linguistically appropriate manner. These requirements and their associated costs are discussed below

Provision of new or additional evidence or rationale: As stated earlier in this preamble, before a plan providing disability benefits can issue an adverse benefit determination on review on a disability benefit claim, these final regulations require such plans to provide the claimant, free of charge, with any new or additional evidence considered, relied upon, or generated by (or at the direction of) the plan or any new or additional rationale upon which the adverse determination is based as soon as possible and sufficiently in advance of the date the notice of adverse benefit determination on review is required to be provided. This requirement may increase the administrative burden on plans to prepare and deliver the enhanced information to claimants. The Department is not aware of a data source substantiating how often plans rely on new or additional evidence or rationale during the appeals process or the volume of materials that comprise the new evidence or rationale. Based on comments and discussions with the regulated community, the Department understands that few plans base adverse benefit determinations on appeal on new evidence or rationales. The Department also understands that the most critical new information relied on by plans when issuing adverse benefit determinations on review are new independent medical reports, and that at least some plans and insurers have a practice of providing claimants with rights to a voluntary additional level of appeal to respond to the new independent medical report if they disagree with its findings.

These final rules further require adverse benefit determinations on review for disability benefit plans to include a description of any contractual limitations period, including the date by which the claimant must bring a lawsuit. In the regulatory impact analysis for the proposal, the Department estimated these costs by assuming that compliance will require medical office staff, or other similar staff for another service provider with a labor rate of $30, five minutes [35] to collect and distribute the additional evidence or rationale considered, relied upon, or generated by (or at the direction of) the plan during the appeals process. Additionally, including a description of any contractual limitations period, including the date by which the claimant must bring a lawsuit would have minimal additional burden as plans already maintain such information in the ordinary course of their claims administration process and would just need to add it to the notice.

One commenter questioned the Department’s assumption asserting that it does not account for time to identify the additional or new information or rationale and for staff to respond. Commenters also asserted that providing the information will trigger a response by the claimant to which they Start Printed Page 92335will have to respond. The commenter provided no alternative estimates or data supporting their assertions that the Department could use to revise its cost estimate.

In the absence of such data, the Department disagrees with the comments. While some effort is required to provide claimants with the new information or rationale, the Department does not find the commenters’ assertion of significant burden to be credible. As part of its customary and usual business practices, the insurer or TPA should have an existing system in place to track any new information or rationale it relies on in making an adverse benefit determination in order to identify, document, and evaluate the information during its claim adjudication process. The Department acknowledges, however, that an average of five minutes may be inadequate time to collect the information and provide it to the claimants; therefore, it has increased the estimate to an average of 30 minutes, which should provide a reasonable amount of time to perform this task.

The Department also agrees that making the new or additional information or rationale available to the claimant may trigger a response from the claimant. However, the Department does not have sufficient data to estimate the number of claimants that will respond with information that the insurer or TPA will need to evaluate or how much time will be required to evaluate the information. Moreover, the Department’s consultations with EBSA field investigators that investigate disability plan issues indicate that many disability plans already allow claimants to respond to the new information or rationale in a back-and-forth process. The requirement imposes no new costs on these plans, insurers, and TPAs. The requirement does impose an additional burden on plans that do not allow claimants to respond to the new information or rationale, but the Department does not have sufficient data to estimate the increased costs. One industry commenter agreed that that it would be difficult to estimate the burden associated with responding to claimants.

Commenters also raised concern regarding a potentially endless cycle of appeals, responses, and reconsiderations that would extend the claim determination process and substantially increase costs. As discussed elsewhere in the preamble, the Department also does not find this claim to be credible. The requirement only requires action if the insurer or TPA produces new or additional information or rationale after reviewing the new information submitted by the claimant, not if it just evaluates the information submitted by the claimant, and the Department’s consultations with its investigators indicated that this occurs infrequently.

Additionally, while a plan fiduciary has a responsibility to ensure the accurate evaluation of all claims, that responsibility does not require the fiduciary to rebut every piece of evidence submitted or seek to deny every claim. Indeed, an endless effort to rebut every piece of evidence submitted by the claimant would call into question whether the fiduciary was impartially resolving claims as required by the duties of prudence and loyalty.

Furthermore, the Department has interpreted ERISA section 503 and the current Section 503 Regulation as already requiring that plans provide claimants with new or additional evidence or rationales upon request and an opportunity to respond in certain circumstances. See Brief of the Secretary of Labor, Hilda L. Solis, as Amicus Curiae in Support of Plaintiff-Appellant’s Petition for Rehearing, Midgett v. Washington Group Int’l Long Term Disability Plan, 561 F.3d 887 (8th Cir. 2009) (No. 08-2523), (expressing disagreement with cases holding that there is no such requirement). The supposed “endless loop” is necessarily limited by claimants’ ability to generate new evidence requiring further review by the plan. Such submissions ordinarily become repetitive in short order, and are further circumscribed by the limited financial resources of most claimants.

For purposes of this regulatory impact analysis, the Department assumes, as an upper bound, that all appealed claims will involve a reliance on additional evidence or rationale. Based on that assumption, the Department assumes that this requirement will impose an annual aggregate cost of $14.5 million. The Department estimates this cost by assuming that compliance will require medical office staff, or another service providers’ similar staff with a labor rate of $42.08, thirty minutes [36] to collect and distribute the additional evidence considered, relied upon, or generated by (or at the direction of) the plan during the appeals process. The Department estimates that on average, material, printing and postage costs will total $2.15 per mailing (20 pages * 0.05 cents per copy + $1.15 postage). The Department further assumes that 30 percent of all mailings will be distributed electronically with no associated material, printing or postage costs.[37]

The Department does not have sufficient data on the number of disability claims that are filed or denied. Therefore, the Department estimates the number of short- and long-term disability claims based on the percentage of private sector employees (122 million) [38] that participate in short- and long-term disability programs (approximately 39 and 33 percent respectively).[39] The Department estimates the number of claims per covered life for long-term disability benefits based on the percentage of covered individuals that file claims under the Social Security Disability Insurance Program (SSDI) (two percent of covered individuals). The Department notes that SSDI uses a standard for disability determinations that is stricter than the standard used in many long-term disability plans offered by private employers. However, the number of claims filed with the SSDI is an acceptable proxy as most employer plans require claimants to file with the SSDI as a condition of receiving benefits from the plan as they offset the benefits paid by plan with the amount received from SSDI.

The Department does not have sufficient data to estimate the percentage of covered individuals that file short-term disability claims. Therefore, for purposes of this analysis, the Department estimates, as it did in Start Printed Page 92336the proposal, that six percent of covered lives file such claims, because it believes that short-term disability claims rates are higher than long-term disability claim rates. The Department received no comments regarding this assumption.

The Department estimates the number of denied claims that would be covered by the rule in the following manner: For long-term disability, the percent of claims denied is estimated using the percent of denied claims for the SSDI Program (75 percent). This estimate may overstate the denial rates for ERISA-covered long-term disability plans, because as discussed above, many plans require claimants to file for SSDI benefits as a requirement to receive benefits from their plan. Plans often have a lower benefit determination standard, at least initially, than the SSDI Program resulting in less denied claims. Therefore, using the SSDI denied claims rate as a proxy for the ERISA-covered plan claims denial rate may overstate the number of private long-term disability plan denied claims. For short-term disability, the estimate of denied claims (three percent) is an assumption based on previous regulations and feedback. The estimates are provided in the table below.

Table 2—Fair and Full Review Burden

[In thousands]
  Short-term Long-term Total
Electronic Paper Electronic Paper Electronic Paper All
Denied Claims and lost Appeals with Additional Information 26 60 168 391 193 451 644
Mailing cost per event $0.00 $2.15 $0.00 $2.15 $0.00 $2.15
Total Mailing Cost $0.00 $129 $0.00 $841 $0.00 $969 $969
Preparation Cost per event $21.04 $21.04 $21.04 $21.04 $21.04 $21.04 $21.04
Total Preparation cost $540 $1,260 $3,526 $8,227 $4,066 $9,487 $13,553
Total $540 $1,388 $3,526 $9,068 $4,066 $10,456 $14,522

Adverse benefit determinations on disability benefit claims would have to contain a discussion of the decision, including the basis for disagreeing with SSA Disability Determination and Views of Treating Physician: Commenters on the proposal noted that costs were not quantified for the added burden of including in the benefit determination a discussion of why the plan did not follow the determination of the SSA or views of health care professionals that treated the claimant. Commenters did not provide data or information that would provide the Department with sufficient data to quantify such costs. Thus, while the Department agrees that there could be added burden imposed on plans to provide this discussion in adverse benefit determinations, the Department is unable to estimate the burden because it does not have sufficient data on the number or percent of claims that would need to contain this discussion.

Departmental investigators reviewing disability claims report that if the plan deviates from an attending physician’s recommendation, a review is conducted by a supervisor, nurse, medical director or a consultant. This additional review usually generates documentation in the claim file. While this documentation may not be adequate in its current form to satisfy the requirement, the incremental costs to comply could be small, because it appears that deviations from physician’s recommendations are documented currently. Plans or insurers may still need to prepare a response using the already available information. The Department does not know how many claim determinations would require this discussion. The average hourly labor rate of a nurse is $46.02 and that of a physician is $157.80, and the Department estimates that preparing a report with information already available should not take more than one hour.

Adverse benefit determination would have to contain the internal rules, guidelines, protocols, standards, or other similar criteria of the plan used in denying the claim. The Department believes that this requirement will have minimal costs. In the process of determining a claim, plans will know, or should know, the internal rules, guidelines or protocols that were used to make a benefit determination. A commenter was concerned about the time and costs that would be required to comb through hundreds of pages of a claim manual to determine that no provision has any conceivable application to a particular claim in order to substantiate this requirement. The Department believes that neither the proposal nor the final rule requires this type of costly and time consuming process. The rule requires only the inclusion of those items that were relied upon and that should already be documented in the claim file at the time it was used to make a determination.

A notice of adverse benefit determination at the claims stage would have to contain a statement that the claimant is entitled to receive relevant documents upon request. The Department believes that this requirement will have a negligible cost impact, because an insignificant amount of time will be required to add the statement to the notice. Although the current claims procedure regulation provides claimants with the right to request relevant documents when challenging an initial claims denial, a statement was required to be included only in notices of adverse benefit determinations on appeal. Including the statement in the initial denial notice as required by the final rule, in the Department’s view, merely confirms claimants’ rights under the current claims procedure regulation and will help ensure that they understand their right to receive such information to help them understand the reasons for the denial and to make informed decisions regarding whether and how they challenge a denial on appeal. The Department acknowledges that it is likely that more claimants will request this information when they are informed of their right to receive it; however, the Department does not have sufficient data to estimate the number of requests that will be made.

Culturally and Linguistically Appropriate Notices: The final regulations require notices of adverse benefit determinations with respect to disability benefits to be provided in a culturally and linguistically appropriate manner in certain situations. This requirement is satisfied if plans provide oral language services including Start Printed Page 92337answering questions and providing assistance with filing claims and appeals in any applicable non-English language. The final regulations also require each notice sent by a plan to which the requirement applies to include a one-sentence statement in the relevant non-English language that translation services are available. The Department believes that this requirement will have a negligible cost impact. Plans also must provide, upon request, a notice in any applicable non-English language.

Although, one commenter reported that oral translation services are not provided by plans, the Department’s conversations with the regulated community indicate that oral translation services generally are offered as a standard service. Based on this information, the Department assumes that only a small number of plans will need to begin offering oral translation services for the first time upon the issuance of the final rule. Therefore, the Department assumes that this requirement will impose minimal additional costs.

The Department expects that the largest cost associated with the requirement is for plans to provide notices in the applicable non-English language upon request. Based on 2014 ACS data, the Department estimates that there are about 22.7 million individuals living in covered counties that are literate only in a covered non-English Language.[40] To estimate the number of these individuals that might request a notice in a non-English language, the Department estimated the number of workers in each county (total population in county * state labor force participation rate * (1—state unemployment rate)) [41 42] and calculated the number with access to short-term and long-term disability insurance by multiplying those estimates by the estimates of the share of workers participating in disability benefit programs (39 percent for short-term and 33 percent for long term disability.) [43] It should be noted that the sums in the right two columns are all workers in the county with disability insurance, not just workers with disability insurance that are eligible to receive notices in the applicable non-English language, because the calculation for the number of requests for translation is based on workers with insurance.

Table 3—Workers in Affected Counties by State
  Pop in the county Total effected foreign language pop in county State labor force participation rate (2015) (%) State unemployment rate (2015) (%) Workers with short-term disability coverage Workers with long-term disability coverage
Alabama 29,519 3,979 56 6 6,097 5,159
Alaska 8,634 2,677 67.1 6.5 2,113 1,788
Arizona 296,362 160,492 59.8 6.1 64,901 54,917
Arkansas 15,864 4,598 57.9 5.2 3,396 2,874
California 26,248,619 8,845,211 62.2 6.2 5,972,612 5,053,748
Colorado 513,177 122,183 66.7 3.9 128,287 108,550
Florida 3,166,261 1,785,759 59.3 5.4 692,719 586,147
Georgia 284,282 72,578 61.3 5.9 63,953 54,114
Idaho 87,012 21,145 63.9 4.1 20,795 17,596
Illinois 484,509 126,443 64.7 5.9 115,043 97,344
Iowa 35,029 7,861 69.9 3.7 9,196 7,781
Kansas 254,997 72,446 67.9 4.2 64,690 54,737
Missouri 6,170 919 65.6 5.0 1,500 1,269
Nebraska 106,532 26,134 70.1 3.0 28,251 23,905
Nevada 1,869,086 431,029 63.2 6.7 429,826 363,699
New Jersey 1,736,310 563,516 64.1 5.6 409,753 346,714
New Mexico 512,864 218,554 57.2 6.6 106,859 90,419
New York 4,983,647 1,472,029 61.1 5.3 1,124,613 951,596
North Carolina 55,317 10,260 61.2 5.7 12,450 10,535
Oklahoma 23,150 7,325 61.9 4.2 5,354 4,530
Oregon 31,532 8,897 61.1 5.7 7,085 5,995
Texas 12,541,167 5,304,121 63.7 4.5 2,975,400 2,517,646
Virginia 50,989 15,060 65.2 4.4 12,395 10,488
Washington 437,583 164,140 63.0 5.7 101,386 85,788
Puerto Rico 3,433,930 3,252,314 39.8 11.2 473,317 400,499
Total 57,212,542 22,699,670 12,825,893 10,852,679

The Department’s discussions with the regulated community indicate that in California, which has a State law requirement for providing translation services for health benefit claims, requests for translations of written documents averages 0.098 requests per 1,000 members (note that requirement applies to all members not just foreign language speaking) for health claims. While the requirements of California differ from those contained in these final regulations and the demographics for California do not match those of covered counties, for purposes of this Start Printed Page 92338analysis, the Department used this percentage to estimate the number of translation service requests that plans could expect to receive. The Department believes that this estimate significantly overstates the number of translation requests that will be received, because there are fewer disability claims than health claims. Industry experts also told the Department that while the cost of translation services varies, $500 per document is a reasonable approximation of translation cost, and the Department used this amount in its cost estimate for the final rule. This number was provided to the Department in 2010; therefore, for purposes of this analysis, the Department has adjusted this amount to $553 to account for inflation.[44]

Based on the foregoing, the Department estimates that the cost to provide translation services pursuant to the final rule will be approximately $1,283,840 annually (23,678,572 lives * 0.098/1000 * $553).

Commenters questioned the data the Department used in the regulatory impact analysis for the proposed rule to estimate the costs incurred by TPAs and insurers to provide culturally and linguistically appropriate notices. One commenter questioned whether the $500 per document translation cost accurately reflects the costs to comply with this provision. The commenter, however, failed to explain its rationale or provide any alternative information the Department could use to refine its estimate.

Another commenter questioned whether it was valid to rely on cost estimates to translate a notice into a non-English language based on data used by the Department to quantify the costs of complying with the a similar ACA requirement for group health plans. The Department believes that its experience with ACA group health plan claims and appeals regulations is directly applicable to this final regulation regarding disability claims and appeals. Contrary to the commenter’s assertion that disability claims are so different from health claims that information about one cannot inform the other, the Department believes that translation of a notice into a different language is very similar for health and disability benefits, particularly as the same translation companies offer services for both types of notices. Also, while commenters argue that disability claims files are much larger than medical claim files, the distinction is not relevant here, because the claim file is not required to be translated; only the notice is.

Another comment received was that there would be additional costs due to privacy issues arising from sharing personal information with a third-party. The same privacy issues arise in the health claims context. Pricing for translation services used in the analysis, therefore already have the costs for privacy issues built into the estimates.

The Department did not have sufficient data to quantify other costs associated with the final rule; and therefore, has provided a qualitative discussion of these costs below and a response to cost-related comments received in response to the regulatory impact analysis for the proposed regulation.

Independence and Impartiality-Avoiding Conflicts of Interest: The Department’s claims and appeals regulation required certain standards of independence for persons making claims decisions before the final rules were issued. These final rules add new criteria for avoiding conflicts that require plans providing disability benefits to ensure “that all claims and appeals for disability benefits are adjudicated in a manner designed to ensure the independence and impartiality of the persons involved in making the decisions.” Also decisions regarding hiring, compensation, termination, promotion, or other similar matters must not be made based on the likelihood that the individual will support the denial of benefits.

These requirements provide protections to claimants by ensuring that their claims are processed impartially and already are considered best practice by many plan administrators who comply with this standard. Some plans and insurers may need to evaluate their policies and procedures to ensure they are compliant with this this requirement. The Department did not have sufficient data to quantify the costs of these requirements.

One commenter, who supported applying independence and impartiality requirements, expressed concern about a statement in the preamble to the proposed rule where the Department explained, as an example, that a plan cannot contract with a medical expert based on the expert’s reputation for outcomes in contested cases rather than based on the expert’s professional qualifications. The commenter expressed concern that the statement in the preamble might result in claimants requesting statistics and other information on cases in which the medical expert expressed opinions in support of denying versus granting a disability benefit claims.

In the Department’s view, the preamble statement is an accurate example of one way that the independence and impartiality standard would be violated, and, accordingly, does not believe it would be appropriate to disclaim or caveat the statement in the final rule. That said, the independence and impartiality requirements in the rule do not modify the scope of what would be “relevant documents” subject to the disclosure requirements in paragraphs (g)(1)(vii)(C) and (h)(2)(iii) of the Section 503 Regulation, as amended by this rule. Nor does the rule prescribe limits on the extent to which information about consulting experts would be discoverable in a court proceeding as part of an evaluation of the extent to which the claims administrator or insurer was acting under a conflict of interest that should be considered in evaluating an adverse benefit determination. Thus, the Department acknowledges that plans may incur costs to respond to claimants’ requests for statistics and other information described by the commenter. However, the commenter provided no evidence or data to support their assertion and did not quantify the additional cost, thus the Department does not have sufficient data to quantify such costs.

Deemed Exhaustion of Claims and Appeals Process: The final rule tracks the proposal and provides that if a plan fails to adhere to all the requirements in the claims procedure regulation, the claimant would be deemed to have exhausted administrative remedies, with a limited exception where the violation was (i) de minimis; (ii) non-prejudicial; (iii) attributable to good cause or matters beyond the plan’s control; (iv) in the context of an ongoing good-faith exchange of information; and (v) not reflective of a pattern or practice of non-compliance. Litigation costs are the primary cost related to this requirement, because claimants may proceed directly to court after a deemed exhaustion. Pursing litigation is more expensive than the plan appeals process, however, it may be the only option claimants have available to obtain denied benefits. Deemed exhaustion is available for the situations when plans are not following the procedural rules of the regulation. At times it may still be in a claimant’s best interest to pursue an appeal inside the plan due to cost and time to resolve issues instead of using the court system. Commenters raised a concern the Start Printed Page 92339claimants would be hurt by the higher costs and delay in obtaining a resolution if they sought resolution through litigation. However, this provision allows claimants to decide if the added costs and time of litigation are offset by the cost to them of remaining in an appeals process that is in violation of the procedural rules.

Some commenters maintained that their liability exposure increases when claimants’ ability to go to court is enhanced. These commenters expressed concern about the expense of discovery to even determine if the procedural requirements have not been followed and asserted that claimants will allege that plans have violated their procedures and go to court to force a settlement.

While all of these scenarios are possible, the Department does not know of, nor did commenters provide, any data or information that would even be suggestive of, the frequency of these events, or the added expense resulting from their occurrence. The Department is not aware of systematic abuses or complaints of abuse with respect to a similar deemed exhaustion requirement contained in the ACA and the Departments’ implementing regulation at 29 CFR 2590.715.2719. Thus, the Department believes these occurrences will be infrequent.

Covered Rescissions-Adverse Benefit Determinations: The final rule adds a new provision to address coverage rescissions. Specifically, the 2000 regulation already covered a rescission if it is the basis, in whole or in part, of an adverse benefit determination. The final regulation amends the definition of adverse benefit determination to include a rescission of disability benefit coverage that has a retroactive effect, whether or not there is an adverse effect on a benefit at that time.

The Department understands that this situation occurs infrequently. When it does occur, plans will incur the cost of providing an appeal of the rescission. The Department does not have sufficient data to estimate the cost to review and appeal a rescission of coverage. However, the Department expects that it would be less than the cost to appeal other disability benefit denials because medical or vocation professionals are not needed to review the claim. Instead, the facts of the coverage situation are required. When a rescission is reversed, the provision of future benefits would be considered a transfer from the plan to the claimant whose rescission was reversed.
C. Regulatory Flexibility Act

The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) imposes certain requirements with respect to Federal rules that are subject to the notice and comment requirements of section 553(b) of the Administrative Procedure Act (5 U.S.C. 551 et seq.) and which are likely to have a significant economic impact on a substantial number of small entities. Unless an agency determines that a final rule is not likely to have a significant economic impact on a substantial number of small entities, section 604 of the RFA requires the agency to present a final regulatory flexibility analysis (FRFA) of the final rule describing the rule’s impact on small entities and explaining how the agency made its decisions with respect to the application of the rule to small entities. Pursuant to section 605(b) of the RFA, the Assistant Secretary of the Employee Benefits Security Administration hereby certifies that the final rule will not have a significant economic impact on a substantial number of small entities. The Department discusses the impacts of the final rule and the basis for its certification below.

Need for and Objectives of the Rule: As discussed in section II above, the final rule will revise and strengthen the current rules regarding claims and appeals applicable to ERISA-covered plans providing disability benefits primarily by adopting several of the new procedural protections and safeguards made applicable to ERISA-covered group health plans by the Affordable Care Act. Before the enactment of the Affordable Care Act, group health plan sponsors and sponsors of ERISA-covered plans providing disability benefits were required to implement internal claims and appeal processes that complied with the Section 503 Regulation. The enactment of the Affordable Care Act and the issuance of the implementing interim final regulations resulted in disability plan claimants receiving fewer procedural protections than group health plan participants even though litigation regarding disability benefit claims is prevalent today.

The Department believes this action is necessary to ensure that disability claimants receive the same protections that Congress and the President established for group health care claimants under the Affordable Care Act. This will result in some participants receiving benefits they might otherwise have been incorrectly denied in the absence of the fuller protections provided by the final regulation. This will help alleviate the financial and emotional hardship suffered by many individuals when they lose earnings due to their becoming disabled.

Affected Small Entities: The Department does not have complete data on the number of plans providing disability benefits or the total number of participants covered by such plans. ERISA-covered welfare benefit plans with more than 100 participants generally are required to file a Form 5500. Only some ERISA-covered welfare benefit plans with less than 100 participants are required to file for various reasons, but this number is very small. Based on current trends in the establishment of pension and health plans, there are many more small plans than large plans, but the majority of participants are covered by the large plans.

Data from the 2014 Form 5500 Schedule A indicates that there are 39,135 plans reporting a code indicating they provide temporary disability benefits covering 40.1 million participants, and 26,171 plans reporting a code indicating they provide long-term disability benefits covering 22.4 million participants. To put the number of large and small plans in perspective, the Department estimates that there are 150,000 large group health plans and 2.1 million small group health plans using 2016 Medical Expenditure Panel Survey-Insurance Component.

Impact of the Rule: The Department has quantified some of the costs associated with these final regulations’ requirements to (1) provide the claimant free of charge with any new or additional evidence considered, and (2) to providing notices of adverse benefit determinations in a culturally and linguistically appropriate manner. These requirements and their associated costs are discussed in the Costs and Transfers section above. Additionally other costs are qualitatively discussed in the Costs section. Comments addressing the burden of the regulations were received and are discussed above as well.

Provision of new or additional evidence or rationale: As stated earlier in this preamble, before a plan can issue a notice of adverse benefit determination on review, the final rule requires plans to provide disability benefit claimants, free of charge, with any new or additional evidence considered, relied upon, or generated by (or at the direction of) the plan as soon as possible and sufficiently in advance of the date the notice of adverse benefit determination on review is required to be provided and any new or additional Start Printed Page 92340rationale sufficiently in advance of the due date of the response to an adverse benefit determination on review.

The Department is not aware of data suggesting how often plans rely on new or additional evidence or rationale during the appeals process or the volume of materials that are received. The Department estimated the cost per claim by assuming that compliance will require medical office staff, or other similar staff in other service setting with a labor rate of $30, 30 minutes to collect and distribute the additional evidence considered, relied upon, or generated by (or at the direction of) the plan during the appeals process. The Department estimates that on average, material, printing and postage costs will total $2.50 per mailing. The Department further assumes that 30 percent of all mailings will be distributed electronically with no associated material, printing or postage costs.

Providing Notices in a Culturally and Linguistically Appropriate Manner: The final rule would require notices of adverse benefit determinations with respect to disability benefits to be provided in a culturally and linguistically appropriate manner in certain situations. This requirement is satisfied if plans provide oral language services including answering questions and providing assistance with filing claims and appeals in any applicable non-English language. The final rule also requires such notices of adverse benefit determinations sent by a plan to which the requirement applies to include a one-sentence statement in the relevant non-English language about the availability of language services. Plans also must provide, upon request, such notices of adverse benefit determinations in the applicable non-English language.

The Department expects that the largest cost associated with the requirement for culturally and linguistically appropriate notices will be for plans to provide notices in the applicable non-English language upon request. Industry experts also told the Department that while the cost of translation services varies, $553 per document is a reasonable approximation of translation cost.

In discussions with the regulated community, the Department found that experience in California, which has a State law requirement for providing translation services, indicates that requests for translations of written documents averages 0.098 requests per 1,000 members for health claims. While the California law is not identical to the final rule, and the demographics for California do not match other counties, for purposes of this analysis, the Department used this percentage to estimate of the number of translation service requests plans could expect to receive. Based on the low number of requests per claim, the Department expects that translation costs would be included as part of a package of services offered to a plan, and that the costs of actual requests will be spread across multiple plans.

Duplication, Overlap, and Conflict With Other Rules and Regulations: The Department does not believe that the final rule will conflict with any relevant regulations, federal or other.
D. Paperwork Reduction Act

In accordance with the requirements of the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)), the Department submitted an information collection request (ICR) to OMB regarding the ICRs contained in the final rule in accordance with 44 U.S.C. 3507(d), for OMB’s review. OMB approved the ICR under OMB Control Number 1210-0053, which currently is scheduled to expire on November 30, 2019.

As discussed earlier in this preamble, the Department’s final amendments to its claims and appeals procedure regulation would revise and strengthen the current rules regarding claims and appeals applicable to ERISA-covered plans providing disability benefits primarily by adopting several of the procedural protections and safeguards made applicable to ERISA-covered group health plans by the ACA. Some of these amendments revise disclosure requirements under the current rule that are information collections covered by the PRA. For example, benefit denial notices must contain a full discussion of why the plan denied the claim, and to the extent the plan did not follow or agree with the views presented by the claimant to the plan or health care professional treating the claimant or vocational professionals who evaluated the claimant, or a disability determination regarding the claimant presented by the claimant to the plan made by the SSA, the discussion must include an explanation of the basis for disagreeing with the views or disability determination. The notices also must include either (1) the specific internal rules, guidelines, protocols, standards or other similar criteria of the plan relied upon in making the adverse determination or, alternatively, or (2) a statement that such rules, guidelines, protocols, standards or other similar criteria of the plan do not exist.

A copy of the ICR may be obtained by contacting the PRA addressee shown below or at http://www.RegInfo.gov. PRA ADDRESSEE: G. Christopher Cosby, Office of Policy and Research, U.S. Department of Labor, Employee Benefits Security Administration, 200 Constitution Avenue NW., Room N- 5718, Washington, DC 20210. Telephone: (202) 693-8410; Fax: (202) 219-4745. These are not toll-free numbers.

After the implementation of the ACA claims regulations, disability plans claimants received fewer procedural protections than group health plan participants even though disability plan claimants experience more issues with the claims review process. These final regulations will reduce the inconsistent procedural rules applied to health and disability benefit plan claims and provide similar procedural protections to claimants of both types of plans.

The burdens associated with the regulatory requirements of the ICRs contained in the final rule are summarized below.

Type of Review: Revised collection.

Agencies: Employee Benefits Security Administration, Department of Labor.

Title: ERISA Claims Procedures.

OMB Number: 1210-0053.

Affected Public: Business or other for-profit; not-for-profit institutions.

Total Respondents: 5,808,000.

Total Responses: 311,790,000.

Frequency of Response: Occasionally.

Estimated Total Annual Burden Hours: 516,000.

Estimated Total Annual Burden Cost: $814,450,000.
IV. Congressional Review Act

The final rule is subject to the Congressional Review Act provisions of the Small Business Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 801 et seq.) and will be transmitted to Congress and the Comptroller General for review. The final rule is not a “major rule” as that term is defined in 5 U.S.C. 804, because it is not likely to result in an annual effect on the economy of $100 million or more.
V. Unfunded Mandates Reform Act

For purposes of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1501 et seq.), as well as Executive Order 12875, this final rule does not include any federal mandate that may result in expenditures by state, local, or tribal governments, or the private sector, which may impose an annual burden of $100 million or more (as adjusted for inflation).
VI. Federalism Statement

Executive Order 13132 outlines fundamental principles of federalism, Start Printed Page 92341and requires the adherence to specific criteria by Federal agencies in the process of their formulation and implementation of policies that have “substantial direct effects” on the States, the relationship between the national government and States, or on the distribution of power and responsibilities among the various levels of government. Federal agencies promulgating regulations that have federalism implications must consult with State and local officials and describe the extent of their consultation and the nature of the concerns of State and local officials in the preamble to the final regulation.

In the Department of Labor’s view, these final regulations have federalism implications because they would have direct effects on the States, the relationship between the national government and the States, or on the distribution of power and responsibilities among various levels of government to the extent states have enacted laws affecting disability plan claims and appeals that contain similar requirements to the final rule. The Department believes these effects are limited, because although section 514 of ERISA supersedes State laws to the extent they relate to any covered employee benefit plan, it preserves State laws that regulate insurance, banking, or securities. In compliance with the requirement of Executive Order 13132 that agencies examine closely any policies that may have federalism implications or limit the policy making discretion of the States, the Department solicited input from affected States, including the National Association of Insurance Commissioners and State insurance officials, regarding this assessment at the proposed rule stage but did not receive any comments.
List of Subjects in 29 CFR Part 2560

Claims
Employee benefit plans

For the reasons stated in the preamble, the Department of Labor amends 29 CFR part 2560 as set forth below:
PART 2560—RULES AND REGULATIONS FOR ADMINISTRATION AND ENFORCEMENT

1. The authority citation for part 2560 is revised to read as follows:

Authority: 29 U.S.C. 1132, 1135, and Secretary of Labor’s Order 1-2011, 77 FR 1088 (Jan. 9, 2012). Section 2560.503-1 also issued under 29 U.S.C. 1133. Section 2560.502c-7 also issued under 29 U.S.C. 1132(c)(7). Section 2560.502c-4 also issued under 29 U.S.C. 1132(c)(4). Section 2560.502c-8 also issued under 29 U.S.C. 1132(c)(8).

2. Section 2560.503-1 is amended by:

a. Adding paragraph (b)(7).

b. Revising paragraph (g)(1)(v).

c. Adding paragraphs (g)(1)(vii) and (viii).

d. Revising paragraphs (h)(4) and (i)(3)(i).

e. Revising paragraphs (j)(4) and (j)(5) introductory text.

f. Adding paragraphs (j)(6) and (7).

g. Revising paragraphs (l) and (m)(4).

i. Redesignating paragraph (o) as (p), and adding new paragraph (o).

j. Revising newly redesignated paragraph (p).

The revisions and additions read as follows:
§ 2560.503-1
Claims procedure.
* * * * *

(b) * * *

(7) In the case of a plan providing disability benefits, the plan must ensure that all claims and appeals for disability benefits are adjudicated in a manner designed to ensure the independence and impartiality of the persons involved in making the decision. Accordingly, decisions regarding hiring, compensation, termination, promotion, or other similar matters with respect to any individual (such as a claims adjudicator or medical or vocational expert) must not be made based upon the likelihood that the individual will support the denial of benefits.
* * * * *

(g) * * * (1) * * *

(v) In the case of an adverse benefit determination by a group health plan—
* * * * *

(vii) In the case of an adverse benefit determination with respect to disability benefits—

(A) A discussion of the decision, including an explanation of the basis for disagreeing with or not following:

(i) The views presented by the claimant to the plan of health care professionals treating the claimant and vocational professionals who evaluated the claimant;

(ii) The views of medical or vocational experts whose advice was obtained on behalf of the plan in connection with a claimant’s adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination; and

(iii) A disability determination regarding the claimant presented by the claimant to the plan made by the Social Security Administration;

(B) If the adverse benefit determination is based on a medical necessity or experimental treatment or similar exclusion or limit, either an explanation of the scientific or clinical judgment for the determination, applying the terms of the plan to the claimant’s medical circumstances, or a statement that such explanation will be provided free of charge upon request;

(C) Either the specific internal rules, guidelines, protocols, standards or other similar criteria of the plan relied upon in making the adverse determination or, alternatively, a statement that such rules, guidelines, protocols, standards or other similar criteria of the plan do not exist; and

(D) A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits. Whether a document, record, or other information is relevant to a claim for benefits shall be determined by reference to paragraph (m)(8) of this section.

(viii) In the case of an adverse benefit determination with respect to disability benefits, the notification shall be provided in a culturally and linguistically appropriate manner (as described in paragraph (o) of this section).
* * * * *

(h) * * *

(4) Plans providing disability benefits. The claims procedures of a plan providing disability benefits will not, with respect to claims for such benefits, be deemed to provide a claimant with a reasonable opportunity for a full and fair review of a claim and adverse benefit determination unless, in addition to complying with the requirements of paragraphs (h)(2)(ii) through (iv) and (h)(3)(i) through (v) of this section, the claims procedures—

(i) Provide that before the plan can issue an adverse benefit determination on review on a disability benefit claim, the plan administrator shall provide the claimant, free of charge, with any new or additional evidence considered, relied upon, or generated by the plan, insurer, or other person making the benefit determination (or at the direction of the plan, insurer or such other person) in connection with the claim; such evidence must be provided as soon as possible and sufficiently in advance of the date on which the notice of adverse benefit determination on review is required to be provided under paragraph (i) of this section to give the claimant a reasonable opportunity to respond prior to that date; and

(ii) Provide that, before the plan can issue an adverse benefit determination on review on a disability benefit claim based on a new or additional rationale, the plan administrator shall provide the Start Printed Page 92342claimant, free of charge, with the rationale; the rationale must be provided as soon as possible and sufficiently in advance of the date on which the notice of adverse benefit determination on review is required to be provided under paragraph (i) of this section to give the claimant a reasonable opportunity to respond prior to that date.
* * * * *

(i) * * *

(3) Disability claims. (i) Except as provided in paragraph (i)(3)(ii) of this section, claims involving disability benefits (whether the plan provides for one or two appeals) shall be governed by paragraph (i)(1)(i) of this section, except that a period of 45 days shall apply instead of 60 days for purposes of that paragraph.
* * * * *

(j) * * *

(4)(i) A statement describing any voluntary appeal procedures offered by the plan and the claimant’s right to obtain the information about such procedures described in paragraph (c)(3)(iv) of this section, and a statement of the claimant’s right to bring an action under section 502(a) of the Act; and,

(ii) In the case of a plan providing disability benefits, in addition to the information described in paragraph (j)(4)(i) of this section, the statement of the claimant’s right to bring an action under section 502(a) of the Act shall also describe any applicable contractual limitations period that applies to the claimant’s right to bring such an action, including the calendar date on which the contractual limitations period expires for the claim.

(5) In the case of a group health plan—
* * * * *

(6) In the case of an adverse benefit decision with respect to disability benefits—

(i) A discussion of the decision, including an explanation of the basis for disagreeing with or not following:

(A) The views presented by the claimant to the plan of health care professionals treating the claimant and vocational professionals who evaluated the claimant;

(B) The views of medical or vocational experts whose advice was obtained on behalf of the plan in connection with a claimant’s adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination; and

(C) A disability determination regarding the claimant presented by the claimant to the plan made by the Social Security Administration;

(ii) If the adverse benefit determination is based on a medical necessity or experimental treatment or similar exclusion or limit, either an explanation of the scientific or clinical judgment for the determination, applying the terms of the plan to the claimant’s medical circumstances, or a statement that such explanation will be provided free of change upon request; and

(iii) Either the specific internal rules, guidelines, protocols, standards or other similar criteria of the plan relied upon in making the adverse determination or, alternatively, a statement that such rules, guidelines, protocols, standards or other similar criteria of the plan do not exist.

(7) In the case of an adverse benefit determination on review with respect to a claim for disability benefits, the notification shall be provided in a culturally and linguistically appropriate manner (as described in paragraph (o) of this section).
* * * * *

(l) Failure to establish and follow reasonable claims procedures. (1) In general. Except as provided in paragraph (l)(2) of this section, in the case of the failure of a plan to establish or follow claims procedures consistent with the requirements of this section, a claimant shall be deemed to have exhausted the administrative remedies available under the plan and shall be entitled to pursue any available remedies under section 502(a) of the Act on the basis that the plan has failed to provide a reasonable claims procedure that would yield a decision on the merits of the claim.

(2) Plans providing disability benefits. (i) In the case of a claim for disability benefits, if the plan fails to strictly adhere to all the requirements of this section with respect to a claim, the claimant is deemed to have exhausted the administrative remedies available under the plan, except as provided in paragraph (l)(2)(ii) of this section. Accordingly, the claimant is entitled to pursue any available remedies under section 502(a) of the Act on the basis that the plan has failed to provide a reasonable claims procedure that would yield a decision on the merits of the claim. If a claimant chooses to pursue remedies under section 502(a) of the Act under such circumstances, the claim or appeal is deemed denied on review without the exercise of discretion by an appropriate fiduciary.

(ii) Notwithstanding paragraph (l)(2)(i) of this section, the administrative remedies available under a plan with respect to claims for disability benefits will not be deemed exhausted based on de minimis violations that do not cause, and are not likely to cause, prejudice or harm to the claimant so long as the plan demonstrates that the violation was for good cause or due to matters beyond the control of the plan and that the violation occurred in the context of an ongoing, good faith exchange of information between the plan and the claimant. This exception is not available if the violation is part of a pattern or practice of violations by the plan. The claimant may request a written explanation of the violation from the plan, and the plan must provide such explanation within 10 days, including a specific description of its bases, if any, for asserting that the violation should not cause the administrative remedies available under the plan to be deemed exhausted. If a court rejects the claimant’s request for immediate review under paragraph (l)(2)(i) of this section on the basis that the plan met the standards for the exception under this paragraph (l)(2)(ii), the claim shall be considered as re-filed on appeal upon the plan’s receipt of the decision of the court. Within a reasonable time after the receipt of the decision, the plan shall provide the claimant with notice of the resubmission.
* * * * *

(m) * * *

(4) The term “adverse benefit determination” means:

(i) Any of the following: A denial, reduction, or termination of, or a failure to provide or make payment (in whole or in part) for, a benefit, including any such denial, reduction, termination, or failure to provide or make payment that is based on a determination of a participant’s or beneficiary’s eligibility to participate in a plan, and including, with respect to group health plans, a denial, reduction, or termination of, or a failure to provide or make payment (in whole or in part) for, a benefit resulting from the application of any utilization review, as well as a failure to cover an item or service for which benefits are otherwise provided because it is determined to be experimental or investigational or not medically necessary or appropriate; and

(ii) In the case of a plan providing disability benefits, the term “adverse benefit determination” also means any rescission of disability coverage with respect to a participant or beneficiary (whether or not, in connection with the rescission, there is an adverse effect on any particular benefit at that time). For this purpose, the term “rescission” means a cancellation or discontinuance Start Printed Page 92343of coverage that has retroactive effect, except to the extent it is attributable to a failure to timely pay required premiums or contributions towards the cost of coverage.
* * * * *

(o) Standards for culturally and linguistically appropriate notices. A plan is considered to provide relevant notices in a “culturally and linguistically appropriate manner” if the plan meets all the requirements of paragraph (o)(1) of this section with respect to the applicable non-English languages described in paragraph (o)(2) of this section.

(1) Requirements. (i) The plan must provide oral language services (such as a telephone customer assistance hotline) that include answering questions in any applicable non-English language and providing assistance with filing claims and appeals in any applicable non-English language;

(ii) The plan must provide, upon request, a notice in any applicable non-English language; and

(iii) The plan must include in the English versions of all notices, a statement prominently displayed in any applicable non-English language clearly indicating how to access the language services provided by the plan.

(2) Applicable non-English language. With respect to an address in any United States county to which a notice is sent, a non-English language is an applicable non-English language if ten percent or more of the population residing in the county is literate only in the same non-English language, as determined in guidance published by the Secretary.

(p) Applicability dates and temporarily applicable provisions. (1) Except as provided in paragraphs (p)(2), (p)(3) and (p)(4) of this section, this section shall apply to claims filed under a plan on or after January 1, 2002.

(2) This section shall apply to claims filed under a group health plan on or after the first day of the first plan year beginning on or after July 1, 2002, but in no event later than January 1, 2003.

(3) Paragraphs (b)(7), (g)(1)(vii) and (viii), (j)(4)(ii), (j)(6) and (7), (l)(2), (m)(4)(ii), and (o) of this section shall apply to claims for disability benefits filed under a plan on or after January 1, 2018, in addition to the other paragraphs in this rule applicable to such claims.

(4) With respect to claims for disability benefits filed under a plan from January 18, 2017 through December 31, 2017, this paragraph (p)(4) shall apply instead of paragraphs (g)(1)(vii), (g)(1)(viii), (h)(4), (j)(6) and (j)(7).

(i) In the case of a notification of benefit determination and a notification of benefit determination on review by a plan providing disability benefits, the notification shall set forth, in a manner calculated to be understood by the claimant—

(A) If an internal rule, guideline, protocol, or other similar criterion was relied upon in making the adverse determination, either the specific rule, guideline, protocol, or other similar criterion; or a statement that such a rule, guideline, protocol, or other similar criterion was relied upon in making the adverse determination and that a copy of such rule, guideline, protocol, or other criterion will be provided free of charge to the claimant upon request; and

(B) If the adverse benefit determination is based on a medical necessity or experimental treatment or similar exclusion or limit, either an explanation of the scientific or clinical judgment for the determination, applying the terms of the plan to the claimant’s medical circumstances, or a statement that such explanation will be provided free of charge upon request.

(ii) The claims procedures of a plan providing disability benefits will not, with respect to claims for such benefits, be deemed to provide a claimant with a reasonable opportunity for a full and fair review of a claim and adverse benefit determination unless the claims procedures comply with the requirements of paragraphs (h)(2)(ii) through (iv) and (h)(3)(i) through (v) of this section.

Signed at Washington, DC, this 9th day of December, 2016.

Phyllis C. Borzi,

Assistant Secretary, Employee Benefits Security Administration, U.S. Department of Labor.
Footnotes

1.  42 FR 27426 (May 27, 1977).
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2.  65 FR 70246 (Nov. 21, 2000), amended at 66 FR 35887 (July 9, 2001).
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3.  A benefit is a disability benefit, subject to the special rules for disability claims under the Section 503 Regulation, if the plan conditions its availability to the claimant upon a showing of disability. If the claims adjudicator must make a determination of disability in order to decide a claim, the claim must be treated as a disability claim for purposes of the Section 503 Regulation, and it does not matter how the benefit is characterized by the plan or whether the plan as a whole is a pension plan or a welfare plan. On the other hand, when a plan, including a pension plan, provides a benefit the availability of which is conditioned on a finding of disability made by a party other than the plan, (e.g., the Social Security Administration or the employer’s long-term disability plan), then a claim for such benefits is not treated as a disability claim for purposes of the Section 503 Regulation. See FAQs About The Benefit Claims Procedure Regulation, A-9 (www.dol.gov/​sites/​default/​files/​ebsa/​about-ebsa/​our-activities/​programs-and-initiatives/​outreach-and-education/​hbec/​CAGHDP.pdf).
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4.  BLS National Compensation Survey, March 2014, at www.bls.gov/​ncs/​ebs/​benefits/​2014/​ebbl0055.pdf.
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5.  See Sean M. Anderson, ERISA Benefits Litigation: An Empirical Picture, 28 ABA J. Lab. & Emp. L. 1 (2012).
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6.  See, e.g., Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666, 678 (9th Cir. 2011) (“The plan’s reasons for denial were shifting and inconsistent as well as illogical. . . . Failing to pay out money owed based on a false statement of reasons for denying is cheating, every bit as much as making a false claim.”); Lauder v. First Unum Life Ins. Co., 76 F. App’x 348, 350 (2d Cir. 2003) (reversing district court’s denial of attorneys’ fees to plaintiff-insured and describing “ample demonstration of bad faith on First Unum’s part, including . . . the frivolous nature of virtually every position it has advocated in the litigation.”); Schully v. Continental Cas. Co., 634 F. Supp. 2d 663, 687 (E.D. La. 2009) (“In concluding that plaintiff was not disabled, the Hartford not only disregarded considerable objective medical evidence, but it also relied heavily on inconclusive and irrelevant evidence . . . Hartford’s denial of coverage results from its preferential and predetermined conclusions.”); Rabuck v. Hartford Life and Accident Ins. Co., 522 F. Supp. 2d 844, 882 (W.D. Mich. 2007) (insurer “obviously motivated by its own self-interest, engaged in an unprincipled and overly aggressive campaign to cut off benefits for a gravely ill insured who could not possibly have endured the rigors of his former occupation on a full-time basis.”); Curtin v. Unum Life Ins. Co. of America, 298 F. Supp. 2d 149, 159 (D. Me. 2004) (“[T]his Court finds that Defendants exhibited a low level of care to avoid improper denial of claims at great human expense.”).
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7.  The Patient Protection and Affordable Care Act, Public Law 111-148, was enacted on March 23, 2010, and the Health Care and Education Reconciliation Act, Public Law 111-152, was enacted on March 30, 2010. (These statutes are collectively known as the “Affordable Care Act.”)
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8.  80 FR 72192 (Nov. 18, 2015).
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9.  Metropolitan Life Ins. Co. v. Glenn, 554 U.S. 105 (2008) (insurance company plan administrator of an ERISA long-term disability plan that both evaluates and pays claims for the employer has a conflict of interest that courts must consider in reviewing denials of benefit claims).
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10.  80 FR 72014.
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11.  80 FR 72192 (Nov. 18, 2015).
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12.  While commenters contended that disability claim files are larger than health benefit claim files, in the Department’s view, this is not a reason for denying claimants the same procedural protections and safeguards that the ACA provided for group health benefit claims. Furthermore, in the 2000 claims regulation, the Department already accommodated differences between health and disability claims by allowing more time for decisions on disability claims. See 29 CFR 2560.503-1(f)(2)(iii)(B) (up to 30 days after receipt of claim with up to 15 days for an extension for post-service health claims); id. § 2560.503-1(f)(3) (up to 45 days after receipt of claim with two possible 30-day extensions for disability claims).
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13.  For example, the Department noted in the preamble to the proposed rule the fact that several federal courts concluded that a failure to provide a discussion of the decision or the specific criteria relied upon in making the adverse benefit determination could make a claim denial arbitrary and capricious.
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14.  The current Section 503 Regulation in paragraph (j)(5)(iii) requires a statement concerning voluntary dispute resolution options in notices of adverse benefit determinations on review for both group health and disability claims. The Department previously issued an FAQ on that provision noting that information on the specific voluntary appeal procedures offered under the plan must be provided under paragraph (j)(4) of the regulation in the notice of adverse benefit determination, along with a statement of the claimant’s right to bring a civil action under section 502(a) of ERISA. The Department, therefore, stated in the FAQ that, pending further review, it will not seek to enforce compliance with the requirements of paragraph (j)(5)(iii). See FAQs About The Benefit Claims Procedure Regulation, D-13 (www.dol.gov/​sites/​default/​files/​ebsa/​about-ebsa/​our-activities/​programs-and-initiatives/​outreach-and-education/​hbec/​CAGHDP.pdf). In light of the fact that this proposal was limited to disability benefit claims, the Department does not believe it would be appropriate to modify the requirement in paragraph (j)(5)(iii) as part of this final rule. Accordingly, the Department will continue the enforcement position articulated in FAQ D-13.
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15.  FAQ C-17 states: “It is the view of the department that where a rule, guideline, protocol, or similar criterion serves as a basis for making a benefit determination, either at the initial level or upon review, the rule, guideline, protocol, or criterion must be set forth in the notice of adverse benefit determination or, following disclosure of reliance and availability, provided to the claimant upon request. However, the underlying data or information used to develop any such rule, guideline, protocol, or similar criterion would not be required to be provided in order to satisfy this requirement. The department also has taken the position that internal rules, guidelines, protocols, or similar criteria would constitute instruments under which a plan is established or operated within the meaning of section 104(b)(4) of ERISA and, as such, must be disclosed to participants and beneficiaries. See § § 2560.503-1(g)(v) (A) and (j)(5)(i); 65 FR at 70251. Also see § § 2560.503-1(h)(2)(iii) and 2560.503-1(m)(8)(i); Advisory Opinion 96-14A (July 31, 1996).
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16.  As a practical matter, these requirements to provide claimants with evidence or rationales that were relied on or used as a basis for an adverse benefit determination largely conforms the rule to the existing process by which benefits claims should be handled in such cases. E.g., Saffon v. Wells Fargo & Co. Long Term Disability Plan, 511 F.3d 1206, 1215 (9th Cir. 2008) (finding that a full and fair review requires a plan administrator to disclose the reasons for denial in the administrative process); 75 FR at 43333 n.7 (noting the DOL’s position that the existing claims procedure regulation already requires plans to provide claimants with new or additional evidence or rationale upon request and an opportunity to respond in certain circumstances).
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17.  See, e.g., Metzger v. Unum Life Ins. Co. of America, 476 F.3d 1161, 1165-67 (10th Cir. 2007) (holding that “subsection (h)(2)(iii) does not require a plan administrator to provide a claimant with access to the medical opinion reports of appeal-level reviewers prior to a final decision on appeal.”). Accord Glazer v. Reliance Standard Life Ins. Co., 524 F.3d 1241 (11th Cir. 2008); Midgett v. Washington Group Int’l Long Term Disability Plan, 561 F.3d 887 (8th Cir. 2009).
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18.  Brief of the Secretary of Labor, Hilda L. Solis, as Amicus Curiae in Support of Plaintiff-Appellant’s Petition for Rehearing, Midgett v. Washington Group Int’l Long Term Disability Plan, 561 F.3d 887 (8th Cir. 2009) (No. 08-2523).
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19.  Brief of the Secretary of Labor, Hilda L. Solis, as Amicus Curiae in Support of Plaintiff-Appellant’s Petition for Rehearing, Midgett v. Washington Group Int’l Long Term Disability Plan, 561 F.3d 887 (8th Cir. 2009) (No. 08-2523), p. 13.
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20.  S ee Moon v. Am. Home Assurance Co., 888 F.2d 86, 89 (11th Cir.1989).
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21.  Some commenters suggested that the Department define “new or additional evidence” to be “new and additional medical reviews, including independent medical reports.” As noted above, these requirements already apply to claims involving group health benefits under the ACA Claims and Appeals Final Rule and we do not think that it is appropriate to restrict this rule to medical reviews since other types of evidence, if new, would clearly need to be provided to claimants to ensure the full and fair review as described above. For example, if a plan were to obtain video evidence of a disability benefit claimant during the pendency of the appeal, but only provide the claimant with a portion of that video evidence, e.g., the portion that supports the denial of benefits, while withholding the portions that favor the claimant, that would be a failure by the plan to provide new evidence developed to the claimant.
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22.  In connection with the ACA Claims and Appeals Final Rule, the Department explained the process as follows: “To address the narrow circumstance raised by some comments that the new or additional information could be first received so late that it would be impossible to provide it, these final regulations provide that if the new or additional evidence is received so late that it would be impossible to provide it to the claimant in time for the claimant to have a reasonable opportunity to respond, the period for providing a notice of final internal adverse benefit determination is tolled until such time as the claimant has a reasonable opportunity to respond. After the claimant responds, or has a reasonable opportunity to respond but fails to do so, the plan or issuer must notify the claimant of the benefit determination as soon as a plan or issuer acting in a reasonable and prompt fashion can provide the notice, taking into account the medical exigencies.”
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23.  That rulemaking notice (at 80 FR 72207) included the following explanation in responding to public comments on that rule: “Commenters requested additional guidance related to the timing and amount of information required to be provided in order to satisfy this requirement. Specifically, individuals asked whether such information actually must be provided automatically to participants and whether or not it would be sufficient to send participants a notice informing them of the availability of new or additional evidence or rationale. The Departments retain the requirement that plans and issuers provide the new or additional evidence or rationale automatically. In the Departments’ view, fundamental fairness requires that participants and beneficiaries have an opportunity to rebut or respond to any new or additional evidence upon which a plan or issuer may rely. Therefore, plans and issuers that wish to rely on any new or additional evidence or rationale in making a benefit determination must send such new or additional evidence or rationale to participants as soon as it becomes available to the plan or issuer. In order to comply with this requirement, a plan or issuer must send the new or additional evidence or rationale to the participant. Merely sending a notice informing participants of the availability of such information fails to satisfy this requirement.” This same explanation applies with equal force to the identical requirement in this final rule applicable to disability benefit claims.
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24.  The provisions in this final rule supersede any and all prior Departmental guidance with respect to disability benefit claims to the extent such guidance is contrary to this final rule, including but not limited to the deemed exhaustion discussion in FAQ F-2 in FAQs About The Benefit Claims Procedure Regulation. (www.dol.gov/​sites/​default/​files/​ebsa/​about-ebsa/​our-activities/​programs-and-initiatives/​outreach-and-education/​hbec/​CAGHDP.pdf).
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25.  See FAQs About The Benefit Claims Procedure Regulation, C-18 (www.dol.gov/​sites/​default/​files/​ebsa/​about-ebsa/​our-activities/​programs-and-initiatives/​outreach-and-education/​hbec/​CAGHDP.pdf).
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26.  See FAQs About The Benefit Claims Procedure Regulation, C-12 (www.dol.gov/​sites/​default/​files/​ebsa/​about-ebsa/​our-activities/​programs-and-initiatives/​outreach-and-education/​hbec/​CAGHDP.pdf).
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27.  See footnote 3, supra, and FAQs About The Benefit Claims Procedure Regulation, A-9 (www.dol.gov/​sites/​default/​files/​ebsa/​about-ebsa/​our-activities/​programs-and-initiatives/​outreach-and-education/​hbec/​CAGHDP.pdf) discussing when a benefit is a disability benefit, subject to the special rules for disability claims under the Section 503 Regulation.
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28.  Each year the U.S. Census Bureau publishes a list of counties that meet the 10% threshold. For 2016, the applicable languages are Chinese, Tagalog, Navajo and Spanish. A complete list of counties is available at www.dol.gov/​agencies/​ebsa/​laws-and-regulations/​laws/​affordable-care-act/​for-employers-and-advisers/​internal-claims-and-appeals.
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29.  See Moyer v. Metropolitan Life Ins. Co., 762 F.3d 503, 505 (6th Cir. 2014) (“The claimant’s right to bring a civil action is expressly included as a part of those procedures for which applicable time limits must be provided” in the notice of adverse benefit determination on review) and Kienstra v. Carpenters’ Health & Welfare Trust Fund of St. Louis, 2014 WL 562557, at *4 (E.D. Mo. Feb. 13, 2014), aff’d sub nom. Munro-Kienstra v. Carpenters’ Health & Welfare Trust Fund of St. Louis, 790 F.3d 799 (8th Cir. 2015) (“an adverse benefit determination must include [a] description of the plan’s review procedures and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action under section 502(a) of [ERISA] following an adverse benefit determination on review.”); Ortega Candelaria v. Orthobiologics LLC, 661 F.3d 675, 680 (1st Cir.2011) (“[The employer] was required by [29 CFR 2560.503-1(g)(1)(iv) ] to provide [the employee] with notice of his right to bring suit under ERISA, and the time frame for doing so, when it denied his request for benefits.”); McGowan v. New Orleans Empl’rs Int’l Longshoremen’s Ass’n, 538 F. App’x 495, 498 (5th Cir.2013) (finding that a benefit termination letter substantially complied with 29 CFR 2560.503-1(g)(1)(iv) because, in addition to enclosing the benefit booklet and specifying the pages containing the review procedures and time limits, the letter “mentioned McGowan’s right to file suit under § 502(a) of ERISA, as well as the one-year time limit”); White v. Sun Life Assurance Co. of Canada, 488 F.3d 240, 247 n. 2 (4th Cir.2007) (emphasizing that the right to bring a civil action is an integral part of a full and fair benefit review and that the adverse benefit determination letter must include the relevant information related to that right) (abrogated on other grounds by Heimeshoff v. Hartford Life & Acc. Ins. Co., 134 S.Ct. 604, 612 (2013)); Novick v. Metropolitan Life Ins. Co., 764 F.Supp.2d 653, 660-64 (S.D.N.Y.2011) (concluding that 29 CFR 2560.503-1(g) requires that the adverse benefit determination letter include the time limits for judicial review); Solien v. Raytheon Long Term Disability Plan # 590, 2008 WL 2323915, at 8 (D.Ariz. June 2, 2008) (holding that “[j]udicial review is an appeal procedure for an adverse benefit determination and is therefore a part of the claim procedures covered by these regulations, especially when the time limit for filing a judicial action is established contractually by the Plan”). But see Wilson v. Standard Ins. Co., 613 F. App’x 841, 844 n.3 (11th Cir. 2015) (unpublished) (finding that 29 CFR 2560.503-1(g)(1)(iv) “can also be reasonably read to mean that notice must be given of the time limits applicable to the `plan’s review procedures,’ and the letter must also inform the claimant of her right to bring a civil action without requiring notice of the time period for doing so”); Scharff v. Raytheon Co. Short Term Disability Plan, 581 F.3d 899, 907-08 (9th Cir. 2009) (declining to supplement ERISA’s comprehensive scheme for regulating disclosures to participants with a California law requiring the express disclosure of a statute of limitations). In an unpublished decision, the Tenth Circuit similarly interpreted language in a plan that was virtually identical to section 2560.503-1(g)(1)(iv) as only requiring denial letters to include time limits applicable to internal review procedures. See Young v. United Parcel Services, 416 F. App’x 734, 740 (10th Cir. 2011) (unpublished) (concluding that requiring a notification of the time limit for filing suit “conflates the internal appeals process, and its associated deadlines, with the filing of a legal action after that process has been fully exhausted”).
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30.  Heimeshoff, 134 S.Ct. at 612 (“Neither Heimeshoff nor the United States claims that the Plan’s 3-year limitations provision is unreasonably short on its face. And with good reason: the United States acknowledges that the regulations governing internal review mean for `mainstream’ claims to be resolved in about one year, Tr. of Oral Arg. 22, leaving the participant with two years to file suit. Even in this case, where the administrative review process required more time than usual, Heimeshoff was left with approximately one year in which to file suit. Heimeshoff does not dispute that a hypothetical 1-year limitations period commencing at the conclusion of internal review would be reasonable. Id., at 4”) (footnote omitted).
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31.  The Department also believes that additional public input beyond the public record for this rulemaking would be needed for the Department to define a minimum period of time necessary for such a period to constitute a reasonable period in which to bring an action under ERISA section 502(a).
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32.  65 FR 70246 (Nov. 21, 2000), amended at 66 FR 35877 (July 9, 2001).
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33.  See Sean M. Anderson, ERISA Benefits Litigation: An Empirical Picture, 28 ABA J. Lab. & Emp. L. 1(2012).
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34.  Almost all plans reporting this code are welfare plans.
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35.  For a description of the Department’s methodology for calculating wage rates, see https://www.dol.gov/​sites/​default/​files/​ebsa/​laws-and-regulations/​rules-and-regulations/​technical-appendices/​labor-cost-inputs-used-in-ebsa-opr-ria-and-pra-burden-calculations-august-2016.pdf.
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36.  For a description of the Department’s methodology for calculating wage rates, see https://www.dol.gov/​sites/​default/​files/​ebsa/​laws-and-regulations/​rules-and-regulations/​technical-appendices/​labor-cost-inputs-used-in-ebsa-opr-ria-and-pra-burden-calculations-august-2016.pdf.
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37.  Commenters disagreed in general with the estimates of the burden for providing the notice in a culturally and linguistically appropriate manner. Their concern was that most notices would be delivered on paper and not electronically. While one commenter did not provide any supporting evidence for this assertion, another commenter reported that a large company’s past experience was that 30 percent of the claims filed under its disability plan were electronic. For purposes of this regulatory impact analysis, the Department accepted the suggestion posited in the comment that a significant percentage of disability benefit claimants are at home without access to an electronic means of communication at work that is required by the Department’s electronic disclosure rule. Therefore, the Department assumes that a higher percentage of notices will be transmitted via mail even though data was provided only for a single company.
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38.  BLS Employment, Hours, and Earnings from the Current Employment Statistics survey (National) Table B-1, May 2016. It should be noted that this estimate differs from the estimates from the Form 5500 reported in the affected entities section. The Form 55000 numbers only include large plans, and some filings could combine estimates for both short and long term disability.
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39.  “Beyond the Numbers: Disability Insurance Plans Trends in Employee Access and Employer Cost,” February 2015 Vol. 4 No. 4. http://www.bls.gov/​opub/​btn/​volume-4/​disability-insurance-plans.htm.
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40.  http://www.cms.gov/​CCIIO/​Resources/​Fact-Sheets-and-FAQs/​Downloads/​2009-13-CLAS-County-Data.pdf.
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41.  Labor force Participation rate: http://www.bls.gov/​lau/​staadata.txt. Unemployment rate: http://www.bls.gov/​lau/​lastrk14.htm.

42.  Please note that using state estimates of labor participation rates and unemployment rates could lead to an over estimate as those reporting in the ACS survey that they speak English less than “very well” are less likely to be employed. Also, this estimate includes both private and public workers, instead of just private workers leading to an overestimate of the costs.
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43.  “Beyond the Numbers: Disability Insurance Plans Trends in Employee Access and Employer Cost,” February 2015 Vol. 4 No. 4. http://www.bls.gov/​opub/​btn/​volume-4/​disability-insurance-plans.htm.
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44.  The 2010 and 2016 GDP Deflator was 100.056 in 2010 and 110.714 in 2016. The adjustment is $500 * (110.714/100.056) = $553. https://fred.stlouisfed.org/​series/​GNPDEF.
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[FR Doc. 2016-30070 Filed 12-16-16; 8:45 am]

BILLING CODE 4510-29-P
Published Document

ERISA Claim Procedure – Published By The Federal Register

Start Printed Page 92316

AGENCY:

Employee Benefits Security Administration, Department of Labor.

ACTION:

Final rule.

SUMMARY:

This document contains a final regulation revising the claims procedure regulations under the Employee Retirement Income Security Act of 1974 (ERISA) for employee benefit plans providing disability benefits. The final rule revises and strengthens the current 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. This rule affects plan administrators and participants and beneficiaries of plans providing disability benefits, and others who assist in the provision of these benefits, such as third-party benefits administrators and other service providers.

DATES:

Effective Date: This rule is effective January 18, 2017.

Applicability Date: This regulation applies to all claims for disability benefits filed on or after January 1, 2018.

FOR FURTHER INFORMATION CONTACT:

Frances P. Steen, Office of Regulations and Interpretations, Employee Benefits Security Administration, (202) 693-8500. This is not a toll free number.

SUPPLEMENTARY INFORMATION:

I. Background

Section 503 of ERISA requires every employee benefit plan, in accordance with regulations of the Department, 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 “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.”

In 1977, the Department published a regulation pursuant to section 503, at 29 CFR 2560.503-1, establishing minimum requirements for benefit claims procedures for employee benefit plans covered by title I of ERISA (hereinafter “Section 503 Regulation”).[1] The Department revised and updated the Section 503 Regulation in 2000 by improving and strengthening the minimum requirements for employee benefit plan claims procedures.[2] As revised in 2000, the Section 503 Regulation provided new time frames and enhanced requirements for notices and disclosure with respect to decisions at both the initial claims decision stage and on review for group health and disability benefits. The regulations were designed to help reduce lawsuits over benefit disputes, promote consistency in handling benefit claims, and provide participants and beneficiaries a non-adversarial method of having a plan fiduciary review and settle claims disputes. Although the Section 503 Regulation applies to all covered employee benefit plans, including pension plans, group health plans, and plans that provide disability benefits, the more stringent procedural protections under the Section 503 Regulation apply to claims for group health benefits and disability benefits.[3]

The Department’s experience since 2000 with the Section 503 Regulation and related changes in the governing law for group health benefits led the Department to conclude that it was appropriate to re-examine the rules governing disability benefit claims. Even though fewer private-sector employees participate in disability plans than in group health and other types of plans,[4] disability cases dominate the ERISA litigation landscape today. An empirical study of ERISA employee benefits litigation from 2006 to 2010 concluded that cases involving long-term disability claims accounted for 64.5% of benefits litigation whereas lawsuits involving health care plans and pension plans accounted for only 14.4% and 9.3%, respectively.[5] Insurers and plans looking to contain disability benefit costs may be motivated to aggressively dispute disability claims.[6] Concerns exist regarding conflicts of interest impairing the objectivity and fairness of the process for deciding claims for group health benefits. Those concerns resulted in the Affordable Care Act recognizing the need to enhance the Section 503 Regulation with added procedural protections and consumer safeguards for claims for group health benefits.[7] The Departments of Health and Human Services, Labor, and the Department of the Treasury issued regulations improving the internal claims and appeals process and establishing rules for the external review processes required under the Affordable Care Act (“ACA”).[8] These additional protections for a fair process include the right of claimants to respond to new and additional evidence and rationales and the requirement for independence and impartiality of the persons involved in making benefit determinations.

The Department’s independent ERISA advisory group also urged the Start Printed Page 92317Department to re-examine the disability claims process. Specifically, in 2012, the ERISA Advisory Council undertook a study on issues relating to managing disability in an environment of individual responsibility. The Council concluded based on the public input it received that “[n]ot all results have been positive for the participant under ERISA-covered plans and the implementing claim procedures regulations, even though these rules were intended to protect participants” and noted that “[t]he Council was made aware of reoccurring issues and administrative practices that participants and beneficiaries face when appealing a claim that may be inconsistent with the existing regulations.” The Advisory Council’s report included the following recommendation for the Department:

Review current claims regulations to determine updates and modifications, drawing upon analogous processes described in health care regulations where appropriate, for disability benefit claims including: (a) Content for denials of such claims; (b) rule regarding full and fair review, addressing what is an adequate opportunity to develop the record and address retroactive rescission of an approved benefit; (c) alternatives that would resolve any conflict between the administrative claims and appeals process and the participants’ ability to timely bring suit; (d) the applicability of the ERISA claim procedures to offsets and eligibility determinations.

2012 ERISA Advisory Council Report, Managing Disability Risks in an Environment of Individual Responsibility, available at www.dol.gov/​sites/​default/​files/​ebsa/​about-ebsa/​about-us/​erisa-advisory-council/​2012ACreport2.pdf.

The Department agreed that the amendments to the claims regulation for group health plans could serve as an appropriate model for improvements to the claims process for disability claims. Those amendments aimed to ensure full and fair consideration of health benefit claims by giving claimants ready access to the relevant evidence and standards; ensuring the impartiality of persons involved in benefit determinations; giving claimants notice and a fair opportunity to respond to the evidence, rationales, and guidelines for decision; and making sure that the bases for decisions are fully and fairly communicated to the claimant. In the Department’s view, these basic safeguards are just as necessary for a full and fair process in the disability context as in the health context. Moreover, as in the group health plan context, disability claims are often reviewed by a court under an abuse of discretion standard based on the administrative record. Because the claimant may have limited opportunities to supplement the record, the Department concluded that it is particularly important that the claimant be given a full opportunity to develop the record that will serve as the basis for review and to respond to the evidence, rationales, and guidelines relevant to the decision.

The Department’s determination to revise the claims procedures was additionally affected by the aggressive posture insurers and plans can take to disability claims as described above coupled with the judicially recognized conflicts of interest insurers and plans often have in deciding benefit claims.[9] In light of these concerns, the Department concluded that enhancements in procedural safeguards and protections similar to those required for group health plans under the Affordable Care Act were as important, if not more important, in the case of claims for disability benefits.

The Department decided to start by proposing to amend the current standards applicable to the processing of claims and appeals for disability benefits so that they included improvements to certain basic procedural protections in the current Section 503 Regulation, many of which already apply to ERISA-covered group health plans pursuant to the Department’s regulations implementing the requirements of the Affordable Care Act.

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.[10] 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. The comments were posted on the Department’s Web site at www.dol.gov/​agencies/​ebsa/​laws-and-regulations/​rules-and-regulations/​public-comments/​1210-AB39. After careful consideration of the issues raised by the written public comments, the Department decided to adopt the improvements in procedural protections and other safeguards largely as set forth in the November 2015 proposal. The Department revised some of the requirements in response to public comments as part of its overall effort to strike a balance between improving a claimant’s reasonable opportunity to pursue a full and fair review and the attendant costs and administrative burdens on plans providing disability benefits.

The Department believes that this action is necessary to ensure that disability claimants receive a full and fair review of their claims, as required by ERISA section 503, under the more stringent procedural protections that Congress established for group health care claimants under the ACA and the Department’s implementing regulation at 29 CFR 2590.715-2719 (“ACA Claims and Appeals Final Rule”).[11] This final rule will promote fairness and accuracy in the claims review process and protect participants and beneficiaries in ERISA-covered disability plans by ensuring they receive benefits that otherwise might have been denied by plan administrators in the absence of the fuller protections provided by this final regulation. The final rule also will help alleviate the financial and emotional hardship suffered by many individuals when they are unable to work after becoming disabled and their claims are denied.

II. Overview of Final Rule

A. Comments on Overall Need To Improve Claims Procedure Rules for Disability Benefits

Numerous disabled claimants and their representatives submitted comments stating general support for the proposed rule. For example, some commenters described the proposal as reinforcing the integrity of disability benefit plan administration and markedly improving the claims process by strengthening notice and disclosure protections, prescribing more exacting standards of conduct for review of denied claims, ensuring claimants’ more effective access to the claims process, and providing safeguards to ensure full court review of adverse benefit determinations. Some commenters supported the proposed amendments as “good first steps” towards providing more transparency and accountability, but advocated additional steps to strengthen, improve, and update the current rules. Some commenters emphasized that disability and lost earnings impose severe hardship on many individuals, arguing that disability claimants have a “poor” prospect of fair review under the current Start Printed Page 92318regulation primarily because of the economic incentive for insurance companies to deny otherwise valid claims and because plans are often able to secure a deferential standard of review in court.

Commenters, primarily disability insurers and benefit providers, commented that the disability claims regulation should not mirror Affordable Care Act requirements because unlike disability claims: (i) The vast majority of medical claims are determined electronically with little or no human involvement, i.e., no reviewers studying materials and consulting with varied professionals; (ii) medical claims typically involve only a limited treatment over a relatively short period of time, whereas disability claims require a series of determinations over a period of several years; (iii) medical claims rarely involve a need to consult with outside professionals; (iv) medical claims involve an isolated issue, whereas disability claims involve a more complex, multi-layered analysis; and (v) medical claim files may consist of only a few pages of materials, whereas disability claim files can consist of hundreds, sometimes thousands of pages of information. As a result of these factors, the commenters stressed that it can take significant time to review and render a decision. Some of those commenters argued that applying ACA protections to disability benefit claims was contrary to Congressional intent because disability plans were not subject to the ACA’s group health plan provisions. Some claimed that the proposed rules in their current form will have unintended consequences (undue delay and increased costs and litigation), and will result in expenses and burdens that will increase the cost of coverage and discourage employers from sponsoring disability benefit plans. Finally, some claimed that the increased protections and transparency that would be required under the proposal would weaken protection against disability fraud and were unnecessary because the current regulations provide ample protections for claimants, are written to benefit the insured, and have worked well for more than a decade as evidenced by the asserted fact that the vast majority of disability claims incurred by insurers are paid, and, of the claims denied, only a very small percentage are ultimately litigated. Some argued that technological advances that have expedited processing of health care claims do not apply to disability claims adjudication, contended that the Department had not properly quantified or qualified the benefits associated with the proposed regulations or provided a sufficient cost analysis associated with the proposed regulations, and commented that the Department should withdraw the proposal until better data is collected.

After careful consideration of the issues raised by the written comments, the Department does not agree with the commenters’ assertion that the ACA changes for group health plans are not an appropriate model for improving claims procedures for disability benefits. The enactment of the ACA, and the issuance of the implementing regulations, has resulted in disability benefit claimants receiving fewer procedural protections than group health plan participants even though litigation regarding disability benefit claims is prevalent today. As noted above, the Department’s Section 503 Regulation imposes more stringent procedural protections on claims for group health and disability benefits than on claims for other types of benefits. The Department believes that disability benefit claimants should continue to receive procedural protections similar to those that apply to group health plans, and that it makes sense to model the final rule on the procedural protections and consumer safeguards that Congress and the President established for group health care claimants under the ACA. These protections and safeguards will allow some participants to receive benefits that might have been incorrectly denied in the absence of the fuller protections provided by the regulation. It will also help alleviate the financial and emotional hardship suffered by many individuals when they lose earnings due to their becoming disabled.

Moreover, the Department carefully selected among the ACA amendments to the claims procedures for group health plans, and incorporated into the proposal only certain of the basic improvements in procedural protections and consumer safeguards. The proposal, and final rule, also include several adjustments to the ACA requirements to account for the different features and characteristics of disability benefit claims.

The Department agrees with the commenters who supported the proposed changes who emphasized that disability and lost earnings impose severe hardship on many individuals. Under those circumstances, and considering the judicially recognized economic incentive for insurance companies to deny otherwise valid claims, the Department views enhancements in procedural safeguards and protections similar to those required for group health plans under the Affordable Care Act as being just as important, if not more important, in the case of claims for disability benefits. This view was supported by the assertions by some plans and disability insurance providers that disability claims processing involves more human involvement, with reviewers studying pages of materials and consulting with varied professionals on claims that involve a more complex, multi-layered analysis. Even assuming the characteristics cited by the commenter fairly describe a percentage of processed disability claims, the Department does not believe those characteristics support a decision to treat the processing of disability benefits more leniently than group health benefits. The Department believes there is potential for error and opportunity for the insurer’s conflict of interest to inappropriately influence a benefit determination under highly automated claims processing, as well as claims processing with more human involvement.[12] Increased transparency and accountability in all claims processes is important if claimants of disability benefits are to have a reasonable opportunity to pursue a full and fair review of a benefit denial, as required by ERISA section 503. Also, and as more fully discussed in the Regulatory Impact Analysis section of this document, the Department does not agree that the adoption of these basic procedural protections will cause excessive increases in costs and litigation, or result in expenses and burdens that will discourage employers from sponsoring plans providing disability benefits. In fact, comments from some industry groups support the conclusion that the protections adopted in the final rule reflect best practices that many insurers and benefit providers already follow on a voluntary basis.

Thus, while the Department has made some changes and clarifications in response to comments, the final rule, described below, is substantially the same as the proposal. Specifically, the major provisions in the final rule Start Printed Page 92319require that: (1) Claims and appeals must be adjudicated in a manner designed to ensure independence and impartiality of the persons involved in making the benefit determination; (2) benefit denial notices must contain a complete discussion of why the plan denied the claim and the standards applied in reaching the decision, including the basis for disagreeing with the views of health care professionals, vocational professionals, or with disability benefit determinations by the Social Security Administration (SSA); (3) claimants must be given timely notice of their right to access to their entire claim file and other relevant documents and be guaranteed the right to present evidence and testimony in support of their claim during the review process; (4) claimants must be given notice and a fair opportunity to respond before denials at the appeals stage are based on new or additional evidence or rationales; (5) plans cannot prohibit a claimant from seeking court review of a claim denial based on a failure to exhaust administrative remedies under the plan if the plan failed to comply with the claims procedure requirements unless the violation was the result of a minor error; (6) certain rescissions of coverage are to be treated as adverse benefit determinations triggering the plan’s appeals procedures; and (7) required notices and disclosures issued under the claims procedure regulation must be written in a culturally and linguistically appropriate manner.

B. Comments on Major Provisions of Final Rule

1. Independence and Impartiality—Avoiding Conflicts of Interest

Consistent with the ACA Claims and Appeals Final Rule governing group health plans, paragraph (b)(7) of this final rule explicitly provides that plans providing disability benefits “must ensure that all claims and appeals for disability benefits are adjudicated in a manner designed to ensure the independence and impartiality of the persons involved in making the decision.” Therefore, this final rule requires that decisions regarding hiring, compensation, termination, promotion, or similar matters with respect to any individual must not be made based upon the likelihood that the individual will support the denial of disability benefits. For example, a plan cannot provide bonuses based on the number of denials made by a claims adjudicator. Similarly, a plan cannot contract with a medical expert based on the expert’s reputation for outcomes in contested cases, rather than based on the expert’s professional qualifications. These added criteria for disability benefit claims address practices and behavior which cannot be reconciled with the “full and fair review” guarantee in section 503 of ERISA, and with the basic fiduciary standards that must be followed in implementing the plan’s claims procedures. For the reasons described below, paragraph (b)(7) of the final rule therefore remains largely unchanged from the proposal.

The Department received numerous comments either generally supporting or not objecting to the idea that the independence and impartiality requirements for claims procedures for disability claims should be consistent with the ACA’s claims procedures requirements for group health plans. Several commenters pointed out that even prior to the proposal, many disability plans had already taken affirmative steps to ensure the independence and impartiality of the persons involved in the decision-making process. Other commenters who opposed the provision as unnecessary similarly cited the fact that the proposed amendments reflect current industry practice and argued that issues regarding the independence and impartiality of the appeal process is already the subject of the well-developed body of case law. Although the Department agrees that the proposal was intended to be consistent with industry best practice trends and developing case law in the area, the Department does not believe that industry trends or court decisions are an acceptable substitute for including these provisions in a generally applicable regulation.

Several commenters suggested that the examples of individuals covered by this provision should include vocational experts. The commenters pointed out that vocational experts are often actively involved in the decision-making process for disability claims and play a role in the claims process similar to the role of a medical or health care professional. They noted that opinions of vocational experts are often relied on in making determinations on eligibility for and the amount of disability benefits. Although the list in the proposed provision was intended to merely reflect examples, not be an exhaustive list, the Department nonetheless agrees that it would be appropriate to add vocational experts to avoid disputes regarding their status under this provision of the final rule. This clarification of the provision from its proposed form is also consistent with the current regulation’s express acknowledgement of the important role of vocational experts in the disability claims process. Specifically, paragraph (h)(3)(iv) of the current regulation already requires that the claims procedure for disability benefit claims must provide for the identification of medical or vocational experts whose advice was obtained on behalf of the plan in connection with a claimant’s adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination. Accordingly, the final rule adds “vocational expert” to the examples of persons involved in the decision-making process who must be insulated from the plan’s or issuer’s conflicts of interest. Decisions regarding hiring, compensation, termination, promotion, or other similar matters must not be based upon the likelihood that the individual will support the denial of benefits.

Commenters also asked the Department to clarify whether “consulting experts” are “involved in making the decision” for purposes of the independence and impartiality requirements. Some commenters were concerned that consulting experts would fall outside of these requirements because plans or claims administrators might assert that consulting experts merely supply information and do not decide claims. In the Department’s view, the text of paragraph (b)(7) is clear that the independence and impartiality requirements are not limited to persons responsible for making the decision. For example, paragraph (b)(7) of the final rule, as in the proposal, refers to a “medical expert” as an example of a person covered by the provision. The text also refers to individuals who may “support the denial of benefits.” Thus, in the Department’s view, the independence and impartiality requirements apply to plans’ decisions regarding hiring, compensation, termination, promotion, or other similar matters with respect to consulting experts. Although some commenters suggested that the Department expand the regulatory text to expressly include “consulting experts,” in the Department’s view, the regulatory text is sufficiently clear to address commenters’ concerns especially with the inclusion of “vocational experts” in this provision of the final rule as described above. The Department also believes that it should avoid creating differences in the text of parallel provisions in the rules for group health benefits under the ACA Claims and Appeals Final Rule and disability benefits absent a reason that addresses a specific issue for disability claims Start Printed Page 92320(like the vocational expert issue discussed above).

Several commenters asked the Department to clarify that the independence and impartiality requirements apply even where the plan does not directly hire or compensate the individuals “involved in making the decision” on a claim. The text of the rule does not limit its scope to individuals that the plan directly hires. Rather, the rule’s coverage extends to individuals hired or compensated by third parties engaged by the plan with respect to claims. Thus, for example, if a plan’s service provider is responsible for hiring, compensating, terminating, or promoting an individual involved in making a decision, this final rule requires the plan to take steps (e.g., in the terms of its service contract and ongoing monitoring) to ensure that the service provider’s policies, practices, and decisions regarding hiring, compensating, terminating, or promoting covered individuals are not based upon the likelihood that the individual will support the denial of benefits.

One commenter, who supported applying independence and impartiality requirements, expressed concern about a statement in the preamble to the proposed rule that a plan cannot contract with a medical expert based on the expert’s reputation for outcomes in contested cases rather than based on the expert’s professional qualifications. The commenter did not object to the prohibition on hiring a medical expert based on a reputation for denying claims, but expressed concern that the statement in the preamble might result in claimants requesting statistics and other information on cases in which the medical expert expressed opinions in support of denying rather than granting a disability benefit claims. Another commenter who opposed the provision also expressed concern about court litigation and discovery regarding “reputation” issues arising from the text in the preamble. In the Department’s view, the preamble statement accurately describes one way that the independence and impartiality standard could be violated. That said, the independence and impartiality requirements in the rule do not modify the scope of “relevant documents” subject to the disclosure requirements in paragraphs (g)(1(vii)(C) and (h)(2)(iii) of the Section 503 Regulation, as amended by this rule. Nor do the independence and impartiality requirements in the rule prescribe limits on the extent to which information about consulting experts would be discoverable in a court proceeding as part of an evaluation of the extent to which the claims administrator or insurer was acting under a conflict of interest that should be considered in evaluating an adverse benefit determination.

Several commenters urged the Department to implement the independence and impartiality requirements with specific quantifiable limitations on the relationship between plans and consultants. For example, one commenter suggested a medical consultant be required to certify that no more than 20% of the consultant’s income is derived from reviewing files for insurance companies and/or self-funded disability benefit plans. Several commenters recommended that plans be required to disclose to claimants a range of quantifiable information regarding its relationship with certain consultants (e.g., number of times a plan has relied upon the third-party vendor who hired the expert in the past year). A few commenters suggested that the Department establish rules on the qualifications, credentials, or licensing of an expert and the nature and type of such expert’s professional practice. For example, one commenter suggested that the rule provide that when a fiduciary relies on a physician or psychologist or other professional, such as a vocational specialist, the person must be licensed in the same jurisdiction where the plan beneficiary resides. Although the Department agrees that more specific quantifiable or other standards relating to the nature and type of an expert’s professional practice might provide additional protections against conflicts of interest, the parallel provisions in the claims procedure rule for group health plans under the ACA Claims and Appeals Final Rule do not contain such provisions. Moreover, an attempt to establish specific measures or other standards would benefit from a further proposal and public input. Accordingly, the final rule does not adopt the commenters’ suggestions.

2. Improvements to Disclosure Requirements

The Department proposed to improve the disclosure requirements for disability benefit claims in three respects. First, the proposal included a provision that expressly required adverse benefit determinations on disability benefit claims to contain a “discussion of the decision,” including the basis for disagreeing with any disability determination by the SSA or other third party disability payer, or any views of health care professionals treating a claimant to the extent the determination or views were presented by the claimant to the plan. Second, notices of adverse benefit determinations must contain the internal rules, guidelines, protocols, standards or other similar criteria of the plan that were relied upon in denying the claim (or a statement that such criteria do not exist). Third, consistent with the current rule applicable to notices of adverse benefit determinations at the review stage, a notice of adverse benefit determination at the initial claims stage must contain a statement that the claimant is entitled to receive, upon request, relevant documents.

In the Department’s view, the existing claims procedure regulation for disability claims already imposes a requirement that denial notices include a reasoned explanation for the denial.[13] For example, the rule requires that the notice must be written in a manner calculated to be understood by the claimant, must include any specific reasons for the adverse determination, must reference the specific provision in governing plan documents on which the determination is based, must include a description of any additional information required to perfect the claim, must include a description of the internal appeal process, and must include the plan’s rules, if any, that were used in denying the claim (or a statement that such rules are available upon request).

The Department’s experience in enforcing the claims procedure requirements and its review of litigation activity, however, leads it to conclude that some plans are providing disability claim notices that are not consistent with the letter or spirit of the Section 503 Regulation. Accordingly, the Department believes that expressly setting forth additional requirements in the regulation, even if some may already apply under the current rule, is an appropriate way of reinforcing the need for plan fiduciaries to administer the plan’s claims procedure in a way that is transparent and that encourages an appropriate dialogue between a claimant and the plan regarding adverse benefit determinations that ERISA and the current claims procedure regulation contemplate.

Commenters generally either supported or did not object to the requirement to explain a disagreement with a treating health care professional in adverse benefit determinations. The Start Printed Page 92321Department, accordingly, is adopting this provision from the proposal. This provision in the final rule would not be satisfied merely by stating that the plan or a reviewing physician disagrees with the treating physician or health care professional. Rather, the rule requires that the adverse benefit determination must include a discussion of the basis for disagreeing with the health care professional’s views. Several commenters suggested, similar to their comments described above on the need to subject vocational experts to the independence and impartiality requirements, that this disclosure provision should also apply to vocational professionals. As noted above, the commenters pointed out that vocational experts have a role somewhat similar to the role of a medical or health care professional in the claims determination process. The Department agrees, and, accordingly, added “vocational professional” to this provision.

An issue raised in the comments related to whether the plan is required to address only third party views presented to the plan by the claimant. The concern was that plans may not know whether other third party views even exist so that any requirement to address third party views should be limited to third party findings where they are presented by the claimant. Although the Department does not believe it would be appropriate to require plans to address views that they were not aware of and had no obligation to discover, the Department’s consideration of this comment led it to conclude that the provision needed to be revised to include medical or vocational experts whose advice was obtained on behalf of the plan in connection with a claimant’s adverse benefit determination. The Department’s experience enforcing the current regulation has revealed circumstances where claims adjudicators may consult several experts and deny a claim based on the view of one expert when advice from other experts who were consulted supported a decision to grant the claim. Some of these cases may have involved intentional “expert shopping.” Requiring plans to explain the basis for disagreeing with experts whose advice the plan sought would not present the problem raised in the comments of addressing third party views the plan does not know even exist, but it would be consistent with and enhance the requirement in paragraph (h)(3)(iv) of the current regulation which already requires that the claims procedure for disability benefit claims must provide for the identification of medical or vocational experts whose advice was obtained on behalf of the plan in connection with a claimant’s adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination. In fact, the Department believes that a request for relevant documents under the current regulation would require the plan to disclose materials related to such a consultation. The plan would also be required under the current regulation to explain its basis for not adopting views of an expert the plan consulted who supported granting the claim if the claimant raised the expert’s views as part of an appeal of an adverse benefit determination. In the Department’s view, this is not a new substantive element of the requirement that plans explain the reasons for a denial, but rather is a process enhancement that removes unnecessary procedural steps for claimants to get an explanation of the reasons the plan disagrees with the views of its own consulting experts.

Accordingly, the final rule revises paragraphs (g)(1)(vii)(A) and (j)(6)(i) to require that adverse benefit determinations on disability benefit claims contain a discussion of the basis for disagreeing with the views of health care professionals who treated the claimant or vocational professionals who evaluated the claimant, when the claimant presents those views to the plan. The final rule also revises paragraphs (g)(1)(vii)(A) and (j)(6)(i) to clarify that adverse benefit determinations on disability benefit claims must contain a discussion of the basis for disagreeing with the views of medical or vocational experts whose advice was obtained on behalf of the plan in connection with a claimant’s adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination.

One commenter suggested that references to the “views” of treating health care professionals is very broad and that it is not clear what is intended to be covered by this reference. The commenter argued that “views” is not synonymous with an opinion or conclusion about whether a claimant is disabled, and that, in many cases, health care professionals do not provide an opinion on the claimant’s disability at all, and if they do, they are not providing an opinion on disability as defined by the plan. Another commenter asserted that a health care professional’s focus is on the patient’s diagnosis and treatment and that the claims adjudicator considers the long-term effect of the individual’s condition on their ability to work. These commenters argued that claims adjudicators are not necessarily agreeing or disagreeing with medical findings by a treating health care provider, rather they are considering if the claimant’s disease or illness significantly impairs their work skills. The commenters said that to require a plan to discuss why it did not agree with the views expressed by a myriad of health care professionals does nothing to help explain why a claims administrator found that the claimant was not disabled under the terms of the plan.

The Department does not believe it is appropriate to limit the scope of the final rule to opinions or conclusions about whether a claimant is disabled. Medical and vocational professionals provide views that may be important to the ultimate determination of whether a person is disabled. In the Department’s view, to the extent the claims adjudicator disagrees with foundational information in denying a claim, the claimant has a right to know that fact to the same extent the claimant should be made aware that the claims adjudicator disagrees with an opinion from a medical or vocational expert that the claimant is disabled. Further, it is part of the fiduciary role of the ERISA claims adjudicator to weigh input from medical and vocational experts in reaching a conclusion on a benefit claim. When the claims adjudicator acting in a fiduciary capacity disagrees with the judgments of medical and vocational professionals in denying a claim, the claims adjudicator as a matter of basic fiduciary accountability should be able to identify those circumstances and explain the basis for that decision. The Department also notes that the final rule requires this explanation in cases where the plan or claims adjudicator disagrees with the views of the medical or vocational expert. There is no disagreement to explain if, as the commenter posed, a treating health care consultant expresses a view only on a diagnosis or treatment which the plan fully accepts in evaluating the question of whether the claimant meets the definition of a disability under the plan. Rather, in such a case, the plan would be under the same obligation that exists under the current regulation to explain why it reached the conclusion that the diagnosed illness or treatment did not impair the claimant’s work skills or ability to work or otherwise failed to satisfy the plan’s definition of disability. In summary, the Department believes that an explanation of the basis for disagreement with the judgments of Start Printed Page 92322health care and vocational professionals is required in order to be responsive to the information submitted by the claimant or developed during evaluation of the claim, and is also necessary for a reasoned explanation of a denial.

With respect to the requirement to explain the basis for disagreeing with or not following disability determinations by the SSA and other payers of disability benefits, several commenters who supported the requirement pointed out that reviewing courts in evaluating whether a plan’s adverse benefit determination was arbitrary and capricious have found an SSA determination to award benefits to be a factor that the plan fiduciary deciding a benefit should consider. Courts have criticized the failure to consider the SSA determination, especially if a plan’s administrator operates under a conflict of interest and if the plan requires or encourages claimants to pursue SSA decisions in order to offset any SSA award against the amount they pay in disability benefits. See, e.g., Montour v. Hartford Life and Accident Ins. Co., 588 F.3d 623, 637 (9th Cir. 2009) (“failure to explain why it reached a different conclusion than the SSA is yet another factor to consider in reviewing the administrator’s decision for abuse of discretion, particularly where, as here, a plan administrator operating with a conflict of interest requires a claimant to apply and then benefits financially from the SSA’s disability finding.”); Brown v. Hartford Life Ins. Co., 301 F. App’x 772, 776 (10th Cir. 2008) (insurer’s discussion was “conclusory” and “provided no specific discussion of how the rationale for the SSA’s decision, or the evidence the SSA considered, differed from its own policy criteria or the medical documentation it considered”). Other commenters, however, urged the Department to remove the requirement to discuss the basis for disagreeing with the disability determinations of the SSA or other payers of benefits. Those commenters argued that it would not be reasonable to require an ERISA plan fiduciary to go outside the plan’s governing document and make a judgment about a disability determination made by some other party that is based upon another plan or program’s definition of disability, which may have entirely different or inconsistent definitions of disability or conditions. The commenters further argued that the plan fiduciary might not be able to get from the SSA or other payer of benefits the documents, case file or other information necessary even to try to conduct such an evaluation. Those commenters also requested that, if such a requirement was to be included in the final rule, then the rule should allow plans to take into account in the discussion of its decision the extent to which the claimant provided the plan, or gave the plan a way to obtain, sufficient documentation from the SSA or other third party to allow a meaningful review of such third-party findings.

The Department is persuaded that the final rule should limit the category of “other payers of benefits” to disability benefit determinations by the SSA. The Department accepts for purposes of this final rule that claims adjudicators generally are trained to understand their own plan or insurance policy requirements and apply those standards to claims in accordance with the internal rules, guidelines, policies, and procedures governing the plan. The Department also agrees that a determination that an individual is entitled to benefits under another employee benefit plan or other insurance coverage may not be governed by the same definitions or criteria, and that it may be difficult for the adjudicator to obtain a comprehensive explanation of the determination or relevant underlying information that was relied on by the other payer in making its determination.

The Department does not believe, however, that those same difficulties are involved in the case of SSA determinations. SSA determinations may include a written decision from an ALJ, and the definitions and presumptions are set forth in publicly available regulations and SSA guidance. Accordingly, the final rule revises paragraphs (g)(1)(vii)(A) and (j)(6)(i) to require that adverse benefit determinations on disability benefit claims contain a discussion of the basis for disagreeing with an SSA disability determination regarding the claimant presented by the claimant to the plan. Although the plan’s claims procedures may place the burden on the claimant to submit any SSA determination that the claimant wants the plan to consider, claims administrators working with an apparently deficient administrative record must inform claimants of the alleged deficiency and provide them with an opportunity to resolve the stated problem by furnishing missing information. It also would not be sufficient for the benefit determination merely to include boilerplate text about possible differences in applicable definitions, presumptions, or evidence. A discussion of the actual differences would be necessary. Further, although the final rule does not, as some commenters requested, require that plans defer to a favorable SSA determination, a more detailed justification would be required in a case where the SSA definitions were functionally equivalent to those under the plan.

Several commenters requested that the Department adopt a rule requiring deference to a treating physician’s opinion for disability determinations, with some commenters suggesting a rule identical to the one applied under the SSA disability program. Nothing in ERISA or the Department’s regulations mandates that a plan administrator give special weight to the opinions of a claimant’s treating physician when rendering a benefit determination. The Department also does not believe the public record on this rulemaking supports the Department imposing such a rule. In the Department’s view, a treating physician rule is not necessary to guard against arbitrary decision-making by plan administrators. In addition to the various improvements in safeguards and procedural protections being adopted as part of this final rule, courts can review adverse benefit determinations to determine whether the claims adjudicator acted unreasonably in disregarding evidence of a claimant’s disability, including the opinions of treating physicians. Nor does the Department believe it would be appropriate to adopt the treating physician rule applicable under the Social Security disability program. That rule was adopted by the Commissioner of Social Security in regulations issued in 1991, to bring nationwide uniformity to a vast statutory benefits program and to address varying decisions by courts of appeals addressing the question. ERISA, by contrast, governs a broad range of private benefit plans to which both the statute and implementing regulations issued by the Secretary of Labor permit significant flexibility in the processing of claims. Moreover, the SSA’s treating physician rule has not been uniformly or generally applied even under statutory disability programs other than Social Security. See Brief for the United States as amicus curiae supporting petitioner, Black & Decker Disability Plan v. Nord, 538 U.S. 822 (2003).

Under the current Section 503 Regulation, if a claim is denied based on a medical necessity, experimental treatment, or similar exclusion or limit, the adverse benefit determination must include either an explanation of the scientific or clinical judgment for the determination, applying the terms of the plan to the claimant’s medical circumstances, or a statement that such Start Printed Page 92323explanation will be provided free of charge upon request. These requirements in paragraphs (g)(1)(v)(B) and (j)(5)(ii) apply to notices of adverse benefit determinations for both group health and disability claims. In proposing new paragraphs (g)(1)(vii) and (j)(6) applicable to disability claims, these requirements were intended to be subsumed in the general requirement in the proposal that adverse benefit determinations include a “discussion of the decision.” The Department is concerned, however, that removing the explicit requirement in the disability claims procedure to explain a denial based on medical necessity, experimental treatment, or similar exclusion may be misinterpreted by some as eliminating that requirement (especially with the group health plan claims procedures continuing to have that explicit requirement). That clearly was not the Department’s intention, and, accordingly, the final rule expressly sets forth in paragraphs (g)(1)(vii)(B) and (j)(6)(ii) the requirement of an explanation of the scientific or clinical judgment for such denials.[14]

The Department received numerous comments in favor of the disclosure requirement in paragraphs (g)(1)(vii)(B) and (j)(6)(ii) of the proposal that notices of adverse benefit determinations include the internal rules, guidelines, protocols, standards or other similar criteria of the plan that were relied upon in denying the claim (or a statement that such criteria do not exist). Commenters who supported the proposal noted that the proposed requirement should not be onerous given that adverse benefit determinations are already required to include the reasons for the denial and the applicable plan terms, and also argued that this further level of transparency would promote the dialogue between claimant and plan regarding adverse benefit determinations that ERISA contemplates. These commenters also pointed out that this requirement would address a problem confronted by some claimants where a plan or claims adjudicator says it is relying on an internal rule in denying a claim, and then refuses to disclose it to the claimant based on an assertion that the internal rule is confidential or proprietary. Commenters who opposed the provision argued that the proposal would be overly burdensome for plans and insurers. They read the provision as requiring disclosure of “details of internal processes that are irrelevant to the claim decision and that would provide little in the way of useful information to claimants.” The comments included concerns about the time and cost to review claims manuals and other internal documents that may include rules, guidelines, protocols, standards or other similar criteria to determine that no provision has any application to a claim in order to make the statement that such internal rules, etc. do not exist.

The final rule, like the proposal, provides that internal rules, guidelines, protocols, standards or other similar criteria of the plan relied upon in making an adverse benefit determination must be provided with the adverse benefit determination. The Department does not agree with commenters who asserted that the requirement will be overly burdensome to plans. Even under the existing claims procedure regulation, internal rules, guidelines, protocols, standards or similar criteria relied upon in denying the claim already must be provided to the claimant upon request. Although the additional requirement to affirmatively include them in the adverse benefit determination adds an incremental paperwork burden, where a plan utilizes a specific internal rule or protocol, understanding the terms of the specific protocol may be crucial to a claimant’s ability to successfully contest the denial on review. With respect to the comments about disclosing an internal process that is irrelevant to the claim decision, it is hard to see how something that is in fact “irrelevant” can be something that was “relied upon” in denying the claim. Furthermore, the Department does not agree that it should change the proposed text based on expressed concerns about the time and cost to review claims manuals and other internal documents to determine that nothing in those materials have application to a claim. Aside from the fact that this provision of the final rule requires the plan to affirmatively include only rules, guidelines, protocols, standards or other similar criteria that were relied on in denying the claim, in the Department’s view, it would present substantial questions about whether the plan or claims adjudicator complied with ERISA’s fiduciary standards if a claim was denied without the claims adjudicator having considered a rule, guideline, protocol or standard that was intended to govern the determination of the claim. Moreover, the current Section 503 regulation for disability plans gives claimants the right to reasonable access to and copies of documents, records, and other information “relevant” to the claimant’s claim for benefits. In addition to capturing documents, records, and other information “relied upon” in making the benefit determination, the definition of “relevant” also captures information submitted, considered or generated in the course of making the benefit determination or that demonstrates compliance with the administrative processes and safeguards designed to ensure and verify that benefit claim determinations have been made in accordance with governing plan documents and that those provisions have been applied consistently with respect to similarly situated claimants. In the case of plans providing group health or disability benefits, “relevant” also includes documents, records, or other information that constitutes a statement of policy or guidance with respect to the plan concerning the denied treatment option or benefit, without regard to whether such advice or statement was relied upon in making the benefit determination. Such a statement of policy or guidance would include any policy or guidance generated or commissioned by the plan or issuer concerning the denied benefit that would or should contribute to deciding generally whether to pay the claim (e.g., studies, surveys or assessments generated or commissioned by the plan or issuer that implicate a denied treatment option or benefit but do not relate specifically to the plan itself). Thus, in the Department’s view, even under the current rule, plans would be required, on request, to verify that the plan has produced all the internal rules, guidelines, protocols, standards or other similar criteria concerning the denied claim that were or should have been considered in deciding the claim.

Another commenter argued that it did not make sense to require plans to Start Printed Page 92324affirmatively state in an adverse benefit determination that plans did not rely on any rule or guideline. They argued that, if the adverse benefit determination failed to cite reliance on such a rule or guideline, the claimant could ask and the plan would respond with a statement that none were relied on. They argued that such a process gives the claimant the ability to obtain that information in cases where the claimant believes that information is important to understanding or contesting the basis for the denial. It is the Department’s view, however, that an affirmative statement would be helpful to the claimant by providing certainty about the existence of any applicable rule or guideline. The Department also does not believe the absence of a statement of reliance in an adverse benefit statement fairly puts a claimant on notice to request confirmation that no rule or guideline was relied upon. Further, the Department does not believe merely requiring such an affirmative statement is burdensome on plans because the plan should know whether it relied on a rule or guideline in denying a claim.

Finally, the existing Section 503 regulation already requires that rules, guidelines, protocols, standards or other similar criteria that were relied on in denying the claim must be disclosed to claimants on request. Nothing in the current regulation allows a plan fiduciary to decline to comply with that requirement based on an assertion that the information is proprietary or confidential. Indeed, the Department has taken the position that internal rules, guidelines, protocols, or similar criteria would constitute instruments under which a plan is established or operated within the meaning of section 104(b)(4) of ERISA and, as such, must be disclosed to participants and beneficiaries. See FAQs About The Benefit Claims Procedure Regulation, C-17 (www.dol.gov/​sites/​default/​files/​ebsa/​about-ebsa/​our-activities/​programs-and-initiatives/​outreach-and-education/​hbec/​CAGHDP.pdf).[15] Similarly, this final rule does not permit a plan to conceal such information from the claimant under an assertion that the information is proprietary or constitutes confidential business information.

The third new disclosure requirement, set forth in paragraph (g)(1)(vii)(C) of the proposal, adds a requirement that an adverse benefit determination at the initial claims stage must include a statement that the claimant is entitled to receive, upon request, documents relevant to the claim for benefits. Although the current Section 503 Regulation provides that claimants challenging an initial denial of a claim have a right to request relevant documents, a statement advising claimants of their right to relevant documents currently is required only in notices of an adverse benefit determination on appeal. No commenters objected to the addition of this statement to the adverse benefit determination at the initial claims stage. The Department believes such a statement in the initial denial notice simply confirms rights claimants already have under the current claims regulation and will help ensure claimants understand their right of access to the information needed to understand the reasons for the denial and decide whether and how they may challenge the denial on appeal. Accordingly, this provision was adopted without change in the final rule.

3. Right To Review and Respond to New Information Before Final Decision

The Department continues to believe that a full and fair review requires that claimants have a right to review and respond to new evidence or rationales developed by the plan during the pendency of the appeal and have the opportunity to fully and fairly present his or her case at the administrative appeal level, as opposed merely to having a right to review such information on request only after the claim has already been denied on appeal. Accordingly, the final rule adopts those provisions of the proposal with certain modifications described below.

Paragraph (h)(4) of the final rule, consistent with the proposal, requires that plans provide claimants, free of charge, with new or additional evidence considered, relied upon, or generated by the plan, insurer, or other person making the benefit determination (or at the direction of the plan, insurer or such other person) during the pendency of the appeal in connection with the claim. Consistent with the proposal, paragraph (h)(4) also provides a similar disclosure requirement for an adverse benefit determination based on a new or additional rationale. The evidence or rationale must be provided as soon as possible and sufficiently in advance of the date on which the notice of adverse benefit determination on review is required to be provided to give the claimant a reasonable opportunity to address the evidence or rationale prior to that date. These requirements already apply to claims involving group health benefits under the ACA Claims and Appeals Final Rule. Further, the Department has interpreted ERISA section 503 and the current Section 503 Regulation as already requiring that plans provide claimants with new or additional evidence or rationales upon request and provide them an opportunity to respond in at least certain circumstances.[16]

The objective of these provisions is to ensure the claimant’s ability to obtain a full and fair review of denied disability claims by explicitly providing that claimants have a right to review and respond to new or additional evidence or rationales developed by the plan during the pendency of the appeal, as opposed merely to having a right to such information on request only after the claim has already been denied on appeal, as some courts have held under the Section 503 Regulation. These protections are direct imports from the ACA Claims and Appeals Final Rule, and they would correct procedural problems evidenced in litigation even predating the ACA.[17] It was and continues to be the view of the Department that claimants are deprived of a full and fair review, as required by Start Printed Page 92325section 503 of ERISA, when they are prevented from responding, at the administrative stage level, to all evidence and rationales.[18]

As an example of how these new provisions would work, assume the plan denies a claim at the initial stage based on a medical report generated by the plan administrator. Also assume the claimant appeals the adverse benefit determination and, during the 45-day period the plan has to make its decision on appeal, the plan administrator causes a new medical report to be generated. The proposal and the final rule would require the plan to automatically furnish to the claimant any new or additional evidence in the second report. The obligation applies to any new or additional evidence, including, in particular, evidence that may support granting the claim. The plan would have to furnish the new or additional evidence to the claimant before the expiration of the 45-day period. The evidence would have to be furnished as soon as possible and sufficiently in advance of the applicable deadline (including an extension if available) in order to give the claimant a reasonable opportunity to address the new or additional evidence. The plan would be required to consider any response from the claimant. If the claimant’s response happened to cause the plan to generate a third medical report containing new or additional evidence, the plan would have to automatically furnish to the claimant any new or additional evidence in the third report. The new or additional evidence would have to be furnished as soon as possible and sufficiently in advance of the applicable deadline to allow the claimant a reasonable opportunity to respond to the new or additional evidence in the third report.

Several commenters asked for clarification regarding the application of the rights in paragraph (h)(4)(i) of the proposal which would have required that the plan’s claims procedures must allow a claimant to review the claim file and to present evidence and testimony as part of the “disability benefit claims and appeals process.” The commenters noted that, although subsection (h) deals with the appeals portion of the claim process, use of the phrase “claims and appeals process” could cause confusion as to whether the requirements of that subsection are intended to apply only to the appeals portion of the process or also to the initial stage of the claim process. Those commenters also suggested that this provision be deleted in its entirety because it was redundant and unnecessary. They pointed out that paragraph (g)(1)(vii)(C) of the proposal already added a requirement that claimants be notified as part of a denial at the initial claims stage of their right to review copies of documents and other information relevant to the claim for benefits. They pointed to the definition of “relevant” in the current regulation at paragraph (m)(8), which includes documents, records or other information that were relied upon in making the benefit determination, submitted, considered or generated in the course of making the benefit determination, demonstrates compliance with the certain administrative safeguards and requirements required under the regulation, or constitutes a statement of policy or guidance with respect to the plan concerning a denied treatment option or benefit or the claimant’s diagnosis. The commenters also noted that paragraph (h)(2)(ii) of the regulation currently gives claimants the right to “submit written comments, documents, records, and other information” as part of an initial claim. Consequently, they asserted that a provision stating that they can also submit “evidence” and “testimony” does not appear to add to the current requirements.

The text in paragraph (h)(4)(i) was intended to parallel text in the regulation for group health plans under the ACA Claims and Appeals Final Rule. The ACA Claims and Appeals Final Rule specifically addressed rights to review and respond to new or additional evidence or rationales during the appeal stage. The Department agrees with the commenters that the provision is intended to be limited to the appeal stage. The Department also agrees that the new text in proposed paragraph (h)(4)(i) on rights to review the claims file and to present evidence is unnecessary in the disability claims procedure regulation because those rights already exist under the current Section 503 regulation. Accordingly, because that provision in the proposal would not have added new substantive requirements, the Department has deleted the provision from the final rule. In light of the deletion of proposed paragraph (h)(4)(i) from the final rule, the definition in the proposal of “claim file” is also unnecessary, and, accordingly, the Department is not including that definitional provision in the final rule. The changes from the proposal should not be viewed, however, as in any way restricting claimant’s rights to documents, records, or other information under the regulation, or to restrict claimant’s rights to present evidence. For example, in the Department’s view, if the plan or claims adjudicator maintains a claims file or other similar compilation of documents, records, and other information, such a file by definition would constitute relevant materials and be subject to mandatory disclosure under the final rule.

In response to the paragraph (h)(4)(i) as drafted in the proposal, several commenters expressed concern that some plans would have read the language as imposing courtroom evidentiary standards for claimants submitting proof of their claim. Others expressed concern about a statement in the proposal’s preamble that referenced “written” testimony because they thought some plans might rely on that reference to prohibit claimants from submitting audio or video evidence. The Department did not intend that the provision be read to limit the types of evidence that claimants can submit or otherwise put claimants in a worse position than they face under the current regulation. For example, the Department does not believe that plans could refuse to accept evidence submitted in the form of video, audio or other electronic media. Further, in the Department’s view, even under the current regulation, it would not be permissible for a plan to impose courtroom evidentiary standards in determining whether the plan will accept or consider information or materials submitted by a claimant.

Several commenters argued that giving claimants new or additional evidence or rationales developed during the pendency of the appeal and requiring plans to consider and address claimant submissions regarding the new or additional evidence or rationale would set up an unnecessary cycle of review and re-review leading to delay and increased costs. The Department is not persuaded by this argument. The requirement conforms the disability claims regulation to the group health plan claims process requirements under the ACA Claims and Appeals Final Rule. Granting both parties (the claimant and the plan) the opportunity to address the other side’s evidence has not resulted in an endless loop of submissions in group health claims under the ACA Claims and Appeals Final Rule, and there is no reason to believe that this would occur in the disability claims administrative process. The Department also has previously stated its view that the supposed “endless loop” is necessarily limited by claimants’ ability to generate new or Start Printed Page 92326additional evidence requiring further review by the plan. Such submissions ordinarily become repetitive in short order, and are further circumscribed by the limited financial resources of most claimants. If a claimant’s assertions do not include new factual information or medical diagnoses, a plan need not generate report after report rather than relying on the reports it already has in hand merely because a claimant objects to or disagrees with the evidence or rationale. The process also necessarily resolves itself when the plan decides it has enough evidence to properly decide the claim and does not generate new or additional evidence or rationales to support its decision.[19] The fiduciary obligation to pay benefits in accordance with the terms of the plan does not require a fiduciary to endlessly rebut credible evidence supplied by a claimant that, if accepted, would be sufficient to justify granting the claim. In fact, an aggressive claims processing practice of routinely rejecting or seeking to undermine credible evidence supplied by a claimant raises questions about whether a fiduciary, especially one operating under a conflict of interest, is violating the fiduciary’s loyalty obligation under ERISA to act solely in the interest of the plan’s participants and beneficiaries.

Several commenters complained about the possibility of claimants arguing that plans failed to comply with the claims procedure whenever any additional evidence was relied on to support a rationale that was already used as a basis for denying a claim. They expressed similar concerns about determining whether a rationale relied on in denying a claim on review was a “new” or “additional” rationale. They asked the Department to include in the final rule a definition of what constitutes “new or additional” evidence or a “new or additional” rationale. They asserted that the rule might be read to permit a claimant to receive and rebut medical opinion reports generated in the course of an administrative appeal, even when those reports contain no new factual information and deny benefits on the same basis as the initial decision.

The Department does not believe it is necessary or appropriate to include definitions of the terms “new evidence” or “new rationale” in the final rule. Those same terms exist in the parallel claims procedure requirement applicable to group health plans under the ACA Claims and Appeals Final Rule, and have been part of the claims procedure requirements for those plans for several years. The Department does, however, intend that the terms be applied broadly so that claimants have the opportunity to respond at the administrative stage level to all evidence and rationales. Many federal courts have held that in reviewing a plan administrator’s decision for abuse of discretion, the courts are limited to the “administrative record”—the materials compiled by the administrator in the course of making his or her decision. See Miller v. United Welfare Fund, 72 F.3d 1066, 1071 (2d Cir.1995) (compiling cases and stating that “[m]ost circuits have declared that, in reviewing decisions of plan fiduciaries under the arbitrary and capricious standard, district courts may consider only the evidence that the fiduciaries themselves considered”). While some courts have held that when conducting a de novo review, any party may be free to submit additional evidence outside the administrative record,[20] most circuits have adopted rules allowing the admission of additional evidence in de novo cases only in limited circumstances. In addition to requiring the deciding fiduciary to consider the claimant’s response to new or additional evidence or rationales, the Department believes it is important that the claimant have the right and opportunity to ensure that a full administrative record is before a reviewing court when new or additional evidence or rationales are introduced into the record by the plan or deciding fiduciary.[21]

The Department requested comments on whether, and to what extent, modifications to the existing timing rules are needed to ensure that disability benefit claimants and plans will have ample time to engage in the back-and-forth dialogue that is contemplated by these new review and response rights. The current Section 503 Regulation requires that the plan must decide claims and appeals within a reasonable period, taking into account all circumstances. The following timeframes reflect the maximum period by which a plan must make a determination: (1) Initial claim: 45 days after submission; additional 30 days with prior notice for circumstances beyond control of the plan; and (2) Appeal: 45 days after receipt of appeal; additional 45 days with prior notice for “special circumstances.” A special deadline for deciding appeals applies when the named fiduciary is a board or committee of a multiemployer plan that meets at least quarterly. The Department received several comments with suggestions on possible new timing requirements for the claimant to respond to the new evidence and a time deadline for the claims administrator to make its final decision. Other commenters asserted that the current regulations are sufficient for the needs of consumers covered under this final regulation and provide “ample” time for plans and claimants to engage in the necessary dialogue. One commenter raised an issue concerning this rule and its impact on the prompt administration of disability claims. The commenter described, by way of example, that the plan would have to send claimants new or additional evidence before the plan may have determined whether and how the evidence may contribute to an adverse appeal decision, claimants would receive new or additional evidence piecemeal as the appeals process continues and claimants could be required to provide comments back without necessarily knowing how that information may, if at all, affect the decision. The Department does not believe that the rule envisions this kind of process. This provision by its terms does not apply if a plan grants the claim on appeal. Instead, when the plan has decided that it is going to deny the claim on appeal, that is the point at which the rule requires new or additional evidence must be provided to the claimant, sufficiently in advance of final decision so that the claimant can address such evidence. The provision does not require that the plan provide the claimant with information in a piecemeal fashion without knowing whether, and if so how, that information may affect the decision.

The Department noted in the preamble to the proposal that the group health plan claims regulation provides that if the new or additional evidence or rationale is received by a plan so late that it would be impossible to provide it to the claimant in time for the Start Printed Page 92327claimant to have a reasonable opportunity to respond, the period for providing a notice of final internal adverse benefit determination is tolled until such time as the claimant has a reasonable opportunity to respond. The Department did not include this special tolling provision in the proposed amendments because the current disability claims regulation, as described above, already permits plans to take extensions at the appeals stage. In the Department’s view, the current disability claims regulation “special circumstances” provision permits the extension and tolling expressly added to the group health plan rule under the ACA Claims and Appeals Final Rule.[22] Although the Department is not including special timing provisions in the final rule, the Department is open to considering comments on whether sub-regulatory guidance regarding the current provisions on extensions and tolling would be helpful in the context of the new review and response rights.

Commenters asked the Department to confirm that a plan could satisfy the new review and response requirements through a current procedure, which was described as “universal and a result of established case law.” Specifically the commenters stated that some plans currently provide claimants with a voluntary opportunity to appeal any rationale raised for the first time in an appeal denial letter. They contended that this process works well because it gives the claimant a choice of whether to appeal and supplement the administrative record based on a challenge to the new evidence or rationale. They also asserted that the procedure would address commenters’ concern that this requirement may conflict with claims administrator’s obligation to meet the requisite time requirements for deciding claims and appeals. In fact, a few other commenters specifically asked that the new requirement not apply to plans that currently offer a voluntary additional level of appeal. The Department does not agree that a voluntary additional level of appeal provides the same rights to claimants because the additional level of appeal is not subject to the rule’s provisions on timing of notification of benefit determinations on appeal. In the Department’s view, it would not be appropriate to condition a claimant’s right to review and respond to new evidence on the claimant effectively being required to give up rights to a timely review and decision at the appeal stage.

Finally, the Department’s experience enforcing the current regulation for group health plans has revealed circumstances where claims adjudicators assert that they are satisfying this requirement by providing claimants with a notice informing them that the plan relied on new or additional evidence or a new or additional rationale in denying the claim, and offering to provide the new evidence or rationale on request. As the Department explained in the preamble to the ACA Claims and Appeals Final Rule for group health plans,[23] in order to comply with this requirement, a plan or issuer must send the new or additional evidence or rationale automatically to the claimant as soon as it becomes available to the plan. Merely sending a notice informing claimants of the availability of such information fails to satisfy the requirement, and if a plan’s claims procedure says the plan will send a notice of the availability of such information, the responsible plan fiduciary similarly would fail to have met the requirement under ERISA section 503 for the plan to establish and maintain a reasonable procedure governing the filing of benefit claims, notification of benefit determinations, and appeal of adverse benefit determinations.

4. Deemed Exhaustion of Claims and Appeals Processes

The final rule tracks the proposal and provides that if a plan fails to adhere to all the requirements in the claims procedure regulation, the claimant would be deemed to have exhausted administrative remedies, with a limited exception where the violation was (i) de minimis; (ii) non-prejudicial; (iii) attributable to good cause or matters beyond the plan’s control; (iv) in the context of an ongoing good-faith exchange of information; and (v) not reflective of a pattern or practice of non-compliance. The rule thus mirrors the existing standard applicable to group health plans under the ACA Claims and Appeals Final Rule and is stricter than a mere “substantial compliance” requirement.

The Department received a number of generally favorable comments regarding the deemed exhaustion provisions in paragraphs (l)(1) and (2) of the proposal. Those commenters argued that claimants should not have to follow a claims and appeals process that is less than full, fair, and timely. Some of those commenters expressed concern that the language in proposed paragraph (l)(2)(i) was potentially inconsistent with language in the preamble. The commenters noted that the preamble stated that “in those situations when the minor errors exception does not apply, the proposal clarifies that the reviewing tribunal should not give special deference to the plan’s decision, but rather should review the dispute de novo.” By contrast, they point out that proposed paragraph (l)(2)(i) provides that “[i]f a claimant chooses to pursue remedies under section 502(a) of ERISA under such circumstances, the claim or appeal is deemed denied on review without the exercise of discretion by an appropriate fiduciary.” According to the commenters, plans could argue that the language in proposed paragraph (l)(2)(i) does not go far enough and suggested that the regulation should expressly require de novo review.

The Department does not intend to establish a general rule regarding the level of deference that a reviewing court may choose to give a fiduciary’s decision interpreting benefit provisions in the plan’s governing documents. However, the cases reviewing a plan fiduciary’s decision under a deferential arbitrary or capricious standard are based on the idea that the plan Start Printed Page 92328documents give the fiduciary discretionary authority to interpret the plan documents. By providing that the claim is deemed denied without the exercise of fiduciary discretion, the regulation relies on the regulatory authority granted the Department in ERISA sections 503 and 505 and is intended to define what constitutes a denial of a claim. The legal effect of the definition may be that a court would conclude that de novo review is appropriate because of the regulation that determines as a matter of law that no fiduciary discretion was exercised in denying the claim.

A number of commenters expressed concern with proposed paragraph (l)(2)(i), arguing that the proposal encourages claimants to circumvent a plan’s claims and appeals process, to seek remedies in court in the case of insignificant missteps in claims management practices that have no impact on claim outcomes, and, therefore, will result in increased litigation. One commenter asked that the proposal be deleted. A few commenters suggested alternative approaches to the proposal. For example, they suggested that the Department consider a rule which first requires claimants to notify the plan that they intend to pursue judicial review based upon the plan’s procedural error, and provide plans with a reasonable period of time to cure the error before the claimant can dispense with further administrative review. The Department does not believe that the typical participant pursuing a disability benefit claim in the context of a fair and timely review process will, as the commenters claimed, seek remedies in court in the case of insignificant missteps in claims management processes that have no impact on the ultimate decision on the claim. Further, the Department does not believe it would be appropriate to create a rule that could create incentives for plans and insurers to violate procedural requirements designed to protect claimants and ensure transparency in the decision-making process knowing that before the claimant could seek redress that the claimant would have to identify the violation, notify the plan of the violation, and give the plan time to cure the error. Rather, after careful consideration of these comments, the Department continues to believe that claimants should not have to follow a claims and appeals process that is less than full, fair, and timely. Accordingly, the Department decided to retain the deemed exhaustion provisions as proposed, including the exception to the strict compliance standard for errors that are minor and that meet certain other specified conditions.[24]

5. Coverage Rescissions—Adverse Benefit Determinations

Paragraph (m)(4) of the final rule amends the definition of an adverse benefit determination to include, for plans providing disability benefits, a rescission of disability benefit coverage that has a retroactive effect, except to the extent it is attributable to a failure to timely pay required premiums or contributions towards the cost of coverage. The Department did not receive any comments objecting to this provision in the proposed rule, and, accordingly, the provision is adopted without change in the final rule.

Several commenters suggested that the provision be expanded to expressly include situations, particularly in cases involving mental health and substance use disorder claims, where a plan approves treatment for a period less than that requested, but defers the right to appeal until the date the approved benefits end. The Department did not make such a modification to paragraph (m)(4) in the final rule because the Department does not agree that such cases should be addressed as rescissions.

Rather, it appears that the commenters were making a more general point that the claims procedure regulation should expressly define an adverse benefit determination to include instances in which such a limitation is invoked. In that regard, the current regulation provides that the term “adverse benefit determination” includes any denial, reduction, or termination of, or a failure to provide or make payment (in whole or in part) for, a benefit. The Department issued a set of FAQs under the current regulation explaining the application of that definition to various situations. One FAQ stated that if a plan provides for the payment of disability benefits for a pre-determined, fixed period (e.g., a specified number of weeks or months or until a specified date), the termination of benefits at the end of the specified period would not constitute an adverse benefit determination under the regulation. Rather, the Department concluded that any request by a claimant for payment of disability benefits beyond the specified period would constitute a new claim.[25] Another FAQ, however, addressed the different situation where the plan pays less than the total amount of expenses submitted with regard to a post-service claim. We explained that, while the plan is paying out the benefits to which the claimant is entitled under its terms, the claimant is nonetheless receiving less than full reimbursement of the submitted expenses. Therefore, in order to permit the claimant to challenge the plan’s calculation of how much it is required to pay, that decision is required to be treated as an adverse benefit determination under the regulation.[26] Whether the situation presented by the commenters should be treated more like the former or latter FAQ will depend on the terms of the plan and the particular facts and circumstances.

One commenter asked whether the proposed rule regarding rescissions of coverage applies to adjustments or suspensions of benefits that reduce or eliminate a disability pension benefit under section 305 of ERISA, which corresponds to section 432 of the Internal Revenue Code of 1986 (Code). It is the Department’s view that a retroactive reduction or elimination of disability pension benefits pursuant to section 305 of ERISA is not a rescission of coverage under paragraph (m)(4)(ii) of the final rule. However, a retroactive reduction or elimination of disability pension benefits, that results from a finding by the plan that the claimant was not disabled within the meaning of the plan when the disability pension benefits were reduced or eliminated under ERISA section 305, would be an adverse benefit determination under the claims procedure regulation. If the claims adjudicator must make a determination of disability in order to decide a claim, the claim must be treated as a disability claim for purposes of the Section 503 Regulation.[27]

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6. Culturally & Linguistically Appropriate Notices

Paragraphs (g)(1)(vii)(C), (j)(7) and (o) of the final rule require plans to provide notice to claimants in a culturally and linguistically appropriate manner. The final rule adopts the standards already applicable to group health plans under the ACA Claims and Appeals Final Rule. Specifically, if a claimant’s address is in a county where ten percent or more of the population residing in that county are literate only in the same non-English language as determined in guidance based on American Community Survey data published by the United States Census Bureau, notices of adverse benefit determinations to the claimant would have to include a statement prominently displayed in the applicable non-English language clearly indicating how to access language services provided by the plan. In addition, plans must provide a customer assistance process (such as a telephone hotline) with oral language services in the non-English language and provide written notices in the non-English language upon request.[28]

A few commenters requested clarification that the culturally and linguistically appropriate standards (CLAS) requirements in the regulation apply only to notices of adverse benefit determinations and not to other communications regarding disability claims. In the Department’s view, the text of paragraphs (g)(1)(vii)(C) and (j)(7) is clear that the CLAS requirements are applicable to notices of adverse benefit determinations. The final rule does not address whether, and under what circumstances, the fiduciary duty or other provisions in ERISA would require plans to provide plan participants and beneficiaries with access to language services (see, for example, the discussion below regarding summary plan description (SPD) requirements).

A few commenters requested that the Department remove the CLAS standards. Other commenters supported the CLAS requirements but requested that the Department provide a reasonable time for compliance with this provision, citing operational changes and costs associated with the CLAS requirements. Other commenters requested that the threshold percentage that triggers the CLAS requirements be reduced to a lower percentage to capture a greater number of counties or to reflect a percentage of plan participants as opposed to the population of a relevant county. One commenter suggested that the Department may have unintentionally reduced protections for non-English speaking participants. The commenter pointed out that although a particular county may not meet the threshold under this rule, particular workforces may meet the Department’s thresholds under section § 2520.102-2(c).

In light of all the comments received, this final rule retains the CLAS requirements as set forth in the proposal. The Department believes that the CLAS requirements impose reasonable language access requirements on plans and appropriately balance the objective of protecting claimants by providing reasonable language assistance to individuals who communicate in languages other than English with the goal of mitigating administrative burdens on plans. The Department continues to believe that it is important to provide claims denial notices in a culturally and linguistically appropriate manner to ensure that individuals get the important information needed to properly evaluate the decision denying a claim and to allow for an informed decision on options for seeking review of a denial. Therefore, the final rule adopts the requirements in the proposal without change.

The Department does not agree that the final rule supersedes the summary plan description foreign language rules in § 2520.102-2(c) which include a requirement to offer assistance (which could include language services) calculated to provide participants with a reasonable opportunity to become informed as to their rights and obligations under the plan. Non-English speaking participants could be eligible for language services under either this final rule or § 2520.102-2(c), depending on the circumstances.

Finally, one commenter asked that the Department clarify that the English version of the notices takes precedence in the event of any conflict with the translated documents. Another commenter asked for clarification that the requirement to provide “assistance with filing claims and appeals in any applicable non-English language” is limited to procedural, not substantive, assistance. The Department was not persuaded that including such provisions in the final rule is necessary or appropriate. Notices provided to participants or beneficiaries should be complete and accurate notwithstanding the language used. Further, a “substantive versus procedural” distinction between the type of assistance required is not, in the Department’s view, particularly meaningful or helpful. Rather, the final rule requires plan fiduciaries to provide disability benefit claimants with the requisite level and amount of assistance necessary to assist the claimants in understanding their rights and obligations so that they can effectively file claims and appeals in pursuing a claim for disability benefits.

7. Miscellaneous

a. Technical Correction

The Department determined that a minor technical fix to the Section 503 Regulation is required with respect to disability claims. The Department proposed to clarify that the extended time frames for deciding disability claims, provided by the quarterly meeting rule found in the current regulation at 29 CFR 2560.503-1(i)(1)(ii), are applicable only to multiemployer plans. The Department did not receive any adverse comments on the proposed technical fix, and, accordingly, the final rule amends paragraph (i)(3) to correctly refer to the appropriate subparagraph in (i)(1) of the Section 503 Regulation.

b. Contractual Limitations Periods for Challenging Benefit Denials

In the proposal, the Department asked for comments on whether the claims procedure rule should address limitations periods in plans that govern the period after a final adverse benefit determination within which a civil action may be filed under section 502(a)(1)(B) of ERISA. We pointed out that ERISA does not specify that period and noted that the federal courts have generally looked to analogous state laws to determine an appropriate limitations period. Analogous state law limitations periods vary, but they generally start with the same event, the plan’s final benefit determination. We acknowledged that the Supreme Court recently upheld the use of contractual limitations periods in plan documents and insurance contracts which may override analogous state laws so long as they are reasonable. See Heimeshoff v. Hartford Life & Accident Ins. Co., 134 S.Ct. 604, 611 (2013). We pointed out that contractual limitations periods are not uniform, the events that trigger the clock vary, and the documents in which the limitations periods are embedded may be difficult for claimants to obtain and understand. We also highlighted a Start Printed Page 92330separate issue, not before the Supreme Court in Heimeshoff, of whether plans must provide participants notice with respect to contractual limitations periods in adverse benefit determinations on review. Although many federal courts have held that plans should provide such notice under the Section 503 Regulation, the court decisions are not uniform.[29] Accordingly, the Department solicited comments on whether the final regulation should require plans to provide claimants with a clear and prominent statement of any applicable contractual limitations period and its expiration date for the claim at issue in the final notice of adverse benefit determination on appeal and with an updated notice of that expiration date if tolling or some other event causes that date to change.

In response, the Department received many comments from claimants and participant advocates supporting a contractual limitations period notice requirement. Numerous commenters further requested that any required notice include the date on which the relevant contractual limitations period expires. They also asked the Department to include a definition of a “reasonable limitations period.” One commenter argued to the contrary that a rule requiring inclusion of a specific date would create confusion for claimants and carries a risk that the insurer or other administrative entity is seen as providing legal advice. Another commenter urged that such a rule should not be adopted because the date by which suit must be filed may be subject to dispute in litigation. A commenter expressed concern that such a notice requirement is largely unnecessary as the information is generally already included in plan documents, (e.g., the summary plan description), and that it could impose significant administrative burden. The commenter suggested that a more appropriate rule would be to require that the notice of adverse benefit determination on review include a statement alerting participants that they should review the terms of the applicable plan documents to determine any deadline by which they must file a civil action. Finally, a number of commenters asked the Department to specifically address whether it is allowable for a contractual limitations period to be structured so that it could actually expire before the plan’s appeals process is completed.

In light of the issues identified regarding contractual limitations periods, the Department concluded that it was appropriate in this final rule to address certain basic points.

First, section 503 of ERISA requires that a plan afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review of that decision by an appropriate named fiduciary. The Department does not believe that a claims procedure would satisfy the statutory requirement if the plan included a contractual limitations period that expired before the review was concluded. In the Department’s view, this is clear from the Supreme Court’s holding in Heimeshoff. In that case, the Supreme Court held that an ERISA disability plan’s three-year limitations period, running from the date of proof of loss, was enforceable even though the statute of limitations began to run before the participant’s cause of action accrued. The Court pointed out that there was nothing to suggest the 3-year contractual limitations period was not “reasonable” in light of the Department’s regulation that would require the internal claims and appeals process to be completed well inside a three-year period. Heimeshoff, 134 S.Ct. at 612 (citing Order of United Commercial Travelers of America v. Wolfe, 67 S.Ct. 1355 (1947)). A limitations period that expires before the conclusion of the plan’s internal appeals process on its face violates ERISA section 503’s requirement of a full and fair review process. A process that effectively requires the claimant to forego the right to judicial review and thereby insulates the administrator from impartial judicial review falls far short of the statutory fairness standard and undermines the claims administrator’s incentives to decide claims correctly.

Further, in rejecting the challenge to the contractual limitations period at issue in Heimeshoff, the Court emphasized that the claimant was allowed a year or more to bring suit after the close of the internal claims review process.[30] A contractual limitations period that does not allow such a reasonable period after the conclusion of the appeal in which to bring a lawsuit is unenforceable.[31] Moreover, as the Start Printed Page 92331Supreme Court also recognized in Heimeshoff, even in cases with an otherwise enforceable contractual limitations period, traditional doctrines, such as waiver and estoppel, may apply if a plan’s internal review prevents a claimant from bringing section 502(a)(1)(B) actions within the contractual period. Heimeshoff, 134 S.Ct. at 615. In addition to such traditional remedies, plans that offer appeals or dispute resolution beyond what is contemplated in the claims procedure regulations must agree to toll the limitations provision during that time. See 29 CFR 2560.503-1(c)(3)(ii).

Second, the Department agrees with the conclusion of those federal courts that have found that the current regulation fairly read requires some basic disclosure of contractual limitations periods in adverse benefit determinations. In fact, in the Department’s view, the statement of the claimant’s right to bring a civil action under section 502(a) of ERISA following an adverse benefit determination on review would be incomplete and potentially misleading if it failed to include limitations or restrictions in the documents governing the plan on the right to bring such a civil action. Accordingly, this final rule includes in new paragraph (j)(4)(ii) a requirement that the notice of an adverse benefit determination on review must include a description of any applicable contractual limitations period and its expiration date.

The Department is not persuaded that inclusion in the notice of adverse benefit determination on review of any applicable contractual limitations period and its expiration date will result in confusion. The Department also does not agree that a statement of the plan’s view as to the exact date the limitations period expires will somehow inappropriately foreclose or otherwise prejudice legitimate arguments about application of the limitations period in individual cases. Nor does the Department believe that disclosure of a contractual limitations period requires the plan to provide legal advice. Additionally, as described below, the Department does not believe that including a description of any contractual limitations period, including the date by which the claimant must bring a lawsuit, would impose more than a minimal additional burden. Although the final rule provision is technically applicable only to disability benefit claims, as explained above, the Department believes that notices of adverse benefit determinations on review for other benefit types would be required to include some disclosure about any applicable contractual limitations period. What would be sufficient will depend on the controlling judicial precedent and the individual facts and circumstances, but the Department would consider the inclusion of the information in paragraph (j)(4)(ii) to be an appropriate disclosure for all plan types.

Several comments raised other issues pertaining to the disclosure of contractual and statutory limitations on a claimant’s right to bring a civil action under section 502(a) of ERISA. Issues beyond this final rule may be addressed in a future regulatory action or other guidance by the Department.

c. Comments Beyond the Scope of the Rulemaking

Some commenters raised disability claims procedure issues pertaining to matters that the Department considers to be beyond the scope of this rulemaking. For example, one commenter suggested that the Department amend its Model Statement of ERISA Rights for SPDs for disability plans to include notification of eligibility for language services. Other commenters requested that the Department propose a rule requiring that adverse benefit determinations on review notify disability benefit claimants of the ERISA venue provisions. Other issues raised by some commenters relate to substantive limitations on recoupment of benefit overpayments, rights to supplement the administrative record for court review, and the validity of discretionary clauses in plans that are used as a basis for seeking a deferential “arbitrary or capricious” standard for court review of benefit denials. Although the Department agrees that the issues raised by the commenters may merit an evaluation of additional regulatory actions on procedural safeguards and protections, those subjects are beyond the scope of this rulemaking. As the Department noted in the preamble to the proposal, this rulemaking was a start to improving the current standards applicable to the processing of claims and appeals for disability benefits so that they include improvements to certain basic procedural protections in the current Section 503 Regulation. Issues beyond this final rule may be addressed in a future regulatory action or other guidance by the Department.

III. Economic Impact and Paperwork Burden

A. Background and Need for Regulatory Action

As discussed in Section I of this preamble, the final amendments would revise and strengthen the current rules regarding claims and appeals applicable to ERISA-covered plans providing disability benefits primarily by adopting several of the new procedural protections and safeguards made applicable to ERISA-covered group health plans by the Affordable Care Act. Before the enactment of the ACA, group health plan sponsors and sponsors of ERISA-covered plans providing disability benefits were required to implement claims and appeal processes that complied with the Department’s regulation establishing minimum requirements for benefit claims procedures for employee benefit plans covered by Title I of ERISA.[32] The enactment of the ACA and the issuance of the implementing interim final regulations in 2010 resulted in disability benefit claimants receiving fewer procedural protections than group health plan participants even though disputes and litigation regarding disability benefit claims are more prevalent than health care benefit claims.[33] In order to ensure fundamental fairness in the claim and appeals procedure process, health and disability plan claimants are entitled to receive the same procedural protections as they did when the 2000 regulation was issued.

The Department believes this action is necessary to ensure that disability claimants receive a full and fair review of their claims under the more stringent procedural protections that Congress established for group health care claimants under the ACA. The final rule will promote fairness and accuracy in the claims review process and protect participants and beneficiaries in ERISA-covered disability plans by ensuring they receive benefits that otherwise might have been denied by plan administrators in the absence of the fuller protections provided by this final regulation. The final rule also will help alleviate the financial and emotional hardship suffered by many individuals when they are unable to work after becoming disabled and their claims are denied.

As stated earlier in this preamble, this action also is necessary to correct Start Printed Page 92332procedural problems evidenced in litigation under the 2000 regulation predating the ACA, which in the Department’s view, resulted in claimants not receiving a full and fair review as required by ERISA section 503. Specifically, some courts held that under the 2000 regulation, claimants only have the right to review and respond to new evidence or rationales developed during the pendency of an appeal after the claim has been denied on appeal. The final rule levels the playing field by explicitly requiring plan administrators to provide claimants, free of charge, with any new evidence or rationale relied upon, considered, or generated by the plan in connection with the claim and a reasonable opportunity for the claimant to respond.

The Department disagrees with commenters’ assertion that disability plan claim procedures should not mirror the ACA group health plan amendments because of the difference between health and disability claims. For reasons discussed earlier in this preamble, after careful consideration, the Department incorporated into the final rule only certain of the ACA group health plan claims procedure amendments to ensure that disability plan claimants receive the same opportunity to pursue a full and fair review of their claims as required by ERISA section 503 with the procedural safeguards and consumer protections that are aligned with those required by group health plans under the ACA and the Department’s implementing regulation at 29 CFR 2590.715-2719. This final rule aligns the disability claims procedures with the ACA procedural safeguards and consumer protections for group health plans. The Department did not amend other provisions of the 2000 regulation that affect how disability plan claims are processed or the timing requirements. Therefore, as discussed more fully below, the Department does not expect that the final rule will lead to delays and significant increased cost for disability claims and appeals processes. The Department considered comments asserting that some of its cost estimates in the proposed Regulatory Impact Analysis (“RIA”) were underestimated and made adjustments where appropriate.

The Department has crafted these final regulations to secure the protections of those submitting disability benefit claims. In accordance with OMB Circular A-4, the Department has quantified the costs where possible and provided a qualitative discussion of the benefits that are associated with these final regulations.

B. Executive Order 12866 and 13563

Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects; distributive impacts; and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility.

Under Executive Order 12866 (58 FR 51735), “significant” regulatory actions are subject to review by the Office of Management and Budget (OMB). Section 3(f) of the Executive Order defines a “significant regulatory action” as an action that is likely to result in a rule (1) having an annual effect on the economy of $100 million or more in any one year, or adversely and materially affecting a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local or tribal governments or communities (also referred to as “economically significant”); (2) creating a serious inconsistency or otherwise interfering with an action taken or planned by another agency; (3) materially altering the budgetary impacts of entitlement grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) raising novel legal or policy issues arising out of legal mandates, the President’s priorities, or the principles set forth in the Executive Order. It has been determined that this rule is significant within the meaning of section 3(f) (4) of the Executive Order. Therefore, OMB has reviewed the final rule pursuant to the Executive Order. The Department provides an assessment of the potential costs and benefits of the final rule below, as summarized in Table 1, below. The Department concludes that the economic benefits of these final regulations justify their costs.

Table 1—Accounting Table

Category Estimate Year dollar Discount rate Period covered
Benefits—Qualitative 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 regulation. 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 will be achieved. Fairness and accuracy will increase as fuller and fairer disability claims processes provide claimants with sufficient information to evaluate the claims process and defend their rights under their plan.
Costs:
Annualized $15,806,000 2016 7% 2018-2027
Monetized 15,806,000 2016 3% 2018-2027
Qualitative The Department believes that these requirements have modest costs associated with them, since many chiefly clarify provisions of the current DOL claims procedure regulation. As discussed in detail in the cost section below, the Department quantified the costs associated with two provisions of the final regulations for which it had sufficient data: The requirements to provide (1) additional information to claimants in the appeals process and (2) information in a culturally and linguistically appropriate manner.

1. Estimated Number of Affected Entities

The Department does not have complete data on the number of plans providing disability benefits or the total number of participants covered by such plans. ERISA-covered welfare benefit plans with more than 100 participants generally are required to file the Form 5500 Annual Return/Report. Currently, only a small number of ERISA-covered welfare benefit plans with less than 100 participants are required to file the form. Based on current trends in the establishment of pension and health plans, there are many more small plans than large plans, but the majority of participants are covered by the large plans.

Data from the 2014 Form 5500 Schedule A indicates that there are 39,135 plans reporting a code indicating they provide temporary disability benefits covering 40.1 million participants, and 26,171 plans reporting a code indicating they provide long-term disability benefits covering 22.4 million participants.[34] To put the number of large and small plans in perspective, the Department estimates that there are 150,000 large group health plans and 2.1 million small group health plans using 2016 Medical Expenditure Panel Survey-Insurance Component. While most plans are small plans most participants are in large plans.

2. Benefits

In developing these final regulations, the Department closely considered their potential economic effects, including both benefits and costs. The Department does not have sufficient data to quantify the benefits associated with these final regulations due to data limitations and a lack of effective measures. Therefore, the Department provides a qualitative discussion of the benefits below.

These final regulations implement a more uniform, rigorous, and fair disability claims and appeals process as required by ERISA section 503 that conforms to a carefully selected set of the requirements applicable to group health plans under the ACA Claims and Appeals Final Rule. In general, the Department expects that these final regulations will improve the procedural protections for disabled workers who make claims for disability benefits from ERISA-covered employee benefit plans. This will cause some participants to receive benefits that, absent the fuller protections of the regulation, they might otherwise have been incorrectly denied. In other circumstances, expenditures in the claims process incurred by plans may be reduced as a fuller and fairer system of claims and appeals processing helps facilitate participant acceptance of cost management efforts. The Department expects that 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 will 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. This certainty and consistency also are expected to benefit, to varying degrees, all parties within the system and lead to broader social welfare gains, particularly for disability benefit plan claimants.

The Department expects that these final regulations also will improve the efficiency of disability benefit plans by improving their transparency and fostering participants’ confidence in their fairness. The enhanced disclosure and notice requirements contained in these final regulations will help ensure that benefit participants and beneficiaries have a clear understanding of the reasons underlying adverse benefit determinations and their appeal rights.

For example, the final regulations require all adverse benefit determinations to contain a discussion of the decision, including an explanation of the basis for disagreeing with the views of a treating health care professional or vocational professional who evaluated the claimant or any disability determination regarding the claimant made by the Social Security Administration and presented to the plan by the claimant. This provision would address the confusion often experienced by claimants when there is little or no explanation provided for their plan’s determination and/or their plan’s determination is contrary to their treating professional’s opinion or their SSA award of disability benefits.

The final rule also requires adverse benefit determinations to contain the internal rules, guidelines, protocols, standards or other similar criteria of the plan that were relied upon in denying the claim (or a statement that these do not exist), and a notice of adverse benefit determination at the claims stage must contain a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s benefit claim. These provisions will benefit claimants by ensuring that they fully understand the reasons why their claim was denied so they are able to meaningfully evaluate the merits of pursuing an appeal or litigation.

The requirement to include a discussion of the decision, as well as the requirement to include specific internal rules, guideline, protocols, standards, or similar criteria relied upon by the plan will improve the accuracy of claims determinations. The process of documenting and explaining the reasoning of the decision will help ensure that plans’ terms are followed and accurate information is used, and will enable plan participants to challenge inadequate or faulty evidence or reasoning.

Under the final rule, adverse benefit determinations must be provided in a culturally and linguistically appropriate manner for certain participants and beneficiaries that are not fluent in Start Printed Page 92334English. Specifically, if a claimant’s address is in a county where 10 percent or more of the population residing in that county, as determined based on American Community Survey (ACS) data published by the United States Census Bureau, are literate only in the same non-English language, notices of adverse benefit determinations to the claimant would have to include a prominent one-sentence statement in the relevant non-English language about the availability of language services. This provision will ensure that certain disability claimants that are not fluent in English understand the notices received from the plan regarding their disability claims and their right to appeal denied claims.

These important protections would benefit participants and beneficiaries by correcting procedural wrongs evidenced in the litigation even predating the ACA.

The voluntary nature of the employment-based benefit system in conjunction with the open and dynamic character of labor markets make explicit as well as implicit negotiations on compensation a key determinant of the prevalence of employee benefits coverage. The prevalence of benefits is therefore largely dependent on the efficacy of this exchange. If workers perceive that there is the potential for inappropriate denial of benefits or handling of appeals, they will discount the value of such benefits to adjust for this risk. This discount drives a wedge in compensation negotiation, limiting its efficiency. If workers undervalue the full benefit of disability coverage, fewer employers will provide such coverage or fewer participants will enroll. To the extent that workers perceive that the final rule, supported by the Department’s enforcement authority, will reduce the risk of inappropriate denials of disability benefits, the differential between the employers’ costs and workers’ willingness to accept wage offsets is minimized.

These final regulations would reduce the likelihood of inappropriate benefit denials by requiring all disability claims and appeals to be adjudicated by persons that are independent and impartial. Specifically, the final rule would prohibit hiring, compensation, termination, promotion, or other similar decisions with respect to any individual (such as a claims adjudicator or a medical or vocational expert) to be made based upon the likelihood that the individual will support the plan’s benefits denial. This will ensure that all disability benefit plan claims and appeals processes are adjudicated in a manner designed to ensure the independence and impartiality of persons involved in making the decisions and enhance participants’ perception that their disability plan’s claims and appeals processes are operated in a fair manner.

As stated above, the final rule requires claimants to have the right to review and respond to new evidence or rationales developed by the plan during the pendency of an appeal, as opposed merely to having a right to such information upon request only after the claim has already been denied on appeal, as some courts have held under the Section 503 Regulation. These provisions will benefit claimants by correcting certain procedural flaws that currently occur when disability benefit claims are litigated and ensuring that they have a right to review and respond to new evidence or rationales developed by the plan during the pendency of the appeal.

In summary, the final rules provide more uniform standards for handling disability benefit claims and appeals that are comparable to the rules applicable to group health plans under the ACA Claims and Appeals Final Rule. These rules will reduce the incidence of inappropriate denials, averting serious financial hardship and emotional distress for participants and beneficiaries that are impacted by a disability. They also would enhance participants’ confidence in the fairness of their plans’ claims and appeals processes. Finally, by improving the transparency and flow of information between plans and claimants, the final regulations will enhance the efficiency of labor and insurance markets.

3. Costs and Transfers

The Department has quantified the costs related to the final regulations’ requirements to (1) provide the claimant free of charge with any new or additional evidence considered, and (2) to providing notices of adverse benefit determinations in a culturally and linguistically appropriate manner. These requirements and their associated costs are discussed below

Provision of new or additional evidence or rationale: As stated earlier in this preamble, before a plan providing disability benefits can issue an adverse benefit determination on review on a disability benefit claim, these final regulations require such plans to provide the claimant, free of charge, with any new or additional evidence considered, relied upon, or generated by (or at the direction of) the plan or any new or additional rationale upon which the adverse determination is based as soon as possible and sufficiently in advance of the date the notice of adverse benefit determination on review is required to be provided. This requirement may increase the administrative burden on plans to prepare and deliver the enhanced information to claimants. The Department is not aware of a data source substantiating how often plans rely on new or additional evidence or rationale during the appeals process or the volume of materials that comprise the new evidence or rationale. Based on comments and discussions with the regulated community, the Department understands that few plans base adverse benefit determinations on appeal on new evidence or rationales. The Department also understands that the most critical new information relied on by plans when issuing adverse benefit determinations on review are new independent medical reports, and that at least some plans and insurers have a practice of providing claimants with rights to a voluntary additional level of appeal to respond to the new independent medical report if they disagree with its findings.

These final rules further require adverse benefit determinations on review for disability benefit plans to include a description of any contractual limitations period, including the date by which the claimant must bring a lawsuit. In the regulatory impact analysis for the proposal, the Department estimated these costs by assuming that compliance will require medical office staff, or other similar staff for another service provider with a labor rate of $30, five minutes [35] to collect and distribute the additional evidence or rationale considered, relied upon, or generated by (or at the direction of) the plan during the appeals process. Additionally, including a description of any contractual limitations period, including the date by which the claimant must bring a lawsuit would have minimal additional burden as plans already maintain such information in the ordinary course of their claims administration process and would just need to add it to the notice.

One commenter questioned the Department’s assumption asserting that it does not account for time to identify the additional or new information or rationale and for staff to respond. Commenters also asserted that providing the information will trigger a response by the claimant to which they Start Printed Page 92335will have to respond. The commenter provided no alternative estimates or data supporting their assertions that the Department could use to revise its cost estimate.

In the absence of such data, the Department disagrees with the comments. While some effort is required to provide claimants with the new information or rationale, the Department does not find the commenters’ assertion of significant burden to be credible. As part of its customary and usual business practices, the insurer or TPA should have an existing system in place to track any new information or rationale it relies on in making an adverse benefit determination in order to identify, document, and evaluate the information during its claim adjudication process. The Department acknowledges, however, that an average of five minutes may be inadequate time to collect the information and provide it to the claimants; therefore, it has increased the estimate to an average of 30 minutes, which should provide a reasonable amount of time to perform this task.

The Department also agrees that making the new or additional information or rationale available to the claimant may trigger a response from the claimant. However, the Department does not have sufficient data to estimate the number of claimants that will respond with information that the insurer or TPA will need to evaluate or how much time will be required to evaluate the information. Moreover, the Department’s consultations with EBSA field investigators that investigate disability plan issues indicate that many disability plans already allow claimants to respond to the new information or rationale in a back-and-forth process. The requirement imposes no new costs on these plans, insurers, and TPAs. The requirement does impose an additional burden on plans that do not allow claimants to respond to the new information or rationale, but the Department does not have sufficient data to estimate the increased costs. One industry commenter agreed that that it would be difficult to estimate the burden associated with responding to claimants.

Commenters also raised concern regarding a potentially endless cycle of appeals, responses, and reconsiderations that would extend the claim determination process and substantially increase costs. As discussed elsewhere in the preamble, the Department also does not find this claim to be credible. The requirement only requires action if the insurer or TPA produces new or additional information or rationale after reviewing the new information submitted by the claimant, not if it just evaluates the information submitted by the claimant, and the Department’s consultations with its investigators indicated that this occurs infrequently.

Additionally, while a plan fiduciary has a responsibility to ensure the accurate evaluation of all claims, that responsibility does not require the fiduciary to rebut every piece of evidence submitted or seek to deny every claim. Indeed, an endless effort to rebut every piece of evidence submitted by the claimant would call into question whether the fiduciary was impartially resolving claims as required by the duties of prudence and loyalty.

Furthermore, the Department has interpreted ERISA section 503 and the current Section 503 Regulation as already requiring that plans provide claimants with new or additional evidence or rationales upon request and an opportunity to respond in certain circumstances. See Brief of the Secretary of Labor, Hilda L. Solis, as Amicus Curiae in Support of Plaintiff-Appellant’s Petition for Rehearing, Midgett v. Washington Group Int’l Long Term Disability Plan, 561 F.3d 887 (8th Cir. 2009) (No. 08-2523), (expressing disagreement with cases holding that there is no such requirement). The supposed “endless loop” is necessarily limited by claimants’ ability to generate new evidence requiring further review by the plan. Such submissions ordinarily become repetitive in short order, and are further circumscribed by the limited financial resources of most claimants.

For purposes of this regulatory impact analysis, the Department assumes, as an upper bound, that all appealed claims will involve a reliance on additional evidence or rationale. Based on that assumption, the Department assumes that this requirement will impose an annual aggregate cost of $14.5 million. The Department estimates this cost by assuming that compliance will require medical office staff, or another service providers’ similar staff with a labor rate of $42.08, thirty minutes [36] to collect and distribute the additional evidence considered, relied upon, or generated by (or at the direction of) the plan during the appeals process. The Department estimates that on average, material, printing and postage costs will total $2.15 per mailing (20 pages * 0.05 cents per copy + $1.15 postage). The Department further assumes that 30 percent of all mailings will be distributed electronically with no associated material, printing or postage costs.[37]

The Department does not have sufficient data on the number of disability claims that are filed or denied. Therefore, the Department estimates the number of short- and long-term disability claims based on the percentage of private sector employees (122 million) [38] that participate in short- and long-term disability programs (approximately 39 and 33 percent respectively).[39] The Department estimates the number of claims per covered life for long-term disability benefits based on the percentage of covered individuals that file claims under the Social Security Disability Insurance Program (SSDI) (two percent of covered individuals). The Department notes that SSDI uses a standard for disability determinations that is stricter than the standard used in many long-term disability plans offered by private employers. However, the number of claims filed with the SSDI is an acceptable proxy as most employer plans require claimants to file with the SSDI as a condition of receiving benefits from the plan as they offset the benefits paid by plan with the amount received from SSDI.

The Department does not have sufficient data to estimate the percentage of covered individuals that file short-term disability claims. Therefore, for purposes of this analysis, the Department estimates, as it did in Start Printed Page 92336the proposal, that six percent of covered lives file such claims, because it believes that short-term disability claims rates are higher than long-term disability claim rates. The Department received no comments regarding this assumption.

The Department estimates the number of denied claims that would be covered by the rule in the following manner: For long-term disability, the percent of claims denied is estimated using the percent of denied claims for the SSDI Program (75 percent). This estimate may overstate the denial rates for ERISA-covered long-term disability plans, because as discussed above, many plans require claimants to file for SSDI benefits as a requirement to receive benefits from their plan. Plans often have a lower benefit determination standard, at least initially, than the SSDI Program resulting in less denied claims. Therefore, using the SSDI denied claims rate as a proxy for the ERISA-covered plan claims denial rate may overstate the number of private long-term disability plan denied claims. For short-term disability, the estimate of denied claims (three percent) is an assumption based on previous regulations and feedback. The estimates are provided in the table below.

Table 2—Fair and Full Review Burden

[In thousands]

Short-term Long-term Total
Electronic Paper Electronic Paper Electronic Paper All
Denied Claims and lost Appeals with Additional Information 26 60 168 391 193 451 644
Mailing cost per event $0.00 $2.15 $0.00 $2.15 $0.00 $2.15
Total Mailing Cost $0.00 $129 $0.00 $841 $0.00 $969 $969
Preparation Cost per event $21.04 $21.04 $21.04 $21.04 $21.04 $21.04 $21.04
Total Preparation cost $540 $1,260 $3,526 $8,227 $4,066 $9,487 $13,553
Total $540 $1,388 $3,526 $9,068 $4,066 $10,456 $14,522

Adverse benefit determinations on disability benefit claims would have to contain a discussion of the decision, including the basis for disagreeing with SSA Disability Determination and Views of Treating Physician: Commenters on the proposal noted that costs were not quantified for the added burden of including in the benefit determination a discussion of why the plan did not follow the determination of the SSA or views of health care professionals that treated the claimant. Commenters did not provide data or information that would provide the Department with sufficient data to quantify such costs. Thus, while the Department agrees that there could be added burden imposed on plans to provide this discussion in adverse benefit determinations, the Department is unable to estimate the burden because it does not have sufficient data on the number or percent of claims that would need to contain this discussion.

Departmental investigators reviewing disability claims report that if the plan deviates from an attending physician’s recommendation, a review is conducted by a supervisor, nurse, medical director or a consultant. This additional review usually generates documentation in the claim file. While this documentation may not be adequate in its current form to satisfy the requirement, the incremental costs to comply could be small, because it appears that deviations from physician’s recommendations are documented currently. Plans or insurers may still need to prepare a response using the already available information. The Department does not know how many claim determinations would require this discussion. The average hourly labor rate of a nurse is $46.02 and that of a physician is $157.80, and the Department estimates that preparing a report with information already available should not take more than one hour.

Adverse benefit determination would have to contain the internal rules, guidelines, protocols, standards, or other similar criteria of the plan used in denying the claim. The Department believes that this requirement will have minimal costs. In the process of determining a claim, plans will know, or should know, the internal rules, guidelines or protocols that were used to make a benefit determination. A commenter was concerned about the time and costs that would be required to comb through hundreds of pages of a claim manual to determine that no provision has any conceivable application to a particular claim in order to substantiate this requirement. The Department believes that neither the proposal nor the final rule requires this type of costly and time consuming process. The rule requires only the inclusion of those items that were relied upon and that should already be documented in the claim file at the time it was used to make a determination.

A notice of adverse benefit determination at the claims stage would have to contain a statement that the claimant is entitled to receive relevant documents upon request. The Department believes that this requirement will have a negligible cost impact, because an insignificant amount of time will be required to add the statement to the notice. Although the current claims procedure regulation provides claimants with the right to request relevant documents when challenging an initial claims denial, a statement was required to be included only in notices of adverse benefit determinations on appeal. Including the statement in the initial denial notice as required by the final rule, in the Department’s view, merely confirms claimants’ rights under the current claims procedure regulation and will help ensure that they understand their right to receive such information to help them understand the reasons for the denial and to make informed decisions regarding whether and how they challenge a denial on appeal. The Department acknowledges that it is likely that more claimants will request this information when they are informed of their right to receive it; however, the Department does not have sufficient data to estimate the number of requests that will be made.

Culturally and Linguistically Appropriate Notices: The final regulations require notices of adverse benefit determinations with respect to disability benefits to be provided in a culturally and linguistically appropriate manner in certain situations. This requirement is satisfied if plans provide oral language services including Start Printed Page 92337answering questions and providing assistance with filing claims and appeals in any applicable non-English language. The final regulations also require each notice sent by a plan to which the requirement applies to include a one-sentence statement in the relevant non-English language that translation services are available. The Department believes that this requirement will have a negligible cost impact. Plans also must provide, upon request, a notice in any applicable non-English language.

Although, one commenter reported that oral translation services are not provided by plans, the Department’s conversations with the regulated community indicate that oral translation services generally are offered as a standard service. Based on this information, the Department assumes that only a small number of plans will need to begin offering oral translation services for the first time upon the issuance of the final rule. Therefore, the Department assumes that this requirement will impose minimal additional costs.

The Department expects that the largest cost associated with the requirement is for plans to provide notices in the applicable non-English language upon request. Based on 2014 ACS data, the Department estimates that there are about 22.7 million individuals living in covered counties that are literate only in a covered non-English Language.[40] To estimate the number of these individuals that might request a notice in a non-English language, the Department estimated the number of workers in each county (total population in county * state labor force participation rate * (1—state unemployment rate)) [41 42] and calculated the number with access to short-term and long-term disability insurance by multiplying those estimates by the estimates of the share of workers participating in disability benefit programs (39 percent for short-term and 33 percent for long term disability.) [43] It should be noted that the sums in the right two columns are all workers in the county with disability insurance, not just workers with disability insurance that are eligible to receive notices in the applicable non-English language, because the calculation for the number of requests for translation is based on workers with insurance.

Table 3—Workers in Affected Counties by State

Pop in the county Total effected foreign language pop in county State labor force participation rate (2015) (%) State unemployment rate (2015) (%) Workers with short-term disability coverage Workers with long-term disability coverage
Alabama 29,519 3,979 56 6 6,097 5,159
Alaska 8,634 2,677 67.1 6.5 2,113 1,788
Arizona 296,362 160,492 59.8 6.1 64,901 54,917
Arkansas 15,864 4,598 57.9 5.2 3,396 2,874
California 26,248,619 8,845,211 62.2 6.2 5,972,612 5,053,748
Colorado 513,177 122,183 66.7 3.9 128,287 108,550
Florida 3,166,261 1,785,759 59.3 5.4 692,719 586,147
Georgia 284,282 72,578 61.3 5.9 63,953 54,114
Idaho 87,012 21,145 63.9 4.1 20,795 17,596
Illinois 484,509 126,443 64.7 5.9 115,043 97,344
Iowa 35,029 7,861 69.9 3.7 9,196 7,781
Kansas 254,997 72,446 67.9 4.2 64,690 54,737
Missouri 6,170 919 65.6 5.0 1,500 1,269
Nebraska 106,532 26,134 70.1 3.0 28,251 23,905
Nevada 1,869,086 431,029 63.2 6.7 429,826 363,699
New Jersey 1,736,310 563,516 64.1 5.6 409,753 346,714
New Mexico 512,864 218,554 57.2 6.6 106,859 90,419
New York 4,983,647 1,472,029 61.1 5.3 1,124,613 951,596
North Carolina 55,317 10,260 61.2 5.7 12,450 10,535
Oklahoma 23,150 7,325 61.9 4.2 5,354 4,530
Oregon 31,532 8,897 61.1 5.7 7,085 5,995
Texas 12,541,167 5,304,121 63.7 4.5 2,975,400 2,517,646
Virginia 50,989 15,060 65.2 4.4 12,395 10,488
Washington 437,583 164,140 63.0 5.7 101,386 85,788
Puerto Rico 3,433,930 3,252,314 39.8 11.2 473,317 400,499
Total 57,212,542 22,699,670 12,825,893 10,852,679

The Department’s discussions with the regulated community indicate that in California, which has a State law requirement for providing translation services for health benefit claims, requests for translations of written documents averages 0.098 requests per 1,000 members (note that requirement applies to all members not just foreign language speaking) for health claims. While the requirements of California differ from those contained in these final regulations and the demographics for California do not match those of covered counties, for purposes of this Start Printed Page 92338analysis, the Department used this percentage to estimate the number of translation service requests that plans could expect to receive. The Department believes that this estimate significantly overstates the number of translation requests that will be received, because there are fewer disability claims than health claims. Industry experts also told the Department that while the cost of translation services varies, $500 per document is a reasonable approximation of translation cost, and the Department used this amount in its cost estimate for the final rule. This number was provided to the Department in 2010; therefore, for purposes of this analysis, the Department has adjusted this amount to $553 to account for inflation.[44]

Based on the foregoing, the Department estimates that the cost to provide translation services pursuant to the final rule will be approximately $1,283,840 annually (23,678,572 lives * 0.098/1000 * $553).

Commenters questioned the data the Department used in the regulatory impact analysis for the proposed rule to estimate the costs incurred by TPAs and insurers to provide culturally and linguistically appropriate notices. One commenter questioned whether the $500 per document translation cost accurately reflects the costs to comply with this provision. The commenter, however, failed to explain its rationale or provide any alternative information the Department could use to refine its estimate.

Another commenter questioned whether it was valid to rely on cost estimates to translate a notice into a non-English language based on data used by the Department to quantify the costs of complying with the a similar ACA requirement for group health plans. The Department believes that its experience with ACA group health plan claims and appeals regulations is directly applicable to this final regulation regarding disability claims and appeals. Contrary to the commenter’s assertion that disability claims are so different from health claims that information about one cannot inform the other, the Department believes that translation of a notice into a different language is very similar for health and disability benefits, particularly as the same translation companies offer services for both types of notices. Also, while commenters argue that disability claims files are much larger than medical claim files, the distinction is not relevant here, because the claim file is not required to be translated; only the notice is.

Another comment received was that there would be additional costs due to privacy issues arising from sharing personal information with a third-party. The same privacy issues arise in the health claims context. Pricing for translation services used in the analysis, therefore already have the costs for privacy issues built into the estimates.

The Department did not have sufficient data to quantify other costs associated with the final rule; and therefore, has provided a qualitative discussion of these costs below and a response to cost-related comments received in response to the regulatory impact analysis for the proposed regulation.

Independence and Impartiality-Avoiding Conflicts of Interest: The Department’s claims and appeals regulation required certain standards of independence for persons making claims decisions before the final rules were issued. These final rules add new criteria for avoiding conflicts that require plans providing disability benefits to ensure “that all claims and appeals for disability benefits are adjudicated in a manner designed to ensure the independence and impartiality of the persons involved in making the decisions.” Also decisions regarding hiring, compensation, termination, promotion, or other similar matters must not be made based on the likelihood that the individual will support the denial of benefits.

These requirements provide protections to claimants by ensuring that their claims are processed impartially and already are considered best practice by many plan administrators who comply with this standard. Some plans and insurers may need to evaluate their policies and procedures to ensure they are compliant with this this requirement. The Department did not have sufficient data to quantify the costs of these requirements.

One commenter, who supported applying independence and impartiality requirements, expressed concern about a statement in the preamble to the proposed rule where the Department explained, as an example, that a plan cannot contract with a medical expert based on the expert’s reputation for outcomes in contested cases rather than based on the expert’s professional qualifications. The commenter expressed concern that the statement in the preamble might result in claimants requesting statistics and other information on cases in which the medical expert expressed opinions in support of denying versus granting a disability benefit claims.

In the Department’s view, the preamble statement is an accurate example of one way that the independence and impartiality standard would be violated, and, accordingly, does not believe it would be appropriate to disclaim or caveat the statement in the final rule. That said, the independence and impartiality requirements in the rule do not modify the scope of what would be “relevant documents” subject to the disclosure requirements in paragraphs (g)(1)(vii)(C) and (h)(2)(iii) of the Section 503 Regulation, as amended by this rule. Nor does the rule prescribe limits on the extent to which information about consulting experts would be discoverable in a court proceeding as part of an evaluation of the extent to which the claims administrator or insurer was acting under a conflict of interest that should be considered in evaluating an adverse benefit determination. Thus, the Department acknowledges that plans may incur costs to respond to claimants’ requests for statistics and other information described by the commenter. However, the commenter provided no evidence or data to support their assertion and did not quantify the additional cost, thus the Department does not have sufficient data to quantify such costs.

Deemed Exhaustion of Claims and Appeals Process: The final rule tracks the proposal and provides that if a plan fails to adhere to all the requirements in the claims procedure regulation, the claimant would be deemed to have exhausted administrative remedies, with a limited exception where the violation was (i) de minimis; (ii) non-prejudicial; (iii) attributable to good cause or matters beyond the plan’s control; (iv) in the context of an ongoing good-faith exchange of information; and (v) not reflective of a pattern or practice of non-compliance. Litigation costs are the primary cost related to this requirement, because claimants may proceed directly to court after a deemed exhaustion. Pursing litigation is more expensive than the plan appeals process, however, it may be the only option claimants have available to obtain denied benefits. Deemed exhaustion is available for the situations when plans are not following the procedural rules of the regulation. At times it may still be in a claimant’s best interest to pursue an appeal inside the plan due to cost and time to resolve issues instead of using the court system. Commenters raised a concern the Start Printed Page 92339claimants would be hurt by the higher costs and delay in obtaining a resolution if they sought resolution through litigation. However, this provision allows claimants to decide if the added costs and time of litigation are offset by the cost to them of remaining in an appeals process that is in violation of the procedural rules.

Some commenters maintained that their liability exposure increases when claimants’ ability to go to court is enhanced. These commenters expressed concern about the expense of discovery to even determine if the procedural requirements have not been followed and asserted that claimants will allege that plans have violated their procedures and go to court to force a settlement.

While all of these scenarios are possible, the Department does not know of, nor did commenters provide, any data or information that would even be suggestive of, the frequency of these events, or the added expense resulting from their occurrence. The Department is not aware of systematic abuses or complaints of abuse with respect to a similar deemed exhaustion requirement contained in the ACA and the Departments’ implementing regulation at 29 CFR 2590.715.2719. Thus, the Department believes these occurrences will be infrequent.

Covered Rescissions-Adverse Benefit Determinations: The final rule adds a new provision to address coverage rescissions. Specifically, the 2000 regulation already covered a rescission if it is the basis, in whole or in part, of an adverse benefit determination. The final regulation amends the definition of adverse benefit determination to include a rescission of disability benefit coverage that has a retroactive effect, whether or not there is an adverse effect on a benefit at that time.

The Department understands that this situation occurs infrequently. When it does occur, plans will incur the cost of providing an appeal of the rescission. The Department does not have sufficient data to estimate the cost to review and appeal a rescission of coverage. However, the Department expects that it would be less than the cost to appeal other disability benefit denials because medical or vocation professionals are not needed to review the claim. Instead, the facts of the coverage situation are required. When a rescission is reversed, the provision of future benefits would be considered a transfer from the plan to the claimant whose rescission was reversed.

C. Regulatory Flexibility Act

The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) imposes certain requirements with respect to Federal rules that are subject to the notice and comment requirements of section 553(b) of the Administrative Procedure Act (5 U.S.C. 551 et seq.) and which are likely to have a significant economic impact on a substantial number of small entities. Unless an agency determines that a final rule is not likely to have a significant economic impact on a substantial number of small entities, section 604 of the RFA requires the agency to present a final regulatory flexibility analysis (FRFA) of the final rule describing the rule’s impact on small entities and explaining how the agency made its decisions with respect to the application of the rule to small entities. Pursuant to section 605(b) of the RFA, the Assistant Secretary of the Employee Benefits Security Administration hereby certifies that the final rule will not have a significant economic impact on a substantial number of small entities. The Department discusses the impacts of the final rule and the basis for its certification below.

Need for and Objectives of the Rule: As discussed in section II above, the final rule will revise and strengthen the current rules regarding claims and appeals applicable to ERISA-covered plans providing disability benefits primarily by adopting several of the new procedural protections and safeguards made applicable to ERISA-covered group health plans by the Affordable Care Act. Before the enactment of the Affordable Care Act, group health plan sponsors and sponsors of ERISA-covered plans providing disability benefits were required to implement internal claims and appeal processes that complied with the Section 503 Regulation. The enactment of the Affordable Care Act and the issuance of the implementing interim final regulations resulted in disability plan claimants receiving fewer procedural protections than group health plan participants even though litigation regarding disability benefit claims is prevalent today.

The Department believes this action is necessary to ensure that disability claimants receive the same protections that Congress and the President established for group health care claimants under the Affordable Care Act. This will result in some participants receiving benefits they might otherwise have been incorrectly denied in the absence of the fuller protections provided by the final regulation. This will help alleviate the financial and emotional hardship suffered by many individuals when they lose earnings due to their becoming disabled.

Affected Small Entities: The Department does not have complete data on the number of plans providing disability benefits or the total number of participants covered by such plans. ERISA-covered welfare benefit plans with more than 100 participants generally are required to file a Form 5500. Only some ERISA-covered welfare benefit plans with less than 100 participants are required to file for various reasons, but this number is very small. Based on current trends in the establishment of pension and health plans, there are many more small plans than large plans, but the majority of participants are covered by the large plans.

Data from the 2014 Form 5500 Schedule A indicates that there are 39,135 plans reporting a code indicating they provide temporary disability benefits covering 40.1 million participants, and 26,171 plans reporting a code indicating they provide long-term disability benefits covering 22.4 million participants. To put the number of large and small plans in perspective, the Department estimates that there are 150,000 large group health plans and 2.1 million small group health plans using 2016 Medical Expenditure Panel Survey-Insurance Component.

Impact of the Rule: The Department has quantified some of the costs associated with these final regulations’ requirements to (1) provide the claimant free of charge with any new or additional evidence considered, and (2) to providing notices of adverse benefit determinations in a culturally and linguistically appropriate manner. These requirements and their associated costs are discussed in the Costs and Transfers section above. Additionally other costs are qualitatively discussed in the Costs section. Comments addressing the burden of the regulations were received and are discussed above as well.

Provision of new or additional evidence or rationale: As stated earlier in this preamble, before a plan can issue a notice of adverse benefit determination on review, the final rule requires plans to provide disability benefit claimants, free of charge, with any new or additional evidence considered, relied upon, or generated by (or at the direction of) the plan as soon as possible and sufficiently in advance of the date the notice of adverse benefit determination on review is required to be provided and any new or additional Start Printed Page 92340rationale sufficiently in advance of the due date of the response to an adverse benefit determination on review.

The Department is not aware of data suggesting how often plans rely on new or additional evidence or rationale during the appeals process or the volume of materials that are received. The Department estimated the cost per claim by assuming that compliance will require medical office staff, or other similar staff in other service setting with a labor rate of $30, 30 minutes to collect and distribute the additional evidence considered, relied upon, or generated by (or at the direction of) the plan during the appeals process. The Department estimates that on average, material, printing and postage costs will total $2.50 per mailing. The Department further assumes that 30 percent of all mailings will be distributed electronically with no associated material, printing or postage costs.

Providing Notices in a Culturally and Linguistically Appropriate Manner: The final rule would require notices of adverse benefit determinations with respect to disability benefits to be provided in a culturally and linguistically appropriate manner in certain situations. This requirement is satisfied if plans provide oral language services including answering questions and providing assistance with filing claims and appeals in any applicable non-English language. The final rule also requires such notices of adverse benefit determinations sent by a plan to which the requirement applies to include a one-sentence statement in the relevant non-English language about the availability of language services. Plans also must provide, upon request, such notices of adverse benefit determinations in the applicable non-English language.

The Department expects that the largest cost associated with the requirement for culturally and linguistically appropriate notices will be for plans to provide notices in the applicable non-English language upon request. Industry experts also told the Department that while the cost of translation services varies, $553 per document is a reasonable approximation of translation cost.

In discussions with the regulated community, the Department found that experience in California, which has a State law requirement for providing translation services, indicates that requests for translations of written documents averages 0.098 requests per 1,000 members for health claims. While the California law is not identical to the final rule, and the demographics for California do not match other counties, for purposes of this analysis, the Department used this percentage to estimate of the number of translation service requests plans could expect to receive. Based on the low number of requests per claim, the Department expects that translation costs would be included as part of a package of services offered to a plan, and that the costs of actual requests will be spread across multiple plans.

Duplication, Overlap, and Conflict With Other Rules and Regulations: The Department does not believe that the final rule will conflict with any relevant regulations, federal or other.

D. Paperwork Reduction Act

In accordance with the requirements of the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)), the Department submitted an information collection request (ICR) to OMB regarding the ICRs contained in the final rule in accordance with 44 U.S.C. 3507(d), for OMB’s review. OMB approved the ICR under OMB Control Number 1210-0053, which currently is scheduled to expire on November 30, 2019.

As discussed earlier in this preamble, the Department’s final amendments to its claims and appeals procedure regulation would revise and strengthen the current rules regarding claims and appeals applicable to ERISA-covered plans providing disability benefits primarily by adopting several of the procedural protections and safeguards made applicable to ERISA-covered group health plans by the ACA. Some of these amendments revise disclosure requirements under the current rule that are information collections covered by the PRA. For example, benefit denial notices must contain a full discussion of why the plan denied the claim, and to the extent the plan did not follow or agree with the views presented by the claimant to the plan or health care professional treating the claimant or vocational professionals who evaluated the claimant, or a disability determination regarding the claimant presented by the claimant to the plan made by the SSA, the discussion must include an explanation of the basis for disagreeing with the views or disability determination. The notices also must include either (1) the specific internal rules, guidelines, protocols, standards or other similar criteria of the plan relied upon in making the adverse determination or, alternatively, or (2) a statement that such rules, guidelines, protocols, standards or other similar criteria of the plan do not exist.

A copy of the ICR may be obtained by contacting the PRA addressee shown below or at http://www.RegInfo.gov. PRA ADDRESSEE: G. Christopher Cosby, Office of Policy and Research, U.S. Department of Labor, Employee Benefits Security Administration, 200 Constitution Avenue NW., Room N- 5718, Washington, DC 20210. Telephone: (202) 693-8410; Fax: (202) 219-4745. These are not toll-free numbers.

After the implementation of the ACA claims regulations, disability plans claimants received fewer procedural protections than group health plan participants even though disability plan claimants experience more issues with the claims review process. These final regulations will reduce the inconsistent procedural rules applied to health and disability benefit plan claims and provide similar procedural protections to claimants of both types of plans.

The burdens associated with the regulatory requirements of the ICRs contained in the final rule are summarized below.

Type of Review: Revised collection.

Agencies: Employee Benefits Security Administration, Department of Labor.

Title: ERISA Claims Procedures.

OMB Number: 1210-0053.

Affected Public: Business or other for-profit; not-for-profit institutions.

Total Respondents: 5,808,000.

Total Responses: 311,790,000.

Frequency of Response: Occasionally.

Estimated Total Annual Burden Hours: 516,000.

Estimated Total Annual Burden Cost: $814,450,000.

IV. Congressional Review Act

The final rule is subject to the Congressional Review Act provisions of the Small Business Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 801 et seq.) and will be transmitted to Congress and the Comptroller General for review. The final rule is not a “major rule” as that term is defined in 5 U.S.C. 804, because it is not likely to result in an annual effect on the economy of $100 million or more.

V. Unfunded Mandates Reform Act

For purposes of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1501 et seq.), as well as Executive Order 12875, this final rule does not include any federal mandate that may result in expenditures by state, local, or tribal governments, or the private sector, which may impose an annual burden of $100 million or more (as adjusted for inflation).

VI. Federalism Statement

Executive Order 13132 outlines fundamental principles of federalism, Start Printed Page 92341and requires the adherence to specific criteria by Federal agencies in the process of their formulation and implementation of policies that have “substantial direct effects” on the States, the relationship between the national government and States, or on the distribution of power and responsibilities among the various levels of government. Federal agencies promulgating regulations that have federalism implications must consult with State and local officials and describe the extent of their consultation and the nature of the concerns of State and local officials in the preamble to the final regulation.

In the Department of Labor’s view, these final regulations have federalism implications because they would have direct effects on the States, the relationship between the national government and the States, or on the distribution of power and responsibilities among various levels of government to the extent states have enacted laws affecting disability plan claims and appeals that contain similar requirements to the final rule. The Department believes these effects are limited, because although section 514 of ERISA supersedes State laws to the extent they relate to any covered employee benefit plan, it preserves State laws that regulate insurance, banking, or securities. In compliance with the requirement of Executive Order 13132 that agencies examine closely any policies that may have federalism implications or limit the policy making discretion of the States, the Department solicited input from affected States, including the National Association of Insurance Commissioners and State insurance officials, regarding this assessment at the proposed rule stage but did not receive any comments.

List of Subjects in 29 CFR Part 2560

  • Claims
  • Employee benefit plans

For the reasons stated in the preamble, the Department of Labor amends 29 CFR part 2560 as set forth below:

PART 2560—RULES AND REGULATIONS FOR ADMINISTRATION AND ENFORCEMENT

1. The authority citation for part 2560 is revised to read as follows:

Authority: 29 U.S.C. 1132, 1135, and Secretary of Labor’s Order 1-2011, 77 FR 1088 (Jan. 9, 2012). Section 2560.503-1 also issued under 29 U.S.C. 1133. Section 2560.502c-7 also issued under 29 U.S.C. 1132(c)(7). Section 2560.502c-4 also issued under 29 U.S.C. 1132(c)(4). Section 2560.502c-8 also issued under 29 U.S.C. 1132(c)(8).

2. Section 2560.503-1 is amended by:

a. Adding paragraph (b)(7).

b. Revising paragraph (g)(1)(v).

c. Adding paragraphs (g)(1)(vii) and (viii).

d. Revising paragraphs (h)(4) and (i)(3)(i).

e. Revising paragraphs (j)(4) and (j)(5) introductory text.

f. Adding paragraphs (j)(6) and (7).

g. Revising paragraphs (l) and (m)(4).

i. Redesignating paragraph (o) as (p), and adding new paragraph (o).

j. Revising newly redesignated paragraph (p).

The revisions and additions read as follows:

Claims procedure.
* * * * *

(b) * * *

(7) In the case of a plan providing disability benefits, the plan must ensure that all claims and appeals for disability benefits are adjudicated in a manner designed to ensure the independence and impartiality of the persons involved in making the decision. Accordingly, decisions regarding hiring, compensation, termination, promotion, or other similar matters with respect to any individual (such as a claims adjudicator or medical or vocational expert) must not be made based upon the likelihood that the individual will support the denial of benefits.

* * * * *

(g) * * * (1) * * *

(v) In the case of an adverse benefit determination by a group health plan—

* * * * *

(vii) In the case of an adverse benefit determination with respect to disability benefits—

(A) A discussion of the decision, including an explanation of the basis for disagreeing with or not following:

(i) The views presented by the claimant to the plan of health care professionals treating the claimant and vocational professionals who evaluated the claimant;

(ii) The views of medical or vocational experts whose advice was obtained on behalf of the plan in connection with a claimant’s adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination; and

(iii) A disability determination regarding the claimant presented by the claimant to the plan made by the Social Security Administration;

(B) If the adverse benefit determination is based on a medical necessity or experimental treatment or similar exclusion or limit, either an explanation of the scientific or clinical judgment for the determination, applying the terms of the plan to the claimant’s medical circumstances, or a statement that such explanation will be provided free of charge upon request;

(C) Either the specific internal rules, guidelines, protocols, standards or other similar criteria of the plan relied upon in making the adverse determination or, alternatively, a statement that such rules, guidelines, protocols, standards or other similar criteria of the plan do not exist; and

(D) A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits. Whether a document, record, or other information is relevant to a claim for benefits shall be determined by reference to paragraph (m)(8) of this section.

(viii) In the case of an adverse benefit determination with respect to disability benefits, the notification shall be provided in a culturally and linguistically appropriate manner (as described in paragraph (o) of this section).

* * * * *

(h) * * *

(4) Plans providing disability benefits. The claims procedures of a plan providing disability benefits will not, with respect to claims for such benefits, be deemed to provide a claimant with a reasonable opportunity for a full and fair review of a claim and adverse benefit determination unless, in addition to complying with the requirements of paragraphs (h)(2)(ii) through (iv) and (h)(3)(i) through (v) of this section, the claims procedures—

(i) Provide that before the plan can issue an adverse benefit determination on review on a disability benefit claim, the plan administrator shall provide the claimant, free of charge, with any new or additional evidence considered, relied upon, or generated by the plan, insurer, or other person making the benefit determination (or at the direction of the plan, insurer or such other person) in connection with the claim; such evidence must be provided as soon as possible and sufficiently in advance of the date on which the notice of adverse benefit determination on review is required to be provided under paragraph (i) of this section to give the claimant a reasonable opportunity to respond prior to that date; and

(ii) Provide that, before the plan can issue an adverse benefit determination on review on a disability benefit claim based on a new or additional rationale, the plan administrator shall provide the Start Printed Page 92342claimant, free of charge, with the rationale; the rationale must be provided as soon as possible and sufficiently in advance of the date on which the notice of adverse benefit determination on review is required to be provided under paragraph (i) of this section to give the claimant a reasonable opportunity to respond prior to that date.

* * * * *

(i) * * *

(3) Disability claims. (i) Except as provided in paragraph (i)(3)(ii) of this section, claims involving disability benefits (whether the plan provides for one or two appeals) shall be governed by paragraph (i)(1)(i) of this section, except that a period of 45 days shall apply instead of 60 days for purposes of that paragraph.

* * * * *

(j) * * *

(4)(i) A statement describing any voluntary appeal procedures offered by the plan and the claimant’s right to obtain the information about such procedures described in paragraph (c)(3)(iv) of this section, and a statement of the claimant’s right to bring an action under section 502(a) of the Act; and,

(ii) In the case of a plan providing disability benefits, in addition to the information described in paragraph (j)(4)(i) of this section, the statement of the claimant’s right to bring an action under section 502(a) of the Act shall also describe any applicable contractual limitations period that applies to the claimant’s right to bring such an action, including the calendar date on which the contractual limitations period expires for the claim.

(5) In the case of a group health plan—

* * * * *

(6) In the case of an adverse benefit decision with respect to disability benefits—

(i) A discussion of the decision, including an explanation of the basis for disagreeing with or not following:

(A) The views presented by the claimant to the plan of health care professionals treating the claimant and vocational professionals who evaluated the claimant;

(B) The views of medical or vocational experts whose advice was obtained on behalf of the plan in connection with a claimant’s adverse benefit determination, without regard to whether the advice was relied upon in making the benefit determination; and

(C) A disability determination regarding the claimant presented by the claimant to the plan made by the Social Security Administration;

(ii) If the adverse benefit determination is based on a medical necessity or experimental treatment or similar exclusion or limit, either an explanation of the scientific or clinical judgment for the determination, applying the terms of the plan to the claimant’s medical circumstances, or a statement that such explanation will be provided free of change upon request; and

(iii) Either the specific internal rules, guidelines, protocols, standards or other similar criteria of the plan relied upon in making the adverse determination or, alternatively, a statement that such rules, guidelines, protocols, standards or other similar criteria of the plan do not exist.

(7) In the case of an adverse benefit determination on review with respect to a claim for disability benefits, the notification shall be provided in a culturally and linguistically appropriate manner (as described in paragraph (o) of this section).

* * * * *

(l) Failure to establish and follow reasonable claims procedures. (1) In general. Except as provided in paragraph (l)(2) of this section, in the case of the failure of a plan to establish or follow claims procedures consistent with the requirements of this section, a claimant shall be deemed to have exhausted the administrative remedies available under the plan and shall be entitled to pursue any available remedies under section 502(a) of the Act on the basis that the plan has failed to provide a reasonable claims procedure that would yield a decision on the merits of the claim.

(2) Plans providing disability benefits. (i) In the case of a claim for disability benefits, if the plan fails to strictly adhere to all the requirements of this section with respect to a claim, the claimant is deemed to have exhausted the administrative remedies available under the plan, except as provided in paragraph (l)(2)(ii) of this section. Accordingly, the claimant is entitled to pursue any available remedies under section 502(a) of the Act on the basis that the plan has failed to provide a reasonable claims procedure that would yield a decision on the merits of the claim. If a claimant chooses to pursue remedies under section 502(a) of the Act under such circumstances, the claim or appeal is deemed denied on review without the exercise of discretion by an appropriate fiduciary.

(ii) Notwithstanding paragraph (l)(2)(i) of this section, the administrative remedies available under a plan with respect to claims for disability benefits will not be deemed exhausted based on de minimis violations that do not cause, and are not likely to cause, prejudice or harm to the claimant so long as the plan demonstrates that the violation was for good cause or due to matters beyond the control of the plan and that the violation occurred in the context of an ongoing, good faith exchange of information between the plan and the claimant. This exception is not available if the violation is part of a pattern or practice of violations by the plan. The claimant may request a written explanation of the violation from the plan, and the plan must provide such explanation within 10 days, including a specific description of its bases, if any, for asserting that the violation should not cause the administrative remedies available under the plan to be deemed exhausted. If a court rejects the claimant’s request for immediate review under paragraph (l)(2)(i) of this section on the basis that the plan met the standards for the exception under this paragraph (l)(2)(ii), the claim shall be considered as re-filed on appeal upon the plan’s receipt of the decision of the court. Within a reasonable time after the receipt of the decision, the plan shall provide the claimant with notice of the resubmission.

* * * * *

(m) * * *

(4) The term “adverse benefit determination” means:

(i) Any of the following: A denial, reduction, or termination of, or a failure to provide or make payment (in whole or in part) for, a benefit, including any such denial, reduction, termination, or failure to provide or make payment that is based on a determination of a participant’s or beneficiary’s eligibility to participate in a plan, and including, with respect to group health plans, a denial, reduction, or termination of, or a failure to provide or make payment (in whole or in part) for, a benefit resulting from the application of any utilization review, as well as a failure to cover an item or service for which benefits are otherwise provided because it is determined to be experimental or investigational or not medically necessary or appropriate; and

(ii) In the case of a plan providing disability benefits, the term “adverse benefit determination” also means any rescission of disability coverage with respect to a participant or beneficiary (whether or not, in connection with the rescission, there is an adverse effect on any particular benefit at that time). For this purpose, the term “rescission” means a cancellation or discontinuance Start Printed Page 92343of coverage that has retroactive effect, except to the extent it is attributable to a failure to timely pay required premiums or contributions towards the cost of coverage.

* * * * *

(o) Standards for culturally and linguistically appropriate notices. A plan is considered to provide relevant notices in a “culturally and linguistically appropriate manner” if the plan meets all the requirements of paragraph (o)(1) of this section with respect to the applicable non-English languages described in paragraph (o)(2) of this section.

(1) Requirements. (i) The plan must provide oral language services (such as a telephone customer assistance hotline) that include answering questions in any applicable non-English language and providing assistance with filing claims and appeals in any applicable non-English language;

(ii) The plan must provide, upon request, a notice in any applicable non-English language; and

(iii) The plan must include in the English versions of all notices, a statement prominently displayed in any applicable non-English language clearly indicating how to access the language services provided by the plan.

(2) Applicable non-English language. With respect to an address in any United States county to which a notice is sent, a non-English language is an applicable non-English language if ten percent or more of the population residing in the county is literate only in the same non-English language, as determined in guidance published by the Secretary.

(p) Applicability dates and temporarily applicable provisions. (1) Except as provided in paragraphs (p)(2), (p)(3) and (p)(4) of this section, this section shall apply to claims filed under a plan on or after January 1, 2002.

(2) This section shall apply to claims filed under a group health plan on or after the first day of the first plan year beginning on or after July 1, 2002, but in no event later than January 1, 2003.

(3) Paragraphs (b)(7), (g)(1)(vii) and (viii), (j)(4)(ii), (j)(6) and (7), (l)(2), (m)(4)(ii), and (o) of this section shall apply to claims for disability benefits filed under a plan on or after January 1, 2018, in addition to the other paragraphs in this rule applicable to such claims.

(4) With respect to claims for disability benefits filed under a plan from January 18, 2017 through December 31, 2017, this paragraph (p)(4) shall apply instead of paragraphs (g)(1)(vii), (g)(1)(viii), (h)(4), (j)(6) and (j)(7).

(i) In the case of a notification of benefit determination and a notification of benefit determination on review by a plan providing disability benefits, the notification shall set forth, in a manner calculated to be understood by the claimant—

(A) If an internal rule, guideline, protocol, or other similar criterion was relied upon in making the adverse determination, either the specific rule, guideline, protocol, or other similar criterion; or a statement that such a rule, guideline, protocol, or other similar criterion was relied upon in making the adverse determination and that a copy of such rule, guideline, protocol, or other criterion will be provided free of charge to the claimant upon request; and

(B) If the adverse benefit determination is based on a medical necessity or experimental treatment or similar exclusion or limit, either an explanation of the scientific or clinical judgment for the determination, applying the terms of the plan to the claimant’s medical circumstances, or a statement that such explanation will be provided free of charge upon request.

(ii) The claims procedures of a plan providing disability benefits will not, with respect to claims for such benefits, be deemed to provide a claimant with a reasonable opportunity for a full and fair review of a claim and adverse benefit determination unless the claims procedures comply with the requirements of paragraphs (h)(2)(ii) through (iv) and (h)(3)(i) through (v) of this section.

Signed at Washington, DC, this 9th day of December, 2016.

Phyllis C. Borzi,

Assistant Secretary, Employee Benefits Security Administration, U.S. Department of Labor.

Footnotes

1.  42 FR 27426 (May 27, 1977).

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2.  65 FR 70246 (Nov. 21, 2000), amended at 66 FR 35887 (July 9, 2001).

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3.  A benefit is a disability benefit, subject to the special rules for disability claims under the Section 503 Regulation, if the plan conditions its availability to the claimant upon a showing of disability. If the claims adjudicator must make a determination of disability in order to decide a claim, the claim must be treated as a disability claim for purposes of the Section 503 Regulation, and it does not matter how the benefit is characterized by the plan or whether the plan as a whole is a pension plan or a welfare plan. On the other hand, when a plan, including a pension plan, provides a benefit the availability of which is conditioned on a finding of disability made by a party other than the plan, (e.g., the Social Security Administration or the employer’s long-term disability plan), then a claim for such benefits is not treated as a disability claim for purposes of the Section 503 Regulation. See FAQs About The Benefit Claims Procedure Regulation, A-9 (www.dol.gov/​sites/​default/​files/​ebsa/​about-ebsa/​our-activities/​programs-and-initiatives/​outreach-and-education/​hbec/​CAGHDP.pdf).

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4.  BLS National Compensation Survey, March 2014, at www.bls.gov/​ncs/​ebs/​benefits/​2014/​ebbl0055.pdf.

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5.  See Sean M. Anderson, ERISA Benefits Litigation: An Empirical Picture, 28 ABA J. Lab. & Emp. L. 1 (2012).

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6.  See, e.g., Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666, 678 (9th Cir. 2011) (“The plan’s reasons for denial were shifting and inconsistent as well as illogical. . . . Failing to pay out money owed based on a false statement of reasons for denying is cheating, every bit as much as making a false claim.”); Lauder v. First Unum Life Ins. Co., 76 F. App’x 348, 350 (2d Cir. 2003) (reversing district court’s denial of attorneys’ fees to plaintiff-insured and describing “ample demonstration of bad faith on First Unum’s part, including . . . the frivolous nature of virtually every position it has advocated in the litigation.”); Schully v. Continental Cas. Co., 634 F. Supp. 2d 663, 687 (E.D. La. 2009) (“In concluding that plaintiff was not disabled, the Hartford not only disregarded considerable objective medical evidence, but it also relied heavily on inconclusive and irrelevant evidence . . . Hartford’s denial of coverage results from its preferential and predetermined conclusions.”); Rabuck v. Hartford Life and Accident Ins. Co., 522 F. Supp. 2d 844, 882 (W.D. Mich. 2007) (insurer “obviously motivated by its own self-interest, engaged in an unprincipled and overly aggressive campaign to cut off benefits for a gravely ill insured who could not possibly have endured the rigors of his former occupation on a full-time basis.”); Curtin v. Unum Life Ins. Co. of America, 298 F. Supp. 2d 149, 159 (D. Me. 2004) (“[T]his Court finds that Defendants exhibited a low level of care to avoid improper denial of claims at great human expense.”).

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7.  The Patient Protection and Affordable Care Act, Public Law 111-148, was enacted on March 23, 2010, and the Health Care and Education Reconciliation Act, Public Law 111-152, was enacted on March 30, 2010. (These statutes are collectively known as the “Affordable Care Act.”)

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8.  80 FR 72192 (Nov. 18, 2015).

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9.  Metropolitan Life Ins. Co. v. Glenn, 554 U.S. 105 (2008) (insurance company plan administrator of an ERISA long-term disability plan that both evaluates and pays claims for the employer has a conflict of interest that courts must consider in reviewing denials of benefit claims).

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11.  80 FR 72192 (Nov. 18, 2015).

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12.  While commenters contended that disability claim files are larger than health benefit claim files, in the Department’s view, this is not a reason for denying claimants the same procedural protections and safeguards that the ACA provided for group health benefit claims. Furthermore, in the 2000 claims regulation, the Department already accommodated differences between health and disability claims by allowing more time for decisions on disability claims. See 29 CFR 2560.503-1(f)(2)(iii)(B) (up to 30 days after receipt of claim with up to 15 days for an extension for post-service health claims); id. § 2560.503-1(f)(3) (up to 45 days after receipt of claim with two possible 30-day extensions for disability claims).

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13.  For example, the Department noted in the preamble to the proposed rule the fact that several federal courts concluded that a failure to provide a discussion of the decision or the specific criteria relied upon in making the adverse benefit determination could make a claim denial arbitrary and capricious.

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14.  The current Section 503 Regulation in paragraph (j)(5)(iii) requires a statement concerning voluntary dispute resolution options in notices of adverse benefit determinations on review for both group health and disability claims. The Department previously issued an FAQ on that provision noting that information on the specific voluntary appeal procedures offered under the plan must be provided under paragraph (j)(4) of the regulation in the notice of adverse benefit determination, along with a statement of the claimant’s right to bring a civil action under section 502(a) of ERISA. The Department, therefore, stated in the FAQ that, pending further review, it will not seek to enforce compliance with the requirements of paragraph (j)(5)(iii). See FAQs About The Benefit Claims Procedure Regulation, D-13 (www.dol.gov/​sites/​default/​files/​ebsa/​about-ebsa/​our-activities/​programs-and-initiatives/​outreach-and-education/​hbec/​CAGHDP.pdf). In light of the fact that this proposal was limited to disability benefit claims, the Department does not believe it would be appropriate to modify the requirement in paragraph (j)(5)(iii) as part of this final rule. Accordingly, the Department will continue the enforcement position articulated in FAQ D-13.

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15.  FAQ C-17 states: “It is the view of the department that where a rule, guideline, protocol, or similar criterion serves as a basis for making a benefit determination, either at the initial level or upon review, the rule, guideline, protocol, or criterion must be set forth in the notice of adverse benefit determination or, following disclosure of reliance and availability, provided to the claimant upon request. However, the underlying data or information used to develop any such rule, guideline, protocol, or similar criterion would not be required to be provided in order to satisfy this requirement. The department also has taken the position that internal rules, guidelines, protocols, or similar criteria would constitute instruments under which a plan is established or operated within the meaning of section 104(b)(4) of ERISA and, as such, must be disclosed to participants and beneficiaries. See § § 2560.503-1(g)(v) (A) and (j)(5)(i); 65 FR at 70251. Also see § § 2560.503-1(h)(2)(iii) and 2560.503-1(m)(8)(i); Advisory Opinion 96-14A (July 31, 1996).

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16.  As a practical matter, these requirements to provide claimants with evidence or rationales that were relied on or used as a basis for an adverse benefit determination largely conforms the rule to the existing process by which benefits claims should be handled in such cases. E.g., Saffon v. Wells Fargo & Co. Long Term Disability Plan, 511 F.3d 1206, 1215 (9th Cir. 2008) (finding that a full and fair review requires a plan administrator to disclose the reasons for denial in the administrative process); 75 FR at 43333 n.7 (noting the DOL’s position that the existing claims procedure regulation already requires plans to provide claimants with new or additional evidence or rationale upon request and an opportunity to respond in certain circumstances).

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17.  See, e.g., Metzger v. Unum Life Ins. Co. of America, 476 F.3d 1161, 1165-67 (10th Cir. 2007) (holding that “subsection (h)(2)(iii) does not require a plan administrator to provide a claimant with access to the medical opinion reports of appeal-level reviewers prior to a final decision on appeal.”). Accord Glazer v. Reliance Standard Life Ins. Co., 524 F.3d 1241 (11th Cir. 2008); Midgett v. Washington Group Int’l Long Term Disability Plan, 561 F.3d 887 (8th Cir. 2009).

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18.  Brief of the Secretary of Labor, Hilda L. Solis, as Amicus Curiae in Support of Plaintiff-Appellant’s Petition for Rehearing, Midgett v. Washington Group Int’l Long Term Disability Plan, 561 F.3d 887 (8th Cir. 2009) (No. 08-2523).

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19.  Brief of the Secretary of Labor, Hilda L. Solis, as Amicus Curiae in Support of Plaintiff-Appellant’s Petition for Rehearing, Midgett v. Washington Group Int’l Long Term Disability Plan, 561 F.3d 887 (8th Cir. 2009) (No. 08-2523), p. 13.

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20.  S ee Moon v. Am. Home Assurance Co., 888 F.2d 86, 89 (11th Cir.1989).

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21.  Some commenters suggested that the Department define “new or additional evidence” to be “new and additional medical reviews, including independent medical reports.” As noted above, these requirements already apply to claims involving group health benefits under the ACA Claims and Appeals Final Rule and we do not think that it is appropriate to restrict this rule to medical reviews since other types of evidence, if new, would clearly need to be provided to claimants to ensure the full and fair review as described above. For example, if a plan were to obtain video evidence of a disability benefit claimant during the pendency of the appeal, but only provide the claimant with a portion of that video evidence, e.g., the portion that supports the denial of benefits, while withholding the portions that favor the claimant, that would be a failure by the plan to provide new evidence developed to the claimant.

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22.  In connection with the ACA Claims and Appeals Final Rule, the Department explained the process as follows: “To address the narrow circumstance raised by some comments that the new or additional information could be first received so late that it would be impossible to provide it, these final regulations provide that if the new or additional evidence is received so late that it would be impossible to provide it to the claimant in time for the claimant to have a reasonable opportunity to respond, the period for providing a notice of final internal adverse benefit determination is tolled until such time as the claimant has a reasonable opportunity to respond. After the claimant responds, or has a reasonable opportunity to respond but fails to do so, the plan or issuer must notify the claimant of the benefit determination as soon as a plan or issuer acting in a reasonable and prompt fashion can provide the notice, taking into account the medical exigencies.”

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23.  That rulemaking notice (at 80 FR 72207) included the following explanation in responding to public comments on that rule: “Commenters requested additional guidance related to the timing and amount of information required to be provided in order to satisfy this requirement. Specifically, individuals asked whether such information actually must be provided automatically to participants and whether or not it would be sufficient to send participants a notice informing them of the availability of new or additional evidence or rationale. The Departments retain the requirement that plans and issuers provide the new or additional evidence or rationale automatically. In the Departments’ view, fundamental fairness requires that participants and beneficiaries have an opportunity to rebut or respond to any new or additional evidence upon which a plan or issuer may rely. Therefore, plans and issuers that wish to rely on any new or additional evidence or rationale in making a benefit determination must send such new or additional evidence or rationale to participants as soon as it becomes available to the plan or issuer. In order to comply with this requirement, a plan or issuer must send the new or additional evidence or rationale to the participant. Merely sending a notice informing participants of the availability of such information fails to satisfy this requirement.” This same explanation applies with equal force to the identical requirement in this final rule applicable to disability benefit claims.

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24.  The provisions in this final rule supersede any and all prior Departmental guidance with respect to disability benefit claims to the extent such guidance is contrary to this final rule, including but not limited to the deemed exhaustion discussion in FAQ F-2 in FAQs About The Benefit Claims Procedure Regulation. (www.dol.gov/​sites/​default/​files/​ebsa/​about-ebsa/​our-activities/​programs-and-initiatives/​outreach-and-education/​hbec/​CAGHDP.pdf).

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27.  See footnote 3, supra, and FAQs About The Benefit Claims Procedure Regulation, A-9 (www.dol.gov/​sites/​default/​files/​ebsa/​about-ebsa/​our-activities/​programs-and-initiatives/​outreach-and-education/​hbec/​CAGHDP.pdf) discussing when a benefit is a disability benefit, subject to the special rules for disability claims under the Section 503 Regulation.

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28.  Each year the U.S. Census Bureau publishes a list of counties that meet the 10% threshold. For 2016, the applicable languages are Chinese, Tagalog, Navajo and Spanish. A complete list of counties is available at www.dol.gov/​agencies/​ebsa/​laws-and-regulations/​laws/​affordable-care-act/​for-employers-and-advisers/​internal-claims-and-appeals.

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29.  See Moyer v. Metropolitan Life Ins. Co., 762 F.3d 503, 505 (6th Cir. 2014) (“The claimant’s right to bring a civil action is expressly included as a part of those procedures for which applicable time limits must be provided” in the notice of adverse benefit determination on review) and Kienstra v. Carpenters’ Health & Welfare Trust Fund of St. Louis, 2014 WL 562557, at *4 (E.D. Mo. Feb. 13, 2014), aff’d sub nom. Munro-Kienstra v. Carpenters’ Health & Welfare Trust Fund of St. Louis, 790 F.3d 799 (8th Cir. 2015) (“an adverse benefit determination must include [a] description of the plan’s review procedures and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action under section 502(a) of [ERISA] following an adverse benefit determination on review.”); Ortega Candelaria v. Orthobiologics LLC, 661 F.3d 675, 680 (1st Cir.2011) (“[The employer] was required by [29 CFR 2560.503-1(g)(1)(iv) ] to provide [the employee] with notice of his right to bring suit under ERISA, and the time frame for doing so, when it denied his request for benefits.”); McGowan v. New Orleans Empl’rs Int’l Longshoremen’s Ass’n, 538 F. App’x 495, 498 (5th Cir.2013) (finding that a benefit termination letter substantially complied with 29 CFR 2560.503-1(g)(1)(iv) because, in addition to enclosing the benefit booklet and specifying the pages containing the review procedures and time limits, the letter “mentioned McGowan’s right to file suit under § 502(a) of ERISA, as well as the one-year time limit”); White v. Sun Life Assurance Co. of Canada, 488 F.3d 240, 247 n. 2 (4th Cir.2007) (emphasizing that the right to bring a civil action is an integral part of a full and fair benefit review and that the adverse benefit determination letter must include the relevant information related to that right) (abrogated on other grounds by Heimeshoff v. Hartford Life & Acc. Ins. Co., 134 S.Ct. 604, 612 (2013)); Novick v. Metropolitan Life Ins. Co., 764 F.Supp.2d 653, 660-64 (S.D.N.Y.2011) (concluding that 29 CFR 2560.503-1(g) requires that the adverse benefit determination letter include the time limits for judicial review); Solien v. Raytheon Long Term Disability Plan # 590, 2008 WL 2323915, at 8 (D.Ariz. June 2, 2008) (holding that “[j]udicial review is an appeal procedure for an adverse benefit determination and is therefore a part of the claim procedures covered by these regulations, especially when the time limit for filing a judicial action is established contractually by the Plan”). But see Wilson v. Standard Ins. Co., 613 F. App’x 841, 844 n.3 (11th Cir. 2015) (unpublished) (finding that 29 CFR 2560.503-1(g)(1)(iv) “can also be reasonably read to mean that notice must be given of the time limits applicable to the `plan’s review procedures,’ and the letter must also inform the claimant of her right to bring a civil action without requiring notice of the time period for doing so”); Scharff v. Raytheon Co. Short Term Disability Plan, 581 F.3d 899, 907-08 (9th Cir. 2009) (declining to supplement ERISA’s comprehensive scheme for regulating disclosures to participants with a California law requiring the express disclosure of a statute of limitations). In an unpublished decision, the Tenth Circuit similarly interpreted language in a plan that was virtually identical to section 2560.503-1(g)(1)(iv) as only requiring denial letters to include time limits applicable to internal review procedures. See Young v. United Parcel Services, 416 F. App’x 734, 740 (10th Cir. 2011) (unpublished) (concluding that requiring a notification of the time limit for filing suit “conflates the internal appeals process, and its associated deadlines, with the filing of a legal action after that process has been fully exhausted”).

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30.  Heimeshoff, 134 S.Ct. at 612 (“Neither Heimeshoff nor the United States claims that the Plan’s 3-year limitations provision is unreasonably short on its face. And with good reason: the United States acknowledges that the regulations governing internal review mean for `mainstream’ claims to be resolved in about one year, Tr. of Oral Arg. 22, leaving the participant with two years to file suit. Even in this case, where the administrative review process required more time than usual, Heimeshoff was left with approximately one year in which to file suit. Heimeshoff does not dispute that a hypothetical 1-year limitations period commencing at the conclusion of internal review would be reasonable. Id., at 4”) (footnote omitted).

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31.  The Department also believes that additional public input beyond the public record for this rulemaking would be needed for the Department to define a minimum period of time necessary for such a period to constitute a reasonable period in which to bring an action under ERISA section 502(a).

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32.  65 FR 70246 (Nov. 21, 2000), amended at 66 FR 35877 (July 9, 2001).

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33.  See Sean M. Anderson, ERISA Benefits Litigation: An Empirical Picture, 28 ABA J. Lab. & Emp. L. 1(2012).

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34.  Almost all plans reporting this code are welfare plans.

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37.  Commenters disagreed in general with the estimates of the burden for providing the notice in a culturally and linguistically appropriate manner. Their concern was that most notices would be delivered on paper and not electronically. While one commenter did not provide any supporting evidence for this assertion, another commenter reported that a large company’s past experience was that 30 percent of the claims filed under its disability plan were electronic. For purposes of this regulatory impact analysis, the Department accepted the suggestion posited in the comment that a significant percentage of disability benefit claimants are at home without access to an electronic means of communication at work that is required by the Department’s electronic disclosure rule. Therefore, the Department assumes that a higher percentage of notices will be transmitted via mail even though data was provided only for a single company.

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38.  BLS Employment, Hours, and Earnings from the Current Employment Statistics survey (National) Table B-1, May 2016. It should be noted that this estimate differs from the estimates from the Form 5500 reported in the affected entities section. The Form 55000 numbers only include large plans, and some filings could combine estimates for both short and long term disability.

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39.  “Beyond the Numbers: Disability Insurance Plans Trends in Employee Access and Employer Cost,” February 2015 Vol. 4 No. 4. http://www.bls.gov/​opub/​btn/​volume-4/​disability-insurance-plans.htm.

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41.  Labor force Participation rate: http://www.bls.gov/​lau/​staadata.txt. Unemployment rate: http://www.bls.gov/​lau/​lastrk14.htm.

42.  Please note that using state estimates of labor participation rates and unemployment rates could lead to an over estimate as those reporting in the ACS survey that they speak English less than “very well” are less likely to be employed. Also, this estimate includes both private and public workers, instead of just private workers leading to an overestimate of the costs.

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43.  “Beyond the Numbers: Disability Insurance Plans Trends in Employee Access and Employer Cost,” February 2015 Vol. 4 No. 4. http://www.bls.gov/​opub/​btn/​volume-4/​disability-insurance-plans.htm.

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44.  The 2010 and 2016 GDP Deflator was 100.056 in 2010 and 110.714 in 2016. The adjustment is $500 * (110.714/100.056) = $553. https://fred.stlouisfed.org/​series/​GNPDEF.

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[FR Doc. 2016-30070 Filed 12-16-16; 8:45 am]

BILLING CODE 4510-29-P

New DOL ERISA Changes

92317
Federal Register
/ Vol. 81, No. 243 / Monday, December 19, 2016 / Rules and Regulations
9
Metropolitan Life Ins. Co.
v.
Glenn,
554 U.S. 105
(2008) (insurance company plan administrator of an
ERISA long-term disability plan that both evaluates
and pays claims for the employer has a conflict of
interest that courts must consider in reviewing
denials of benefit claims).
10
80 FR 72014.
11
80 FR 72192 (Nov. 18, 2015).
Department to re-examine the disability
claims process. Specifically, in 2012,
the ERISA Advisory Council undertook
a study on issues relating to managing
disability in an environment of
individual responsibility. The Council
concluded based on the public input it
received that ‘‘[n]ot all results have been
positive for the participant under
ERISA-covered plans and the
implementing claim procedures
regulations, even though these rules
were intended to protect participants’’
and noted that ‘‘[t]he Council was made
aware of reoccurring issues and
administrative practices that
participants and beneficiaries face when
appealing a claim that may be
inconsistent with the existing
regulations.’’ The Advisory Council’s
report included the following
recommendation for the Department:
Review current claims regulations to
determine updates and modifications,
drawing upon analogous processes described
in health care regulations where appropriate,
for disability benefit claims including: (a)
Content for denials of such claims; (b) rule
regarding full and fair review, addressing
what is an adequate opportunity to develop
the record and address retroactive rescission
of an approved benefit; (c) alternatives that
would resolve any conflict between the
administrative claims and appeals process
and the participants’ ability to timely bring
suit; (d) the applicability of the ERISA claim
procedures to offsets and eligibility
determinations.
2012 ERISA Advisory Council Report,
Managing Disability Risks in an
Environment of Individual
Responsibility,
available at
www.dol.gov/sites/default/files/ebsa/
about-ebsa/about-us/erisa-advisory-
council/2012ACreport2.pdf.
The Department agreed that the
amendments to the claims regulation for
group health plans could serve as an
appropriate model for improvements to
the claims process for disability claims.
Those amendments aimed to ensure full
and fair consideration of health benefit
claims by giving claimants ready access
to the relevant evidence and standards;
ensuring the impartiality of persons
involved in benefit determinations;
giving claimants notice and a fair
opportunity to respond to the evidence,
rationales, and guidelines for decision;
and making sure that the bases for
decisions are fully and fairly
communicated to the claimant. In the
Department’s view, these basic
safeguards are just as necessary for a full
and fair process in the disability context
as in the health context. Moreover, as in
the group health plan context, disability
claims are often reviewed by a court
under an abuse of discretion standard
based on the administrative record.
Because the claimant may have limited
opportunities to supplement the record,
the Department concluded that it is
particularly important that the claimant
be given a full opportunity to develop
the record that will serve as the basis for
review and to respond to the evidence,
rationales, and guidelines relevant to
the decision.
The Department’s determination to
revise the claims procedures was
additionally affected by the aggressive
posture insurers and plans can take to
disability claims as described above
coupled with the judicially recognized
conflicts of interest insurers and plans
often have in deciding benefit claims.
9
In light of these concerns, the
Department concluded that
enhancements in procedural safeguards
and protections similar to those
required for group health plans under
the Affordable Care Act were as
important, if not more important, in the
case of claims for disability benefits.
The Department decided to start by
proposing to amend the current
standards applicable to the processing
of claims and appeals for disability
benefits so that they included
improvements to certain basic
procedural protections in the current
Section 503 Regulation, many of which
already apply to ERISA-covered group
health plans pursuant to the
Department’s regulations implementing
the requirements of the Affordable Care
Act.
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.
10
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. The comments were posted
on the Department’s Web site at
www.dol.gov/agencies/ebsa/laws-and-
regulations/rules-and-regulations/
public-comments/1210-AB39.
After
careful consideration of the issues
raised by the written public comments,
the Department decided to adopt the
improvements in procedural protections
and other safeguards largely as set forth
in the November 2015 proposal. The
Department revised some of the
requirements in response to public
comments as part of its overall effort to
strike a balance between improving a
claimant’s reasonable opportunity to
pursue a full and fair review and the
attendant costs and administrative
burdens on plans providing disability
benefits.
The Department believes that this
action is necessary to ensure that
disability claimants receive a full and
fair review of their claims, as required
by ERISA section 503, under the more
stringent procedural protections that
Congress established for group health
care claimants under the ACA and the
Department’s implementing regulation
at 29 CFR 2590.715–2719 (‘‘ACA Claims
and Appeals Final Rule’’).
11
This final
rule will promote fairness and accuracy
in the claims review process and protect
participants and beneficiaries in ERISA-
covered disability plans by ensuring
they receive benefits that otherwise
might have been denied by plan
administrators in the absence of the
fuller protections provided by this final
regulation. The final rule also will help
alleviate the financial and emotional
hardship suffered by many individuals
when they are unable to work after
becoming disabled and their claims are
denied.
II. Overview of Final Rule
A. Comments on Overall Need To
Improve Claims Procedure Rules for
Disability Benefits
Numerous disabled claimants and
their representatives submitted
comments stating general support for
the proposed rule. For example, some
commenters described the proposal as
reinforcing the integrity of disability
benefit plan administration and
markedly improving the claims process
by strengthening notice and disclosure
protections, prescribing more exacting
standards of conduct for review of
denied claims, ensuring claimants’ more
effective access to the claims process,
and providing safeguards to ensure full
court review of adverse benefit
determinations. Some commenters
supported the proposed amendments as
‘‘good first steps’’ towards providing
more transparency and accountability,
but advocated additional steps to
strengthen, improve, and update the
current rules. Some commenters
emphasized that disability and lost
earnings impose severe hardship on
many individuals, arguing that
disability claimants have a ‘‘poor’’
prospect of fair review under the current
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12
While commenters contended that disability
claim files are larger than health benefit claim files,
in the Department’s view, this is not a reason for
denying claimants the same procedural protections
and safeguards that the ACA provided for group
health benefit claims. Furthermore, in the 2000
claims regulation, the Department already
accommodated differences between health and
disability claims by allowing more time for
decisions on disability claims. See 29 CFR
2560.503–1(f)(2)(iii)(B) (up to 30 days after receipt
of claim with up to 15 days for an extension for
post-service health claims); id. § 2560.503–1(f)(3)
(up to 45 days after receipt of claim with two
possible 30-day extensions for disability claims).
regulation primarily because of the
economic incentive for insurance
companies to deny otherwise valid
claims and because plans are often able
to secure a deferential standard of
review in court.
Commenters, primarily disability
insurers and benefit providers,
commented that the disability claims
regulation should not mirror Affordable
Care Act requirements because unlike
disability claims: (i) The vast majority of
medical claims are determined
electronically with little or no human
involvement,
i.e.,
no reviewers studying
materials and consulting with varied
professionals; (ii) medical claims
typically involve only a limited
treatment over a relatively short period
of time, whereas disability claims
require a series of determinations over
a period of several years; (iii) medical
claims rarely involve a need to consult
with outside professionals; (iv) medical
claims involve an isolated issue,
whereas disability claims involve a
more complex, multi-layered analysis;
and (v) medical claim files may consist
of only a few pages of materials,
whereas disability claim files can
consist of hundreds, sometimes
thousands of pages of information. As a
result of these factors, the commenters
stressed that it can take significant time
to review and render a decision. Some
of those commenters argued that
applying ACA protections to disability
benefit claims was contrary to
Congressional intent because disability
plans were not subject to the ACA’s
group health plan provisions. Some
claimed that the proposed rules in their
current form will have unintended
consequences (undue delay and
increased costs and litigation), and will
result in expenses and burdens that will
increase the cost of coverage and
discourage employers from sponsoring
disability benefit plans. Finally, some
claimed that the increased protections
and transparency that would be
required under the proposal would
weaken protection against disability
fraud and were unnecessary because the
current regulations provide ample
protections for claimants, are written to
benefit the insured, and have worked
well for more than a decade as
evidenced by the asserted fact that the
vast majority of disability claims
incurred by insurers are paid, and, of
the claims denied, only a very small
percentage are ultimately litigated.
Some argued that technological
advances that have expedited
processing of health care claims do not
apply to disability claims adjudication,
contended that the Department had not
properly quantified or qualified the
benefits associated with the proposed
regulations or provided a sufficient cost
analysis associated with the proposed
regulations, and commented that the
Department should withdraw the
proposal until better data is collected.
After careful consideration of the
issues raised by the written comments,
the Department does not agree with the
commenters’ assertion that the ACA
changes for group health plans are not
an appropriate model for improving
claims procedures for disability
benefits. The enactment of the ACA, and
the issuance of the implementing
regulations, has resulted in disability
benefit claimants receiving fewer
procedural protections than group
health plan participants even though
litigation regarding disability benefit
claims is prevalent today. As noted
above, the Department’s Section 503
Regulation imposes more stringent
procedural protections on claims for
group health and disability benefits than
on claims for other types of benefits.
The Department believes that disability
benefit claimants should continue to
receive procedural protections similar to
those that apply to group health plans,
and that it makes sense to model the
final rule on the procedural protections
and consumer safeguards that Congress
and the President established for group
health care claimants under the ACA.
These protections and safeguards will
allow some participants to receive
benefits that might have been
incorrectly denied in the absence of the
fuller protections provided by the
regulation. It will also help alleviate the
financial and emotional hardship
suffered by many individuals when they
lose earnings due to their becoming
disabled.
Moreover, the Department carefully
selected among the ACA amendments to
the claims procedures for group health
plans, and incorporated into the
proposal only certain of the basic
improvements in procedural protections
and consumer safeguards. The proposal,
and final rule, also include several
adjustments to the ACA requirements to
account for the different features and
characteristics of disability benefit
claims.
The Department agrees with the
commenters who supported the
proposed changes who emphasized that
disability and lost earnings impose
severe hardship on many individuals.
Under those circumstances, and
considering the judicially recognized
economic incentive for insurance
companies to deny otherwise valid
claims, the Department views
enhancements in procedural safeguards
and protections similar to those
required for group health plans under
the Affordable Care Act as being just as
important, if not more important, in the
case of claims for disability benefits.
This view was supported by the
assertions by some plans and disability
insurance providers that disability
claims processing involves more human
involvement, with reviewers studying
pages of materials and consulting with
varied professionals on claims that
involve a more complex, multi-layered
analysis. Even assuming the
characteristics cited by the commenter
fairly describe a percentage of processed
disability claims, the Department does
not believe those characteristics support
a decision to treat the processing of
disability benefits more leniently than
group health benefits. The Department
believes there is potential for error and
opportunity for the insurer’s conflict of
interest to inappropriately influence a
benefit determination under highly
automated claims processing, as well as
claims processing with more human
involvement.
12
Increased transparency
and accountability in all claims
processes is important if claimants of
disability benefits are to have a
reasonable opportunity to pursue a full
and fair review of a benefit denial, as
required by ERISA section 503. Also,
and as more fully discussed in the
Regulatory Impact Analysis section of
this document, the Department does not
agree that the adoption of these basic
procedural protections will cause
excessive increases in costs and
litigation, or result in expenses and
burdens that will discourage employers
from sponsoring plans providing
disability benefits. In fact, comments
from some industry groups support the
conclusion that the protections adopted
in the final rule reflect best practices
that many insurers and benefit
providers already follow on a voluntary
basis.
Thus, while the Department has made
some changes and clarifications in
response to comments, the final rule,
described below, is substantially the
same as the proposal. Specifically, the
major provisions in the final rule
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require that: (1) Claims and appeals
must be adjudicated in a manner
designed to ensure independence and
impartiality of the persons involved in
making the benefit determination; (2)
benefit denial notices must contain a
complete discussion of why the plan
denied the claim and the standards
applied in reaching the decision,
including the basis for disagreeing with
the views of health care professionals,
vocational professionals, or with
disability benefit determinations by the
Social Security Administration (SSA);
(3) claimants must be given timely
notice of their right to access to their
entire claim file and other relevant
documents and be guaranteed the right
to present evidence and testimony in
support of their claim during the review
process; (4) claimants must be given
notice and a fair opportunity to respond
before denials at the appeals stage are
based on new or additional evidence or
rationales; (5) plans cannot prohibit a
claimant from seeking court review of a
claim denial based on a failure to
exhaust administrative remedies under
the plan if the plan failed to comply
with the claims procedure requirements
unless the violation was the result of a
minor error; (6) certain rescissions of
coverage are to be treated as adverse
benefit determinations triggering the
plan’s appeals procedures; and (7)
required notices and disclosures issued
under the claims procedure regulation
must be written in a culturally and
linguistically appropriate manner.
B. Comments on Major Provisions of
Final Rule
1. Independence and Impartiality—
Avoiding Conflicts of Interest
Consistent with the ACA Claims and
Appeals Final Rule governing group
health plans, paragraph (b)(7) of this
final rule explicitly provides that plans
providing disability benefits ‘‘must
ensure that all claims and appeals for
disability benefits are adjudicated in a
manner designed to ensure the
independence and impartiality of the
persons involved in making the
decision.’’ Therefore, this final rule
requires that decisions regarding hiring,
compensation, termination, promotion,
or similar matters with respect to any
individual must not be made based
upon the likelihood that the individual
will support the denial of disability
benefits. For example, a plan cannot
provide bonuses based on the number of
denials made by a claims adjudicator.
Similarly, a plan cannot contract with a
medical expert based on the expert’s
reputation for outcomes in contested
cases, rather than based on the expert’s
professional qualifications. These added
criteria for disability benefit claims
address practices and behavior which
cannot be reconciled with the ‘‘full and
fair review’’ guarantee in section 503 of
ERISA, and with the basic fiduciary
standards that must be followed in
implementing the plan’s claims
procedures. For the reasons described
below, paragraph (b)(7) of the final rule
therefore remains largely unchanged
from the proposal.
The Department received numerous
comments either generally supporting or
not objecting to the idea that the
independence and impartiality
requirements for claims procedures for
disability claims should be consistent
with the ACA’s claims procedures
requirements for group health plans.
Several commenters pointed out that
even prior to the proposal, many
disability plans had already taken
affirmative steps to ensure the
independence and impartiality of the
persons involved in the decision-
making process. Other commenters who
opposed the provision as unnecessary
similarly cited the fact that the proposed
amendments reflect current industry
practice and argued that issues
regarding the independence and
impartiality of the appeal process is
already the subject of the well-
developed body of case law. Although
the Department agrees that the proposal
was intended to be consistent with
industry best practice trends and
developing case law in the area, the
Department does not believe that
industry trends or court decisions are an
acceptable substitute for including these
provisions in a generally applicable
regulation.
Several commenters suggested that
the examples of individuals covered by
this provision should include vocational
experts. The commenters pointed out
that vocational experts are often actively
involved in the decision-making process
for disability claims and play a role in
the claims process similar to the role of
a medical or health care professional.
They noted that opinions of vocational
experts are often relied on in making
determinations on eligibility for and the
amount of disability benefits. Although
the list in the proposed provision was
intended to merely reflect examples, not
be an exhaustive list, the Department
nonetheless agrees that it would be
appropriate to add vocational experts to
avoid disputes regarding their status
under this provision of the final rule.
This clarification of the provision from
its proposed form is also consistent with
the current regulation’s express
acknowledgement of the important role
of vocational experts in the disability
claims process. Specifically, paragraph
(h)(3)(iv) of the current regulation
already requires that the claims
procedure for disability benefit claims
must provide for the identification of
medical or vocational experts whose
advice was obtained on behalf of the
plan in connection with a claimant’s
adverse benefit determination, without
regard to whether the advice was relied
upon in making the benefit
determination. Accordingly, the final
rule adds ‘‘vocational expert’’ to the
examples of persons involved in the
decision-making process who must be
insulated from the plan’s or issuer’s
conflicts of interest. Decisions regarding
hiring, compensation, termination,
promotion, or other similar matters
must not be based upon the likelihood
that the individual will support the
denial of benefits.
Commenters also asked the
Department to clarify whether
‘‘consulting experts’’ are ‘‘involved in
making the decision’’ for purposes of
the independence and impartiality
requirements. Some commenters were
concerned that consulting experts
would fall outside of these requirements
because plans or claims administrators
might assert that consulting experts
merely supply information and do not
decide claims. In the Department’s
view, the text of paragraph (b)(7) is clear
that the independence and impartiality
requirements are not limited to persons
responsible for making the decision. For
example, paragraph (b)(7) of the final
rule, as in the proposal, refers to a
‘‘medical expert’’ as an example of a
person covered by the provision. The
text also refers to individuals who may
‘‘support the denial of benefits.’’ Thus,
in the Department’s view, the
independence and impartiality
requirements apply to plans’ decisions
regarding hiring, compensation,
termination, promotion, or other similar
matters with respect to consulting
experts. Although some commenters
suggested that the Department expand
the regulatory text to expressly include
‘‘consulting experts,’’ in the
Department’s view, the regulatory text is
sufficiently clear to address
commenters’ concerns especially with
the inclusion of ‘‘vocational experts’’ in
this provision of the final rule as
described above. The Department also
believes that it should avoid creating
differences in the text of parallel
provisions in the rules for group health
benefits under the ACA Claims and
Appeals Final Rule and disability
benefits absent a reason that addresses
a specific issue for disability claims
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13
For example, the Department noted in the
preamble to the proposed rule the fact that several
federal courts concluded that a failure to provide
a discussion of the decision or the specific criteria
relied upon in making the adverse benefit
determination could make a claim denial arbitrary
and capricious.
(like the vocational expert issue
discussed above).
Several commenters asked the
Department to clarify that the
independence and impartiality
requirements apply even where the plan
does not directly hire or compensate the
individuals ‘‘involved in making the
decision’’ on a claim. The text of the
rule does not limit its scope to
individuals that the plan directly hires.
Rather, the rule’s coverage extends to
individuals hired or compensated by
third parties engaged by the plan with
respect to claims. Thus, for example, if
a plan’s service provider is responsible
for hiring, compensating, terminating, or
promoting an individual involved in
making a decision, this final rule
requires the plan to take steps (
e.g.,
in
the terms of its service contract and
ongoing monitoring) to ensure that the
service provider’s policies, practices,
and decisions regarding hiring,
compensating, terminating, or
promoting covered individuals are not
based upon the likelihood that the
individual will support the denial of
benefits.
One commenter, who supported
applying independence and impartiality
requirements, expressed concern about
a statement in the preamble to the
proposed rule that a plan cannot
contract with a medical expert based on
the expert’s reputation for outcomes in
contested cases rather than based on the
expert’s professional qualifications. The
commenter did not object to the
prohibition on hiring a medical expert
based on a reputation for denying
claims, but expressed concern that the
statement in the preamble might result
in claimants requesting statistics and
other information on cases in which the
medical expert expressed opinions in
support of denying rather than granting
a disability benefit claims. Another
commenter who opposed the provision
also expressed concern about court
litigation and discovery regarding
‘‘reputation’’ issues arising from the text
in the preamble. In the Department’s
view, the preamble statement accurately
describes one way that the
independence and impartiality standard
could be violated. That said, the
independence and impartiality
requirements in the rule do not modify
the scope of ‘‘relevant documents’’
subject to the disclosure requirements in
paragraphs (g)(1(vii)(C) and (h)(2)(iii) of
the Section 503 Regulation, as amended
by this rule. Nor do the independence
and impartiality requirements in the
rule prescribe limits on the extent to
which information about consulting
experts would be discoverable in a court
proceeding as part of an evaluation of
the extent to which the claims
administrator or insurer was acting
under a conflict of interest that should
be considered in evaluating an adverse
benefit determination.
Several commenters urged the
Department to implement the
independence and impartiality
requirements with specific quantifiable
limitations on the relationship between
plans and consultants. For example, one
commenter suggested a medical
consultant be required to certify that no
more than 20% of the consultant’s
income is derived from reviewing files
for insurance companies and/or self-
funded disability benefit plans. Several
commenters recommended that plans be
required to disclose to claimants a range
of quantifiable information regarding its
relationship with certain consultants
(
e.g.,
number of times a plan has relied
upon the third-party vendor who hired
the expert in the past year). A few
commenters suggested that the
Department establish rules on the
qualifications, credentials, or licensing
of an expert and the nature and type of
such expert’s professional practice. For
example, one commenter suggested that
the rule provide that when a fiduciary
relies on a physician or psychologist or
other professional, such as a vocational
specialist, the person must be licensed
in the same jurisdiction where the plan
beneficiary resides. Although the
Department agrees that more specific
quantifiable or other standards relating
to the nature and type of an expert’s
professional practice might provide
additional protections against conflicts
of interest, the parallel provisions in the
claims procedure rule for group health
plans under the ACA Claims and
Appeals Final Rule do not contain such
provisions. Moreover, an attempt to
establish specific measures or other
standards would benefit from a further
proposal and public input. Accordingly,
the final rule does not adopt the
commenters’ suggestions.
2. Improvements to Disclosure
Requirements
The Department proposed to improve
the disclosure requirements for
disability benefit claims in three
respects. First, the proposal included a
provision that expressly required
adverse benefit determinations on
disability benefit claims to contain a
‘‘discussion of the decision,’’ including
the basis for disagreeing with any
disability determination by the SSA or
other third party disability payer, or any
views of health care professionals
treating a claimant to the extent the
determination or views were presented
by the claimant to the plan. Second,
notices of adverse benefit
determinations must contain the
internal rules, guidelines, protocols,
standards or other similar criteria of the
plan that were relied upon in denying
the claim (or a statement that such
criteria do not exist). Third, consistent
with the current rule applicable to
notices of adverse benefit
determinations at the review stage, a
notice of adverse benefit determination
at the initial claims stage must contain
a statement that the claimant is entitled
to receive, upon request, relevant
documents.
In the Department’s view, the existing
claims procedure regulation for
disability claims already imposes a
requirement that denial notices include
a reasoned explanation for the denial.
13
For example, the rule requires that the
notice must be written in a manner
calculated to be understood by the
claimant, must include any specific
reasons for the adverse determination,
must reference the specific provision in
governing plan documents on which the
determination is based, must include a
description of any additional
information required to perfect the
claim, must include a description of the
internal appeal process, and must
include the plan’s rules, if any, that
were used in denying the claim (or a
statement that such rules are available
upon request).
The Department’s experience in
enforcing the claims procedure
requirements and its review of litigation
activity, however, leads it to conclude
that some plans are providing disability
claim notices that are not consistent
with the letter or spirit of the Section
503 Regulation. Accordingly, the
Department believes that expressly
setting forth additional requirements in
the regulation, even if some may already
apply under the current rule, is an
appropriate way of reinforcing the need
for plan fiduciaries to administer the
plan’s claims procedure in a way that is
transparent and that encourages an
appropriate dialogue between a
claimant and the plan regarding adverse
benefit determinations that ERISA and
the current claims procedure regulation
contemplate.
Commenters generally either
supported or did not object to the
requirement to explain a disagreement
with a treating health care professional
in adverse benefit determinations. The
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Department, accordingly, is adopting
this provision from the proposal. This
provision in the final rule would not be
satisfied merely by stating that the plan
or a reviewing physician disagrees with
the treating physician or health care
professional. Rather, the rule requires
that the adverse benefit determination
must include a discussion of the basis
for disagreeing with the health care
professional’s views. Several
commenters suggested, similar to their
comments described above on the need
to subject vocational experts to the
independence and impartiality
requirements, that this disclosure
provision should also apply to
vocational professionals. As noted
above, the commenters pointed out that
vocational experts have a role somewhat
similar to the role of a medical or health
care professional in the claims
determination process. The Department
agrees, and, accordingly, added
‘‘vocational professional’’ to this
provision.
An issue raised in the comments
related to whether the plan is required
to address only third party views
presented to the plan by the claimant.
The concern was that plans may not
know whether other third party views
even exist so that any requirement to
address third party views should be
limited to third party findings where
they are presented by the claimant.
Although the Department does not
believe it would be appropriate to
require plans to address views that they
were not aware of and had no obligation
to discover, the Department’s
consideration of this comment led it to
conclude that the provision needed to
be revised to include medical or
vocational experts whose advice was
obtained on behalf of the plan in
connection with a claimant’s adverse
benefit determination. The Department’s
experience enforcing the current
regulation has revealed circumstances
where claims adjudicators may consult
several experts and deny a claim based
on the view of one expert when advice
from other experts who were consulted
supported a decision to grant the claim.
Some of these cases may have involved
intentional ‘‘expert shopping.’’
Requiring plans to explain the basis for
disagreeing with experts whose advice
the plan sought would not present the
problem raised in the comments of
addressing third party views the plan
does not know even exist, but it would
be consistent with and enhance the
requirement in paragraph (h)(3)(iv) of
the current regulation which already
requires that the claims procedure for
disability benefit claims must provide
for the identification of medical or
vocational experts whose advice was
obtained on behalf of the plan in
connection with a claimant’s adverse
benefit determination, without regard to
whether the advice was relied upon in
making the benefit determination. In
fact, the Department believes that a
request for relevant documents under
the current regulation would require the
plan to disclose materials related to
such a consultation. The plan would
also be required under the current
regulation to explain its basis for not
adopting views of an expert the plan
consulted who supported granting the
claim if the claimant raised the expert’s
views as part of an appeal of an adverse
benefit determination. In the
Department’s view, this is not a new
substantive element of the requirement
that plans explain the reasons for a
denial, but rather is a process
enhancement that removes unnecessary
procedural steps for claimants to get an
explanation of the reasons the plan
disagrees with the views of its own
consulting experts.
Accordingly, the final rule revises
paragraphs (g)(1)(vii)(A) and (j)(6)(i) to
require that adverse benefit
determinations on disability benefit
claims contain a discussion of the basis
for disagreeing with the views of health
care professionals who treated the
claimant or vocational professionals
who evaluated the claimant, when the
claimant presents those views to the
plan. The final rule also revises
paragraphs (g)(1)(vii)(A) and (j)(6)(i) to
clarify that adverse benefit
determinations on disability benefit
claims must contain a discussion of the
basis for disagreeing with the views of
medical or vocational experts whose
advice was obtained on behalf of the
plan in connection with a claimant’s
adverse benefit determination, without
regard to whether the advice was relied
upon in making the benefit
determination.
One commenter suggested that
references to the ‘‘views’’ of treating
health care professionals is very broad
and that it is not clear what is intended
to be covered by this reference. The
commenter argued that ‘‘views’’ is not
synonymous with an opinion or
conclusion about whether a claimant is
disabled, and that, in many cases, health
care professionals do not provide an
opinion on the claimant’s disability at
all, and if they do, they are not
providing an opinion on disability as
defined by the plan. Another
commenter asserted that a health care
professional’s focus is on the patient’s
diagnosis and treatment and that the
claims adjudicator considers the long-
term effect of the individual’s condition
on their ability to work. These
commenters argued that claims
adjudicators are not necessarily agreeing
or disagreeing with medical findings by
a treating health care provider, rather
they are considering if the claimant’s
disease or illness significantly impairs
their work skills. The commenters said
that to require a plan to discuss why it
did not agree with the views expressed
by a myriad of health care professionals
does nothing to help explain why a
claims administrator found that the
claimant was not disabled under the
terms of the plan.
The Department does not believe it is
appropriate to limit the scope of the
final rule to opinions or conclusions
about whether a claimant is disabled.
Medical and vocational professionals
provide views that may be important to
the ultimate determination of whether a
person is disabled. In the Department’s
view, to the extent the claims
adjudicator disagrees with foundational
information in denying a claim, the
claimant has a right to know that fact to
the same extent the claimant should be
made aware that the claims adjudicator
disagrees with an opinion from a
medical or vocational expert that the
claimant is disabled. Further, it is part
of the fiduciary role of the ERISA claims
adjudicator to weigh input from medical
and vocational experts in reaching a
conclusion on a benefit claim. When the
claims adjudicator acting in a fiduciary
capacity disagrees with the judgments of
medical and vocational professionals in
denying a claim, the claims adjudicator
as a matter of basic fiduciary
accountability should be able to identify
those circumstances and explain the
basis for that decision. The Department
also notes that the final rule requires
this explanation in cases where the plan
or claims adjudicator disagrees with the
views of the medical or vocational
expert. There is no disagreement to
explain if, as the commenter posed, a
treating health care consultant expresses
a view only on a diagnosis or treatment
which the plan fully accepts in
evaluating the question of whether the
claimant meets the definition of a
disability under the plan. Rather, in
such a case, the plan would be under
the same obligation that exists under the
current regulation to explain why it
reached the conclusion that the
diagnosed illness or treatment did not
impair the claimant’s work skills or
ability to work or otherwise failed to
satisfy the plan’s definition of disability.
In summary, the Department believes
that an explanation of the basis for
disagreement with the judgments of
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health care and vocational professionals
is required in order to be responsive to
the information submitted by the
claimant or developed during
evaluation of the claim, and is also
necessary for a reasoned explanation of
a denial.
With respect to the requirement to
explain the basis for disagreeing with or
not following disability determinations
by the SSA and other payers of
disability benefits, several commenters
who supported the requirement pointed
out that reviewing courts in evaluating
whether a plan’s adverse benefit
determination was arbitrary and
capricious have found an SSA
determination to award benefits to be a
factor that the plan fiduciary deciding a
benefit should consider. Courts have
criticized the failure to consider the
SSA determination, especially if a
plan’s administrator operates under a
conflict of interest and if the plan
requires or encourages claimants to
pursue SSA decisions in order to offset
any SSA award against the amount they
pay in disability benefits.
See, e.g.,
Montour
v.
Hartford Life and Accident
Ins. Co.,
588 F.3d 623, 637 (9th Cir.
2009) (‘‘failure to explain why it
reached a different conclusion than the
SSA is yet another factor to consider in
reviewing the administrator’s decision
for abuse of discretion, particularly
where, as here, a plan administrator
operating with a conflict of interest
requires a claimant to apply and then
benefits financially from the SSA’s
disability finding.’’);
Brown
v.
Hartford
Life Ins. Co.,
301 F. App’x 772, 776
(10th Cir. 2008) (insurer’s discussion
was ‘‘conclusory’’ and ‘‘provided no
specific discussion of how the rationale
for the SSA’s decision, or the evidence
the SSA considered, differed from its
own policy criteria or the medical
documentation it considered’’). Other
commenters, however, urged the
Department to remove the requirement
to discuss the basis for disagreeing with
the disability determinations of the SSA
or other payers of benefits. Those
commenters argued that it would not be
reasonable to require an ERISA plan
fiduciary to go outside the plan’s
governing document and make a
judgment about a disability
determination made by some other party
that is based upon another plan or
program’s definition of disability, which
may have entirely different or
inconsistent definitions of disability or
conditions. The commenters further
argued that the plan fiduciary might not
be able to get from the SSA or other
payer of benefits the documents, case
file or other information necessary even
to try to conduct such an evaluation.
Those commenters also requested that,
if such a requirement was to be
included in the final rule, then the rule
should allow plans to take into account
in the discussion of its decision the
extent to which the claimant provided
the plan, or gave the plan a way to
obtain, sufficient documentation from
the SSA or other third party to allow a
meaningful review of such third-party
findings.
The Department is persuaded that the
final rule should limit the category of
‘‘other payers of benefits’’ to disability
benefit determinations by the SSA. The
Department accepts for purposes of this
final rule that claims adjudicators
generally are trained to understand their
own plan or insurance policy
requirements and apply those standards
to claims in accordance with the
internal rules, guidelines, policies, and
procedures governing the plan. The
Department also agrees that a
determination that an individual is
entitled to benefits under another
employee benefit plan or other
insurance coverage may not be governed
by the same definitions or criteria, and
that it may be difficult for the
adjudicator to obtain a comprehensive
explanation of the determination or
relevant underlying information that
was relied on by the other payer in
making its determination.
The Department does not believe,
however, that those same difficulties are
involved in the case of SSA
determinations. SSA determinations
may include a written decision from an
ALJ, and the definitions and
presumptions are set forth in publicly
available regulations and SSA guidance.
Accordingly, the final rule revises
paragraphs (g)(1)(vii)(A) and (j)(6)(i) to
require that adverse benefit
determinations on disability benefit
claims contain a discussion of the basis
for disagreeing with an SSA disability
determination regarding the claimant
presented by the claimant to the plan.
Although the plan’s claims procedures
may place the burden on the claimant
to submit any SSA determination that
the claimant wants the plan to consider,
claims administrators working with an
apparently deficient administrative
record must inform claimants of the
alleged deficiency and provide them
with an opportunity to resolve the
stated problem by furnishing missing
information. It also would not be
sufficient for the benefit determination
merely to include boilerplate text about
possible differences in applicable
definitions, presumptions, or evidence.
A discussion of the actual differences
would be necessary. Further, although
the final rule does not, as some
commenters requested, require that
plans defer to a favorable SSA
determination, a more detailed
justification would be required in a case
where the SSA definitions were
functionally equivalent to those under
the plan.
Several commenters requested that
the Department adopt a rule requiring
deference to a treating physician’s
opinion for disability determinations,
with some commenters suggesting a rule
identical to the one applied under the
SSA disability program. Nothing in
ERISA or the Department’s regulations
mandates that a plan administrator give
special weight to the opinions of a
claimant’s treating physician when
rendering a benefit determination. The
Department also does not believe the
public record on this rulemaking
supports the Department imposing such
a rule. In the Department’s view, a
treating physician rule is not necessary
to guard against arbitrary decision-
making by plan administrators. In
addition to the various improvements in
safeguards and procedural protections
being adopted as part of this final rule,
courts can review adverse benefit
determinations to determine whether
the claims adjudicator acted
unreasonably in disregarding evidence
of a claimant’s disability, including the
opinions of treating physicians. Nor
does the Department believe it would be
appropriate to adopt the treating
physician rule applicable under the
Social Security disability program. That
rule was adopted by the Commissioner
of Social Security in regulations issued
in 1991, to bring nationwide uniformity
to a vast statutory benefits program and
to address varying decisions by courts of
appeals addressing the question. ERISA,
by contrast, governs a broad range of
private benefit plans to which both the
statute and implementing regulations
issued by the Secretary of Labor permit
significant flexibility in the processing
of claims. Moreover, the SSA’s treating
physician rule has not been uniformly
or generally applied even under
statutory disability programs other than
Social Security.
See
Brief for the United
States as amicus curiae supporting
petitioner,
Black & Decker Disability
Plan
v.
Nord,
538 U.S. 822 (2003).
Under the current Section 503
Regulation, if a claim is denied based on
a medical necessity, experimental
treatment, or similar exclusion or limit,
the adverse benefit determination must
include either an explanation of the
scientific or clinical judgment for the
determination, applying the terms of the
plan to the claimant’s medical
circumstances, or a statement that such
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14
The current Section 503 Regulation in
paragraph (j)(5)(iii) requires a statement concerning
voluntary dispute resolution options in notices of
adverse benefit determinations on review for both
group health and disability claims. The Department
previously issued an FAQ on that provision noting
that information on the specific voluntary appeal
procedures offered under the plan must be provided
under paragraph (j)(4) of the regulation in the notice
of adverse benefit determination, along with a
statement of the claimant’s right to bring a civil
action under section 502(a) of ERISA. The
Department, therefore, stated in the FAQ that,
pending further review, it will not seek to enforce
compliance with the requirements of paragraph
(j)(5)(iii).
See
FAQs About The Benefit Claims
Procedure Regulation, D–13 (
www.dol.gov/sites/
default/files/ebsa/about-ebsa/our-activities/
programs-and-initiatives/outreach-and-education/
hbec/CAGHDP.pdf
). In light of the fact that this
proposal was limited to disability benefit claims,
the Department does not believe it would be
appropriate to modify the requirement in paragraph
(j)(5)(iii) as part of this final rule. Accordingly, the
Department will continue the enforcement position
articulated in FAQ D–13.
explanation will be provided free of
charge upon request. These
requirements in paragraphs (g)(1)(v)(B)
and (j)(5)(ii) apply to notices of adverse
benefit determinations for both group
health and disability claims. In
proposing new paragraphs (g)(1)(vii)
and (j)(6) applicable to disability claims,
these requirements were intended to be
subsumed in the general requirement in
the proposal that adverse benefit
determinations include a ‘‘discussion of
the decision.’’ The Department is
concerned, however, that removing the
explicit requirement in the disability
claims procedure to explain a denial
based on medical necessity,
experimental treatment, or similar
exclusion may be misinterpreted by
some as eliminating that requirement
(especially with the group health plan
claims procedures continuing to have
that explicit requirement). That clearly
was not the Department’s intention,
and, accordingly, the final rule
expressly sets forth in paragraphs
(g)(1)(vii)(B) and (j)(6)(ii) the
requirement of an explanation of the
scientific or clinical judgment for such
denials.
14
The Department received numerous
comments in favor of the disclosure
requirement in paragraphs (g)(1)(vii)(B)
and (j)(6)(ii) of the proposal that notices
of adverse benefit determinations
include the internal rules, guidelines,
protocols, standards or other similar
criteria of the plan that were relied upon
in denying the claim (or a statement that
such criteria do not exist). Commenters
who supported the proposal noted that
the proposed requirement should not be
onerous given that adverse benefit
determinations are already required to
include the reasons for the denial and
the applicable plan terms, and also
argued that this further level of
transparency would promote the
dialogue between claimant and plan
regarding adverse benefit
determinations that ERISA
contemplates. These commenters also
pointed out that this requirement would
address a problem confronted by some
claimants where a plan or claims
adjudicator says it is relying on an
internal rule in denying a claim, and
then refuses to disclose it to the
claimant based on an assertion that the
internal rule is confidential or
proprietary. Commenters who opposed
the provision argued that the proposal
would be overly burdensome for plans
and insurers. They read the provision as
requiring disclosure of ‘‘details of
internal processes that are irrelevant to
the claim decision and that would
provide little in the way of useful
information to claimants.’’ The
comments included concerns about the
time and cost to review claims manuals
and other internal documents that may
include rules, guidelines, protocols,
standards or other similar criteria to
determine that no provision has any
application to a claim in order to make
the statement that such internal rules,
etc.
do not exist.
The final rule, like the proposal,
provides that internal rules, guidelines,
protocols, standards or other similar
criteria of the plan relied upon in
making an adverse benefit
determination must be provided with
the adverse benefit determination. The
Department does not agree with
commenters who asserted that the
requirement will be overly burdensome
to plans. Even under the existing claims
procedure regulation, internal rules,
guidelines, protocols, standards or
similar criteria relied upon in denying
the claim already must be provided to
the claimant upon request. Although the
additional requirement to affirmatively
include them in the adverse benefit
determination adds an incremental
paperwork burden, where a plan utilizes
a specific internal rule or protocol,
understanding the terms of the specific
protocol may be crucial to a claimant’s
ability to successfully contest the denial
on review. With respect to the
comments about disclosing an internal
process that is irrelevant to the claim
decision, it is hard to see how
something that is in fact ‘‘irrelevant’’
can be something that was ‘‘relied
upon’’ in denying the claim.
Furthermore, the Department does not
agree that it should change the proposed
text based on expressed concerns about
the time and cost to review claims
manuals and other internal documents
to determine that nothing in those
materials have application to a claim.
Aside from the fact that this provision
of the final rule requires the plan to
affirmatively include only rules,
guidelines, protocols, standards or other
similar criteria that were relied on in
denying the claim, in the Department’s
view, it would present substantial
questions about whether the plan or
claims adjudicator complied with
ERISA’s fiduciary standards if a claim
was denied without the claims
adjudicator having considered a rule,
guideline, protocol or standard that was
intended to govern the determination of
the claim. Moreover, the current Section
503 regulation for disability plans gives
claimants the right to reasonable access
to and copies of documents, records,
and other information ‘‘relevant’’ to the
claimant’s claim for benefits. In addition
to capturing documents, records, and
other information ‘‘relied upon’’ in
making the benefit determination, the
definition of ‘‘relevant’’ also captures
information submitted, considered or
generated in the course of making the
benefit determination or that
demonstrates compliance with the
administrative processes and safeguards
designed to ensure and verify that
benefit claim determinations have been
made in accordance with governing
plan documents and that those
provisions have been applied
consistently with respect to similarly
situated claimants. In the case of plans
providing group health or disability
benefits, ‘‘relevant’’ also includes
documents, records, or other
information that constitutes a statement
of policy or guidance with respect to the
plan concerning the denied treatment
option or benefit, without regard to
whether such advice or statement was
relied upon in making the benefit
determination. Such a statement of
policy or guidance would include any
policy or guidance generated or
commissioned by the plan or issuer
concerning the denied benefit that
would or should contribute to deciding
generally whether to pay the claim (
e.g.,
studies, surveys or assessments
generated or commissioned by the plan
or issuer that implicate a denied
treatment option or benefit but do not
relate specifically to the plan itself).
Thus, in the Department’s view, even
under the current rule, plans would be
required, on request, to verify that the
plan has produced all the internal rules,
guidelines, protocols, standards or other
similar criteria concerning the denied
claim that were or should have been
considered in deciding the claim.
Another commenter argued that it did
not make sense to require plans to
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15
FAQ C–17 states: ‘‘It is the view of the
department that where a rule, guideline, protocol,
or similar criterion serves as a basis for making a
benefit determination, either at the initial level or
upon review, the rule, guideline, protocol, or
criterion must be set forth in the notice of adverse
benefit determination or, following disclosure of
reliance and availability, provided to the claimant
upon request. However, the underlying data or
information used to develop any such rule,
guideline, protocol, or similar criterion would not
be required to be provided in order to satisfy this
requirement. The department also has taken the
position that internal rules, guidelines, protocols, or
similar criteria would constitute instruments under
which a plan is established or operated within the
meaning of section 104(b)(4) of ERISA and, as such,
must be disclosed to participants and beneficiaries.
See § § 2560.503–1(g)(v) (A) and (j)(5)(i); 65 FR at
70251. Also see § § 2560.503–1(h)(2)(iii) and
2560.503–1(m)(8)(i); Advisory Opinion 96–14A
(July 31, 1996).
16
As a practical matter, these requirements to
provide claimants with evidence or rationales that
were relied on or used as a basis for an adverse
benefit determination largely conforms the rule to
the existing process by which benefits claims
should be handled in such cases.
E.g., Saffon
v.
Wells Fargo & Co. Long Term Disability Plan,
511
F.3d 1206, 1215 (9th Cir. 2008) (finding that a full
and fair review requires a plan administrator to
disclose the reasons for denial in the administrative
process); 75 FR at 43333 n.7 (noting the DOL’s
position that the existing claims procedure
regulation already requires plans to provide
claimants with new or additional evidence or
rationale upon request and an opportunity to
respond in certain circumstances).
17
See, e.g., Metzger
v.
Unum Life Ins. Co. of
America,
476 F.3d 1161, 1165–67 (10th Cir. 2007)
(holding that ‘‘subsection (h)(2)(iii) does not require
a plan administrator to provide a claimant with
access to the medical opinion reports of appeal-
level reviewers prior to a final decision on
appeal.’’).
Accord Glazer
v.
Reliance Standard Life
Ins. Co.,
524 F.3d 1241 (11th Cir. 2008);
Midgett
v.
Washington Group Int’l Long Term Disability Plan,
561 F.3d 887 (8th Cir. 2009).
affirmatively state in an adverse benefit
determination that plans did not rely on
any rule or guideline. They argued that,
if the adverse benefit determination
failed to cite reliance on such a rule or
guideline, the claimant could ask and
the plan would respond with a
statement that none were relied on.
They argued that such a process gives
the claimant the ability to obtain that
information in cases where the claimant
believes that information is important to
understanding or contesting the basis
for the denial. It is the Department’s
view, however, that an affirmative
statement would be helpful to the
claimant by providing certainty about
the existence of any applicable rule or
guideline. The Department also does not
believe the absence of a statement of
reliance in an adverse benefit statement
fairly puts a claimant on notice to
request confirmation that no rule or
guideline was relied upon. Further, the
Department does not believe merely
requiring such an affirmative statement
is burdensome on plans because the
plan should know whether it relied on
a rule or guideline in denying a claim.
Finally, the existing Section 503
regulation already requires that rules,
guidelines, protocols, standards or other
similar criteria that were relied on in
denying the claim must be disclosed to
claimants on request. Nothing in the
current regulation allows a plan
fiduciary to decline to comply with that
requirement based on an assertion that
the information is proprietary or
confidential. Indeed, the Department
has taken the position that internal
rules, guidelines, protocols, or similar
criteria would constitute instruments
under which a plan is established or
operated within the meaning of section
104(b)(4) of ERISA and, as such, must be
disclosed to participants and
beneficiaries.
See
FAQs About The
Benefit Claims Procedure Regulation, C–
17 (
www.dol.gov/sites/default/files/
ebsa/about-ebsa/our-activities/
programs-and-initiatives/outreach-and-
education/hbec/CAGHDP.pdf
).
15
Similarly, this final rule does not permit
a plan to conceal such information from
the claimant under an assertion that the
information is proprietary or constitutes
confidential business information.
The third new disclosure
requirement, set forth in paragraph
(g)(1)(vii)(C) of the proposal, adds a
requirement that an adverse benefit
determination at the initial claims stage
must include a statement that the
claimant is entitled to receive, upon
request, documents relevant to the claim
for benefits. Although the current
Section 503 Regulation provides that
claimants challenging an initial denial
of a claim have a right to request
relevant documents, a statement
advising claimants of their right to
relevant documents currently is
required only in notices of an adverse
benefit determination on appeal. No
commenters objected to the addition of
this statement to the adverse benefit
determination at the initial claims stage.
The Department believes such a
statement in the initial denial notice
simply confirms rights claimants
already have under the current claims
regulation and will help ensure
claimants understand their right of
access to the information needed to
understand the reasons for the denial
and decide whether and how they may
challenge the denial on appeal.
Accordingly, this provision was adopted
without change in the final rule.
3. Right To Review and Respond to New
Information Before Final Decision
The Department continues to believe
that a full and fair review requires that
claimants have a right to review and
respond to new evidence or rationales
developed by the plan during the
pendency of the appeal and have the
opportunity to fully and fairly present
his or her case at the administrative
appeal level, as opposed merely to
having a right to review such
information on request only after the
claim has already been denied on
appeal. Accordingly, the final rule
adopts those provisions of the proposal
with certain modifications described
below.
Paragraph (h)(4) of the final rule,
consistent with the proposal, requires
that plans provide claimants, free of
charge, with new or additional evidence
considered, relied upon, or generated by
the plan, insurer, or other person
making the benefit determination (or at
the direction of the plan, insurer or such
other person) during the pendency of
the appeal in connection with the claim.
Consistent with the proposal, paragraph
(h)(4) also provides a similar disclosure
requirement for an adverse benefit
determination based on a new or
additional rationale. The evidence or
rationale must be provided as soon as
possible and sufficiently in advance of
the date on which the notice of adverse
benefit determination on review is
required to be provided to give the
claimant a reasonable opportunity to
address the evidence or rationale prior
to that date. These requirements already
apply to claims involving group health
benefits under the ACA Claims and
Appeals Final Rule. Further, the
Department has interpreted ERISA
section 503 and the current Section 503
Regulation as already requiring that
plans provide claimants with new or
additional evidence or rationales upon
request and provide them an
opportunity to respond in at least
certain circumstances.
16
The objective of these provisions is to
ensure the claimant’s ability to obtain a
full and fair review of denied disability
claims by explicitly providing that
claimants have a right to review and
respond to new or additional evidence
or rationales developed by the plan
during the pendency of the appeal, as
opposed merely to having a right to
such information on request only after
the claim has already been denied on
appeal, as some courts have held under
the Section 503 Regulation. These
protections are direct imports from the
ACA Claims and Appeals Final Rule,
and they would correct procedural
problems evidenced in litigation even
predating the ACA.
17
It was and
continues to be the view of the
Department that claimants are deprived
of a full and fair review, as required by
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ERISA LTD Statute of Limitations Addressed by Supreme Court

(Slip Opinion)
OCTOBER TERM, 2013
Syllabus

HEIMESHOFF v. HARTFORD LIFE & ACCIDENT INSURANCE CO. ET AL. CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR

THE SECOND CIRCUIT No. 12–729. Argued October 15, 2013—Decided December 16, 2013
Respondent Hartford Life & Accident Insurance Co. (Hartford) is the administrator of Wal-Mart Stores, Inc.’s (Wal-Mart) Group Long Term Disability Plan (Plan), an employee benefit plan covered by the Employee Retirement Income Security Act of 1974 (ERISA). The Plan’s insurance policy requires any suit to recover benefits pursuant to the judicial review provision in ERISA §502(a)(1)(B), 29 U. S. C. §1132(a)(1)(B), to be filed within three years after “proof of loss” is due. Petitioner Heimeshoff filed a claim for long-term disability benefits with Hartford. After petitioner exhausted the mandatory administrative review process, Hartford issued its final denial. Almost three years after that final denial but more than three years after proof of loss was due, Heimeshoff filed a claim for judicial review pursuant to ERISA §502(a)(1)(B). Hartford and Wal-Mart moved to dis-miss on the ground that the claim was untimely. The District Court granted the motion, recognizing that while ERISA does not provide a statute of limitations, the contractual 3-year limitations period was enforceable under applicable State law and Circuit precedent. The Second Circuit affirmed.
Held: The Plan’s limitations provision is enforceable. Pp. 4–16. (a) The courts of appeals require participants in an employee benefit plan covered by ERISA to exhaust the plan’s administrative remedies before filing suit to recover benefits. A plan participant’s cause of action under ERISA §502(a)(1)(B) therefore does not accrue until the plan issues a final denial. But it does not follow that a plan and its participants cannot agree to commence the limitations period before that time. Pp. 4–8. (1) The rule set forth in Order of United Commercial Travelers of HEIMESHOFF v. HARTFORD LIFE & ACCIDENT INS. CO. Opinion of the Court a senior public relations manager for Wal-Mart Stores, Inc. Her physician later diagnosed her with lupus and fibromyalgia. Heimeshoff stopped working on June 8. On August 22, 2005, Heimeshoff filed a claim for long-term disability benefits with Hartford Life & Accident Insurance Co., the administrator of Wal-Mart’s Group Long Term Disability Plan (Plan). Her claim form, supported by a statement from her rheumatologist, listed her symptoms as “ ‘extreme fatigue, significant pain, and difficulty in concentration.’” App. to Pet. for Cert. 7. In November 2005, Hartford notified Heimeshoff that it could not determine whether she was disabled because her rheumatologist had never responded to Hartford’s request for additional information. Hartford denied the claim the following month for failure to provide satisfactory proof of loss. Hartford instructed Heimeshoff that it would consider an appeal filed within 180 days, but later informed her that it would reopen her claim, without the need for an appeal, if her rheumatologist provided the requested information. In July 2006, another physician evaluated Heimeshoff and concluded that she was disabled. Heimeshoff submitted that evaluation and additional medical evidence in October 2006. Hartford then retained a physician to review Heimeshoff ’s records and speak with her rheumatologist. That physician issued a report in November 2006 concluding that Heimeshoff was able to perform the activities required by her sedentary occupation. Hartford denied Heimeshoff ’s claim later that November. In May 2007, Heimeshoff requested an extension of the Plan’s appeal deadline until September 30, 2007, in order——————
The insurance policy provides: “ ‘Written proof of loss must be sent to The Hartford within 90 days after the start of the period for which The Hartford owes payment. After that, The Hartford may require further written proof that you are still Disabled.’” App. to Pet. for Cert. 10. Cite as: 571 U. S. ____ (2013) Opinion of the Court to provide additional evidence. Hartford granted the extension. On September 26, 2007, Heimeshoff submitted her appeal along with additional cardiopulmonary and neuropsychological evaluations. After two additional physicians retained by Hartford reviewed the claim, Hartford issued its final denial on November 26, 2007. On November 18, 2010, almost three years later (but more than three years after proof of loss was due), Heimeshoff filed suit in District Court seeking review of her denied claim pursuant to ERISA §502(a)(1)(B). Hartford and Wal-Mart moved to dismiss on the ground that Heimeshoff ’s complaint was barred by the Plan’s limitations provision, which stated: “Legal action cannot be taken against The Hartford . . . [more than] 3 years after the time written proof of loss is required to be furnished according to the terms of the policy.” Id., at 10. The District Court granted the motion to dismiss. Recognizing that ERISA does not provide a statute of limitations for actions under §502(a)(1)(B), the court explained that the limitations period provided by the most nearly analogous state statute applies. See North Star Steel Co. v. Thomas, 515 U. S. 29, 33–34 (1995). Under Connecticut law, the Plan was permitted to specify a limitations period expiring “[not] less than one year from the time when the loss insured against occurs.”2 Conn. Gen. Stat. §38a–290 (2012); see App. to Pet. for Cert. 13. The court held that,under Circuit precedent, a 3-year limitations period set to begin when proof of loss is due is enforceable, and Heimeshoff ’s claim was therefore untimely. 3 Id., at 13, 152 The parties do not dispute that Connecticut provides the relevant state law governing the limitations period in this case. 3 Heimeshoff also argued before the District Court that even if the Plan’s limitations provision were enforceable, her suit was still timely because Hartford had granted her request for an extension until September 30, 2007. Even crediting the contention that proof of loss was not due until that date, the court held that the Plan’s limitations4

HAISLEY v. SEDGWICK

 776 F. Supp. 2d 33 (2011)
Beverly A. HAISLEY, Plaintiff,
v.
SEDGWICK CLAIMS MANAGEMENT SERVICES, INC., PNC Financial Services Group, Inc., and the PNC Financial Services Group, Inc., Long Term Disability Plan, Defendants. Civil Action No. 08-1463. United States District Court, W.D. Pennsylvania. March 2, 2011.
*35 Tybe A. Brett, Janice M. Pintar, Stember, Feinstein, Doyle & Payne, LLC, Pittsburgh, PA, for Plaintiff.

Gina D. Wodarski, Edwards & Angell, Boston, MA, Pamela G. Cochenour, Pietragallo, Bosick & Gordon, Pittsburgh, PA, for Defendants.

MEMORANDUM OPINION
CONTI, District Judge.

I. Introduction
Pending before the court are cross-motions for summary judgment filed by plaintiff *36 Beverly A. Haisley (“Haisley” or “plaintiff”) and defendants Sedgwick Claims Management Services, Inc. (“Sedgwick”), PNC Financial Services Group, Inc. (“PNC”), and the PNC Financial Services Group, Inc., Long Term Disability Plan (the “Plan” and together with Sedgwick and PNC “defendants”). (ECF Nos. 56 & 59.) For the reasons that follow, Haisley’s motion for summary judgment will be granted in part, and defendants’ motion for summary judgment will be denied. The Plan will be required to pay long term disability (“LTD”) benefits to Haisley for the period commencing on October 3, 2007, and ending on October 2, 2009, and the case will be remanded for a determination whether plaintiff is entitled to benefits after October 2, 2009.

II. Background

Haisley was born on April 13, 1951. (ECF No. 1 ¶ 7.) She was employed by PNC between May 3, 1971, and June 22, 2007. (Administrative Record (“AR”) AR0034.) As of June 22, 2007, she was working as a Collections/Recovery Team Manager. (ECF No. 104 ¶ 1.) In this capacity, Haisley managed a team of adjustors responsible for collecting on accounts that had been delinquent for thirty days or more. (ECF No. 96 ¶ 2.) Her monthly salary was $4,708.33. (Id. ¶ 1.)

Haisley’s mother died on June 28, 2007. (AR0027.) Haisley applied for short-term disability (“STD”) benefits. (ECF No. 96 ¶ 18.) This request was based, at least in part, on depression and anxiety suffered by Haisley as a result of her mother’s death. (Id.) At that time, Haisley was also suffering from peripheral neuropathy. (AR0027-29.) PNC approved Haisley’s request for STD benefits for a full period commencing on July 5, 2007, and concluding on October 2, 2007. (ECF No. 96 ¶¶ 18-19.) She received STD benefits at the rate of 100% of her monthly salary. (Id. ¶ 19.)

The Plan provides full-time, salaried employees who are unable to work for more than ninety days with long-term disability (“LTD”) benefits of up to 70% of their base salaries. (ECF No. 104 ¶ 2.) Haisley participated in the Plan because of her employment with PNC. (Id. ¶ 1.) PNC established a “Group Benefits Trust” to fund LTD disability payments made pursuant to the Plan. (AR0296-97.) As the Plan Administrator, PNC has the power “[t]o determine the eligibility and status of any [e]mployee with respect to Plan participation.” (AR0233, AR0245.) PNC administers and funds the Plan as follows:

5. The Plan is a fully self-funded employee welfare benefit plan as defined in the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).
The Plan provides long term disability benefits for eligible employees of PNC. A third party does not insure the Plan. It is self-funded by means of a separate trust established by PNC solely for the purpose of providing benefits. The Trust is known and referred to as the “Group Benefits Trust” (the “GBT”).
6. PNC makes fixed, periodic cash contributions to the GBT based on calculations and projections of its future long term disability liability performed by an independent actuary. PNC holds no residual interest in the assets of the GBT. Rather, any and all monies in the trust are contributed without condition at all times and at all times must be used for the exclusive benefit of Plan participants or beneficiaries.
7. Long term disability benefits determined to be payable under the terms of the Plan are paid from the GBT.
(Kerry A. Allen, Aff. Sept. 11, 2009, AR0334.)

*37 The Plan is administered pursuant to a service agreement (the “Service Agreement”) executed by PNC and Sedgwick in December 2004. (AR0251-76.) The Service Agreement delegates to Sedgwick the responsibility for administering LTD claims under the Plan. (AR0271.) In accordance with the Service Agreement, Sedgwick receives, investigates and responds to LTD claims filed by employees of PNC. (ECF No. 96 ¶ 11.) Under the Service Agreement, PNC is responsible for providing Sedgwick with sufficient funds to cover LTD claims, and Sedgwick is expressly relieved of the obligation to advance its own funds to cover such claims. (AR0273.) The Plan defines the terms “Total Disability” and “Totally Disabled” as follows:

21. “Total Disability” and “Totally Disabled” mean that because of Injury or Sickness:
a. The Participant cannot perform each of the material duties of his or her regular occupation; and
b. After benefits have been paid for 24 months, the Participant cannot perform each of the material duties of any gainful occupation for which he or she is reasonably fitted by training, education or experience.
(AR0234.) The Plan contains a “Mental Illness Limitation,” which provides:

a. Benefits for Total Disability due to mental illness will not exceed 24 months of Monthly Total Disability Benefit payments unless the Participant meets one of the following:
(1) The Participant is in a hospital or institution and is still Totally Disabled as a result of the mental illness at the end of the 24-month period. In this case, the Monthly Total Disability Benefit will be paid during the Participant’s confinement in the hospital or institution.
(2) If the Participant is still Totally Disabled when he is discharged from a hospital or institution as set forth in III.14.a.(1), the Monthly Total Disability Benefit will be paid for a recovery period of up to 90 days.
(3) If the Participant becomes re-confined in a hospital or institution as a result of such mental illness during the recovery period for at least 14 days in a row, Total Disability Benefits will be paid for the confinement and another recovery period up to 90 more days.
Notwithstanding the foregoing, benefits for Total Disability due to mental illness will not be paid for a period longer than 180 days from the expiration of the 24-month period.
(AR0242.) The term “mental illness,” as used in the language of the Plan, means “mental, nervous or emotional diseases or disorders of any type.” (AR0243.)

At the conclusion of her STD period, Haisley believed that she was still incapable of performing the duties of her job. (ECF No. 96 ¶¶ 20-21.) She applied for LTD benefits on October 11, 2007. (AR0053-58.) On the application, Haisley indicated that she was disabled due to depression, anxiety and neuropathy. (AR0053.) She reported that she first noticed her symptoms on May 2, 2007, and that her last day of work was June 22, 2007. (Id.)

In support of her claim, Haisley submitted written reports which were supplied by her treating health-care providers. (ECF No. 96 ¶¶ 22-26.) Included with these reports were the results of nerve conduction studies which were conducted on August 15, 2007. (AR0075-76, AR0086-87.) These studies showed Haisley to be suffering from “diffuse peripheral neuropathy” that was deemed to be of “mild to moderate *38 severity.” (AR0076.) Charlotte Graham (“Graham”), an LTD case worker employed by Sedgwick, requested additional information from Haisley’s treating physicians. (AR0084-85.)

In response to an inquiry from Graham dated October 19, 2007, Dr. Dushan Majkic, Haisley’s primary care physician, reported that Haisley was suffering from both peripheral neuropathy and a relapse of major depression. (AR0084.) Dr. Majkic opined that Haisley was unable to concentrate because of the side effects of her medication, she could not sit or stand for prolonged periods of time, and her prognosis for returning to gainful employment was “undetermined.” (Id.)

In a letter to Graham dated November 9, 2007, Dr. Sidney W. White, Haisley’s clinical psychologist, stated that he began to treat Haisley on July 17, 2007. (AR0088.) According to Dr. White, the “immediate precipitant” of Haisley’s symptoms was the death of her mother on June 28, 2007. (AR0089.) In the letter, Dr. White explained:

Ms. Haisley currently does not possess the functional capabilities just mentioned that are necessary for the effective performance of her job. Besides the pain from the Peripheral Neuropathy, Ms. Haisley is emotionall [sic] drained and physically exhausted most days. She does not have the motivation, energy, and emotional strength to follow leadership, much less provide it for her employees. Ms. Haisley’s current cognitive impairments are equally compromising and preclude the effective performance of her job. She is unable to sustain focus and concentration on a consistent basis. While her cognitive abilities are intact, they are nevertheless slowed and deliberate. Ms. Haisley is not currently able to process information efficiently or make decisions quickly. She is also experiencing lapses in her short-term memory.
Ms. Haisley views her current absence from work as a necessity, and this is the recommendation of both Dr. Majkic and myself. Ms. Haisley’s absence from work is thus a collaborative decision. I am hopeful that Ms. Haisley’s depressive symptoms will eventually remit, but at the present time and foreseeable future I do not believe she can perform her work.
The symptoms and impairments that I have noted are based both on Ms. Haisley’s self-report and on my own clinical interview interactions and observations of Ms. Haisley. I have tried to describe specific and concrete tasks inherent in Ms. Haisley’s work. I have then tried to indicate how Ms. Haisley’s physical, emotional, and cognitive impairments preclude any effective performance of her work-related tasks.
(AR0090.) Dr. White expressed his willingness to provide further information in connection with Haisley’s LTD claim. (AR0091.)

On November 30, 2007, Graham sent Haisley a letter stating that Sedgwick approved her application for LTD benefits.[1] (ECF No. 63, Ex. K, BAH00125-27.) The *39 applicable LTD period began on October 3, 2007. (AR0027.) A Sedgwick supervisor recommended on December 6, 2007, that the “approval” of Haisley’s claim be rescinded until additional medical records could be received and evaluated. (AR0025.) In order to receive LTD benefits under the Plan, Haisley was required to apply for disability benefits under the Social Security Act (“SSA”), 42 U.S.C. §§ 401-33, 1381-83f. (AR0283.) For this reason, she applied for social security disability benefits. (ECF No. 96 ¶ 29.) Haisley was ultimately awarded disability insurance benefits under Title II of the SSA. (AR0016; ECF No. 63, Ex. K, BAH000071.)

In a letter dated December 20, 2007, Graham informed Haisley that her claim for LTD benefits had been “formally suspended” as of December 1, 2007, due to “a lack of current treatment information on file supportive of continuing total disability.” (AR0100.) In that letter Graham stated that Dr. White’s report of November 9, 2007, had not been supported by treatment records or documentation concerning Haisley’s medications. (AR0101.) Haisley was given until January 17, 2008, to provide Sedgwick with more detailed information about her treatment regimen. (Id.)

Haisley was experiencing discomfort in both her lower extremities. (AR0102.) On December 27, 2007, she was examined by Dr. Richard B. Kasdan, a neurologist. (Id.) Suspecting that Haisley’s problems had a “lumbar source,” Dr. Kasdan recommended that she undergo a magnetic resonance imaging (“MRI”) scan. (Id.) Although the MRI scan revealed that Haisley had experienced “minor disc changes,” it showed “nothing to explain her leg numbness.” (AR0103.)

Dr. White responded to the suspension of Haisley’s LTD benefits in a letter to Graham dated December 31, 2007. (AR0094-95.) He claimed that Graham “misrepresented” the contents of his earlier report. (AR0094.) After providing more specific information about Haisley’s medication regimen, Dr. White wrote:

As I indicated in my 11/9/07 report, and as may be gleaned from the above-noted medications, Ms. Haisley is struggling with a convergence of difficult symptoms. Her mood is markedly worried and depressed, a persistent sleep disturbance has left Ms. Haisley physically exhausted and continually fatigued, and the daily neuropathy pain has significantly limited her mobility. The cognitive impairments noted in my 11/9/07 report remain prominent. Not yet having found any relief for the neuropathy pain, Ms. Haisley is only more worried and preoccupied in her thoughts. Faced with this extensive symptomology, there is no way Ms. Haisley can return to work at the present time. Ms. Haisley does attend to her personal hygiene, but her activities are mainly confined to keeping doctor’s appointments and some light housework when motivation and energy permit. She cannot sustain focus and concentration long enough to read or watch a full length program on television.
(AR0095.) Haisley provided Sedgwick with treatment records from Dr. Majkic and Dr. Kasdan. (ECF No. 96 ¶¶ 31-34.)

On February 29, 2008, Sedgwick denied Haisley’s application for LTD benefits.[2] (AR0133-136.) In a letter informing Haisley about Sedgwick’s decision, Graham *40 stated that the denial was based on peer reviews which had been completed by Dr. Reginald A. Givens, a psychiatrist, and Dr. Sankar Pemmaraju, a physiatrist. (AR0134-35.) Graham made the following comments about Dr. Givens’ peer review:

A peer review was completed on January 18, 2008 by Dr. Reginald A. Givens, a board certified psychiatrist. Dr. Givens also held a teleconference with Dr. White on January 17, 2008. Dr. Givens reviewed your file records and determined there was no evidence of delusions or hallucinations. You were oriented to person, place and time. You were articulate, coherent and capable of reasoning with slowed and deliberated speech. Your mood was described as markedly depressed with punctuations of anxiety and affect mostly flat. Dr. Givens indicated that [sic] was no specific testing of cognitive functioning in the records but only subjective complaints of difficulty with concentration and memory. Dr. Givens finds there is insufficient objective evidence in medical records from a psychiatric perspective to support your complete inability to work due to cognitive dysfunction. There is no evidence or documentation of impairment so significant that would limit your activities of daily living or prevent a return to work.
(AR0134.) In the letter Graham stated that Dr. Pemmaraju unsuccessfully attempted to conduct teleconferences with Dr. Kasdan on February 12, 2008, and February 14, 2008. (AR0135.) With respect to Dr. Pemmaraju’s findings, Graham explained:

In his review, Dr. Pemmaraju found no abnormalities exist outside the notation of diffuse peripheral neuropathy that was likely idiopathic in nature. There was no documentation to support radiculopathy, plexopathy, or entrapment mononeuropathy. There were no objective functional measures detailing your overall objective abilities including overall effort as well as validity of testing. Dr. Pemmaraju concluded there was no available clinical documentation supporting any significant or severe positive objective findings that would have prevented a return to work.
(AR0135.)

Since Sedgwick concluded Haisley had erroneously received LTD benefits for a period of time commencing on October 3, 2007, and ending on November 30, 2007, Haisley was instructed to reimburse PNC in the amount of $6,154.60 within thirty days. (Id.) Haisley was informed that she had 180 days to appeal Sedgwick’s decision denying her application. (Id.) Haisley appealed Sedgwick’s denial of her LTD claim by means of a letter authored by her counsel, Steven F. Kessler (“Kessler”), on May 7, 2008. (AR0142-44.) Enclosed with the appeal letter were additional documents that were supplied by Haisley’s healthcare providers. (ECF No. 96 ¶ 50.) The submission included several pages of treatment notes from Dr. Majkic’s office. (AR0146-79.) In a letter to Kessler dated March 27, 2008, Dr. Kasdan stated that Haisley was “still disabled from her job” due to “multifocal motor neuropathy.” (AR0145.) Dr. Kasdan remarked that this condition was very difficult to diagnose, and explained why he had not previously made this diagnosis with respect to Haisley. (Id.) His opinion was based, at least in part, on nerve conduction studies of Haisley performed on February 7, 2008. (AR0182-83.) This information was forwarded to Sedgwick in connection with Haisley’s appeal. (ECF No. 96 ¶ 50.) Sedgwick was provided with documentary evidence establishing that Haisley was awarded social security disability benefits on April 20, 2008. (Id.)

*41 In a letter to Kessler dated April 3, 2008, Dr. White took issue with much of what Graham had said in the letter denying Haisley’s LTD claim. (ECF No. 63, Ex. K, BAH000376-79.) He stated that his teleconference with Dr. Givens “lasted no more than ten minutes,” and involved only a few questions. (ECF No. 63, Ex. K, BAH000377.) Dr. White declared that “objective mini-mental status exams” conducted on March 17, 2008, and March 25, 2008, confirmed the accuracy of Haisley’s “subjective complaints of difficulty with memory and concentration.” (ECF No. 63, Ex. K, AH000378.) Dr. White made the following observations:

Dr. Givens also refers to “insufficient objective evidence . . . to support (Ms. Haisley’s) complete inability to work due to cognitive dysfunction.” The wording “complete inability” almost conjures up the image of a comatose state. The usual understanding of disability to my knowledge is not that a patient’s abilities have entirely evaporated, but that he/she cannot sustain those abilities in an effective manner in the work setting. I would also point out that I never maintained that Ms. Haisley’s inability to return to work was due solely to cognitive dysfunction. Indeed, my reports are replete with references to a marked depressed mood, tearfulness, a protracted sleep disturbance, physical exhaustion and fatigue, loss of energy and motivation, escalating anxiety over the meaning of her physical symptoms, and the daily lower leg pain that precludes her standing or sitting comfortably for any extended period of time. It is precisely the convergence of all of these symptoms, not just cognitive impairments, that makes it impossible for Ms. Haisley to return to work.
(ECF No. 63, Ex. K, BAH000378-79.) Dr. White concluded the letter by remarking that the denial of Haisley’s claim only aggravated her condition, and a “positive resolution” was warranted. (ECF No. 63, Ex. K, BAH000379.) The parties vigorously dispute whether Dr. White’s letter was forwarded to Sedgwick in connection with Haisley’s appeal. (ECF No. 96 ¶¶ 51-69.) While Haisley contends that Kessler forwarded the letter to Sedgwick when the appeal was filed, Sedgwick maintains that the letter was not included within Haisley’s submission. (Id. 151.)

Haisley’s appeal was reviewed by Dr. Steven M. Arbit, a physiatrist, and Dr. Marcus J. Goldman, a psychiatrist. (ECF No. 63, Ex. K, BAH000193-200.) Dr. Arbit conducted teleconferences with Dr. Kasdan and Dr. Majkic respectively, on June 3, 2008, and June 4, 2008. (ECF No. 63, Ex. K, BAH000193.) Dr. Kasdan expressed the view that Haisley’s neuropathy would inhibit her ability to work. (ECF No. 63, Ex. K, BAH000194.) In a written report dated June 6, 2008, Dr. Arbit described his teleconference with Dr. Majkic as follows:

Dr. Majkie [sic] told me that Ms. Haisley reports to him that she can [sic] sit, stand, or walk for more than 30 minutes at a time because she develops pain, but if she is sitting for 30 minutes, and she gets up and walks, her pain in her legs go [sic] away. He states that it is due to neuropathic pain because she has a neuropathy. I explained to him that I was doing the review from a PM & R perspective and he told me that it [sic] is more to it than just PM & R, that there are some psychiatric issues and psychological issues. I asked if he felt that from a physical standpoint she would be able to do a job that would enable her to move around every 30 minutes from sitting to standing and there would not be static positioning, and he felt purely from a physical standpoint that she would be able to do that.
*42 (ECF No. 63, Ex. K, BAH000193.) Dr. Arbit opined that Haisley’s neuropathy would not prevent her from returning to her position at PNC, which he described as a “sedentary job.” (ECF No. 63, Ex. K, BAH000194-95.)

On June 4, 2008, Dr. Goldman spoke with Dr. White. (ECF No. 63, Ex. K, BAH000197.) Dr. White claimed that Haisley “would not be able to perform the [] work duties associated with her prior job due to depression and fatigability.” (Id.) After conferring with Dr. White, Dr. Goldman determined that Haisley’s impairments would not preclude her return to work. (ECF No. 63, Ex. K, BAH000199.) He stated that Dr. White’s treatment records did “not contain sufficient objective or observable data to establish significant psychopathology that would preclude worker functionality.” (ECF No. 63, Ex. K, BAH000200.) Dr. Goldman noted that there was “no quantified data” to support a finding that Haisley suffered from “significant cognitive dysfunction.” (Id.)

In a letter dated June 23, 2008, Sedgwick’s appeals specialist Tim A. Prater (“Prater”) informed Kessler that Sedgwick decided to uphold its prior decision denying Haisley’s claim. (AR0220-23.) This determination was based primarily on the recommendations that had been made by Dr. Arbit and Dr. Goldman. (Id.) Prater’s letter stated that no further information would be considered in connection with Haisley’s claim, and that the administrative record involving that claim was closed. (AR0222.)

Haisley commenced this action on October 16, 2008, alleging violations of the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001 et seq. (ECF No. 1.) On July 7, 2010, the parties filed cross-motions for summary judgment pursuant to Federal Rule of Civil Procedure 56. (ECF Nos. 56 & 59.) These motions are the subject of this memorandum opinion.

III. Standard of Review
Since Haisley argues that she was wrongfully denied “benefits due” to her under existing Plan provisions, her claims are properly grounded in 29 U.S.C. § 1132(a)(1)(B). Eichorn v. AT&T Corp., 484 F.3d 644, 651, 653 (3d Cir.2007). The standards applicable to claims arising under this statutory provision were articulated by the United States Supreme Court in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 109 S. Ct. 948, 103 L. Ed. 2d 80 (1989), Metropolitan Life Insurance Co. v. Glenn, 554 U.S. 105, 128 S. Ct. 2343, 171 L. Ed. 2d 299 (2008), and Conkright v. Frommert, ___ U.S. ___, 130 S. Ct. 1640, 176 L. Ed. 2d 469 (2010).

In Firestone Tire, the Supreme Court observed that the ERISA did not contain specific language establishing a judicial standard of review for claims arising under § 1132(a)(1)(B). Firestone Tire, 489 U.S. at 108-09, 109 S. Ct. 948. Turning to principles of trust law, the Supreme Court explained that while “a deferential standard of review” was appropriate when a trustee exercised “discretionary powers,” de novo review of eligibility determinations was warranted when the particular plan at issue did not provide the relevant employer or administrator with “discretionary or final authority to construe uncertain terms.” Id. at 110-13, 109 S. Ct. 948. It was determined that, in the absence of specific language according deference to determinations made by a plan administrator, the de novo standard of review would apply “regardless of whether the plan at issue [was] funded or unfunded and regardless of whether the administrator or fiduciary [was] operating under a possible or actual conflict of interest.” Id. at 115, *43 109 S. Ct. 948. The Supreme Court acknowledged that where a benefit plan gave discretionary powers to an administrator or fiduciary who was operating under a conflict of interest, it was appropriate for that conflict to be weighed as a factor relevant to whether the discretionary authority given to the administrator or fiduciary had been abused. Id.

In Glenn, the Supreme Court clarified that a “conflict of interest” exists where “a plan administrator both evaluates claims for benefits and pays benefits claims.” Glenn, 554 U.S. at 112, 128 S. Ct. 2343. The existence of such a conflict, however, does not deprive a plan administrator of whatever discretionary authority that it may possess under Firestone Tire. Instead, the conflict is merely one factor relevant to a determination with respect to whether an abuse of discretion has occurred. Id. at 115-17, 128 S. Ct. 2343. The importance of a conflict as a factor depends upon whether the factual circumstances of the case at issue suggest that the conflict actually affected the challenged administrative decision, or upon whether the relevant plan administrator “has a history of biased claims administration.” Id. at 117, 128 S. Ct. 2343. The Supreme Court opined that a conflict “should prove less important (perhaps to the vanishing point) where the administrator has taken active steps to reduce potential bias and to promote accuracy, for example, by walling off claims administrators from those interested in firm finances, or by imposing management checks that penalize inaccurate decisionmaking irrespective of whom the inaccuracy benefits.” Id.

These principles were discussed further in Conkright, in which the Supreme Court declared that a single mistake by a plan administrator cannot serve as a basis for depriving that administrator of deference that would otherwise be warranted under Firestone Tire. Conkright, 130 S.Ct. at 1644-47. It was noted that deference to the findings of a plan administrator, where warranted under the terms of the plan in question, promoted the goals of “efficiency,” “predictability” and “uniformity.” Id. at 1649. Deference promotes efficiency by encouraging the resolution of benefits disputes by means of “internal grievance procedures,” rather than by means of “costly litigation.” Id. Predictability is ensured by standards allowing an employer to “rely on the expertise of the plan administrator rather than worry about unexpected and inaccurate plan interpretations that might result from de novo judicial review.” Id. Uniformity is secured when an employer is able to “avoid a patchwork of different interpretations of a plan” that covers multiple employees in several different jurisdictions. Id. ERISA does not affirmatively require employers to establish employee benefit plans, nor does it mandate what types of benefits must be provided by employers who choose to create such plans. Lockheed Corp. v. Spink, 517 U.S. 882, 887, 116 S. Ct. 1783, 135 L. Ed. 2d 153 (1996). It should not be construed in such a way as to “lead those employers with existing plans to reduce benefits,” or to discourage employers without such plans from adopting them in the first place. Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 11, 107 S. Ct. 2211, 96 L. Ed. 2d 1 (1987). Instead, it should be interpreted in light of its objectives of ensuring the enforcement of employees’ rights under existing employee benefit plans and encouraging employers to create additional employee benefit plans. Aetna Health, Inc. v. Davila, 542 U.S. 200, 215, 124 S. Ct. 2488, 159 L. Ed. 2d 312 (2004).

IV. Discussion

A. Proper Defendants
Haisley brings her claims pursuant to 29 U.S.C. § 1132(a)(1)(B), which permits *44 a plan “participant” or “beneficiary” to bring a civil action “to recover benefits due him [or her] under the terms of his [or her] plan, to enforce his [or her] rights under the terms of the plan, or to clarify his [or her] rights to future benefits under the terms of the plan. . . .” 29 U.S.C. § 1132(a)(1)(B). Before reaching the merits of Haisley’s claims, the court must address a preliminary matter concerning whether Sedgwick and PNC are proper defendants in this action. Sedgwick and PNC maintain that they are not proper defendants, and that the Plan is the only defendant that can properly be named in a case such as this. (ECF No. 84 at 18-19.) Some decisions support this argument. See Jass v. Prudential Health Care Plan, Inc., 88 F.3d 1482, 1491 (7th Cir.1996); Lee v. Burkhart, 991 F.2d 1004, 1009 (2d Cir.1993); Madden v. ITT Long Term Disability Plan for Salaried Emps., 914 F.2d 1279, 1287 (9th Cir.1990); Olick v. Kearney, 451 F. Supp. 2d 665, 672 (E.D.Pa. 2006). The United States Court of Appeals for the Third Circuit takes a different approach. In Hahnemann University Hospital v. All Shore, Inc., 514 F.3d 300, 308 (3d Cir.2008), the court of appeals observed that a court can direct a plan administrator to pay benefits from the assets of a plan just “as a trustee may be compelled to satisfy a trust obligation from trust assets.” See Graden v. Conexant Sys., Inc., 496 F.3d 291, 301 (3d Cir.2007) (remarking that plan administrators can be named in their official capacities in actions brought under § 1132(a)(1)(B)).

The statutory language most relevant to the court’s analysis is codified at 29 U.S.C. § 1132(d), which provides:

(d) Status of employee benefit plan as entity. (1) An employee benefit plan may sue or be sued under this title as an entity. Service of summons, subpoena, or other legal process of a court upon a trustee or an administrator of an employee benefit plan in his capacity as such shall constitute service upon the employee benefit plan. In a case where a plan has not designated in the summary plan description of the plan an individual as agent for the service of legal process, service upon the Secretary shall constitute such service. The Secretary, not later than 15 days after receipt of service under the preceding sentence, shall notify the administrator or any trustee of the plan of receipt of such service. (2) Any money judgment under this subchapter against any employee benefit plan shall be enforceable only against the plan as an entity and shall not be enforceable against any other person unless liability against such person is established in his individual capacity under this title.
29 U.S.C. § 1132(d). There is no question that, under this statutory language, the Plan is a proper defendant in this action. It is also clear that an entity or “person” other than a plan can be liable for a “money judgment” under certain circumstances.[3] The only remaining questions are whether Sedgwick and PNC are proper defendants under the present circumstances, and whether Haisley’s claims would subject them to direct monetary liability.

Under the ERISA, a fiduciary who breaches a fiduciary duty in connection with a plan may “be personally liable to make good to such plan any losses to the plan resulting from each such breach, and to restore to such plan any profits of such *45 fiduciary which have been made through use of assets of the plan by the fiduciary,. . . .” 29 U.S.C. § 1109(a). “When a denial of `benefits due’ arises from a plan administrator’s breach of its fiduciary obligations to the claimant,” the plan beneficiary may “seek redress for the breach directly from the plan administrator as a fiduciary.” Hahnemann Univ. Hosp., 514 F.3d at 309.

In this case, Haisley is seeking benefits solely from the assets of the Plan. (ECF No. 1 at 9-10.) She is not pursuing relief against Sedgwick and PNC in their individual capacities. Haisley’s claims against Sedgwick and PNC are against them in their official capacities. Because a judgment in Haisley’s favor would be enforceable only against the assets of the Plan itself, Sedgwick and PNC are only nominal defendants. Patrick v. Verizon Servs. Corp., Civil Action No. 07-766, 2009 WL 2043914, at *16 (W.D.Pa. July 8, 2009) (recognizing an official-capacity claim against a plan administrator as being “essentially a claim that is only nominally asserted against the plan administrator and is, for all practical purposes, a claim against the relevant plan itself”).

The exercise of control over the administration of benefits is the “defining feature” of a proper defendant in an action brought under § 1132(a)(1)(B). Evans v. Emp. Benefit Plan, 311 Fed.Appx. 556, 558 (3d Cir.2009). It is undisputed that Sedgwick was responsible for denying Haisley’s claim at both the initial and appellate stages of the administrative process. (AR0133-36, AR0220-23.) The plain language of the Plan designates PNC as the “Plan Administrator,” thereby giving PNC the power “[t]o determine the eligibility and status of any [e]mployee with respect to Plan participation.” (AR0233, AR0245.) As the Plan Administrator, PNC obviously plays some role in administering the Plan. Curcio v. John Hancock Mut. Life Ins. Co., 33 F.3d 226, 234 (3d Cir.1994). Consequently, Haisley can pursue official-capacity claims against both Sedgwick and PNC.[4]Graden, 496 F.3d at 301.

B. The Merits of Haisley’s Claims
Haisley seeks both an order requiring the defendants to pay all LTD benefits owed to her under the terms of the Plan and a declaration clarifying her entitlement to future benefits under the Plan. (ECF No. 1 at 9-10.)

The first step in the court’s analysis is to determine whether the decisions of Sedgwick and PNC are entitled to deference under the terms of the Plan. Firestone Tire, 489 U.S. at 115, 109 S. Ct. 948. As the Plan Administrator, PNC is accorded the powers “[t]o interpret the Plan” and “[t]o determine the eligibility and status of any [e]mployee with respect to Plan participation.” (AR0233, AR0245.) The Plan expressly provides that “[t]he Administrator shall have complete and sole discretion with regard to each of [these] powers,” and that “no decision of the Administrator shall be overturned unless the decision is arbitrary and capricious.” (AR0245.) Pursuant to the terms of the Service Agreement, Sedgwick is “responsible for claims administration for any employee applying for LTD [benefits]” under the Plan. (AR0271.) Given the clear and unambiguous language of the Plan, the court cannot review the challenged determination de novo. Firestone Tire, 489 U.S. at 115, 109 S. Ct. 948. Instead, the dispositive inquiry is whether the decision denying Haisley’s application for LTD benefits was “arbitrary and capricious.” *46 Id. Before considering the factors relevant to that inquiry, however, the court must address an argument raised by defendants concerning the timeliness of Haisley’s application for LTD benefits.

1. Timeliness
Defendants argue that Haisley’s claims are time-barred under the terms of the Plan. (ECF No. 84 at 16-18.) They base their argument on language stating that “[a]ny claim for benefits under the Plan must be filed with the Claims Administrator not later than 90 days following the date Total Disability begins.” (AR0246.) Haisley applied for LTD benefits on October 11, 2007. She listed May 2, 2007, as the first day that she had noticed her symptoms and June 22, 2007, as the last day that she had worked. Her STD benefit period commenced on July 5, 2007. Defendants contend that Haisley’s claims cannot proceed, since she did not apply for LTD benefits within 90 days of July 5, 2007.

Haisley points out that the Plan contains an ambiguity concerning the timeliness of her application. Under the heading “Notice of Claim,” the Plan provides:

a. The Participant must notify his Benefits Department within 30 days of the date Total Disability starts, if that is possible. If that is not possible, the Benefits Department must be notified as soon as it is reasonably practicable to do so, but in any event no later than 120 days after the date Total Disability starts.
b. Upon notification by the Participant, the Benefits Department will forward to the Participant a claim form to be completed by the Participant and the Participant’s Physician. This claim form should be completed by the Participant and the Participant’s Physician within 60 days of the date Total Disability starts if that is possible, or if it is not possible, as soon as it is reasonably practicable to do so, but in any event no later than 180 days after the date Total Disability starts.
c. The Participant’s Benefits Department will complete the Employer section of the claim form and forward it to the Administrator or its designated agent.
(AR0245-46.) Haisley argues that this language when read with the language creating the ninety-day limitations period relied upon by defendants created an ambiguity, and that this ambiguity should result in a construction of the Plan language that is favorable to her. She contends that defendants waived the defense of untimeliness by failing to assert it during the course of the administrative proceedings. (ECF No. 88 at 12-13.)

Under the doctrine of contra proferentem, ambiguous provisions of insurance policies are generally construed in favor of the insured and against the insurer. Royal Ins. Co. of Am. v. KSI Trading Corp., 563 F.3d 68, 74 (3d Cir.2009). “The policy rationale underlying strict application of the doctrine is that because most insurance agreements are drafted by the insurance industry, they are essentially contracts of adhesion.” Pittston Co. Ultramar Am. Ltd. v. Allianz Ins. Co., 124 F.3d 508, 520 (3d Cir.1997). Because the insurance company is typically the drafter of the ambiguous contractual language at issue, it must suffer any negative consequences stemming from its own failure to draft clear and unambiguous language. In Kunin v. Benefit Trust Life Insurance Co., 910 F.2d 534 (9th Cir.1990), the United States Court of Appeals for the Ninth Circuit explained:

Insurance policies are almost always drafted by specialists employed by the *47 insurer. In light of the drafters’ expertise and experience, the insurer should be expected to set forth any limitations on its liability clearly enough for a common layperson to understand; if it fails to do this, it should not be allowed to take advantage of the very ambiguities that it could have prevented with greater diligence. Moreover, once the policy language has been drafted, it is not usually subject to amendment by the insured, even if he sees an ambiguity; an insurer’s practice of forcing the insured to guess and hope regarding the scope of coverage requires that any doubts be resolved in favor of the party who has been placed in such a predicament.
Kunin, 910 F.2d at 540. Alluding to the doctrine of contra proferentem, Haisley asserts that the ambiguous portions of the Plan should be read in a manner that does not unfairly disadvantage LTD claimants, and that protects the contractually-defined benefits established by the Plan.

In Heasley v. Belden & Blake Corp., 2 F.3d 1249, 1257-58 (3d Cir.1993), the United States Court of Appeals for the Third Circuit held that the doctrine of contra proferentem should be applied where the language of a plan is ambiguous about whether the plan administrator has the type of discretion that would warrant deference under Firestone Tire. In other words, an ambiguity about whether a plan accords discretion to a plan administrator should ordinarily result in a determination that de novo review of the plan administrator’s findings is required under the ERISA. Heasley, 2 F.3d at 1257-58. In the aftermath of Heasley, district courts within this circuit have expressed differing views about whether contra proferentem should be utilized as a vehicle for interpreting other types of plan provisions. Some courts have indicated that the doctrine should be applied to ambiguous plan terms whenever the relevant ambiguity cannot otherwise be satisfactorily resolved. Erbe v. Connecticut Gen. Life Ins. Co., 695 F. Supp. 2d 232, 248 (W.D.Pa.2010); Cohen v. Standard Ins. Co., 155 F. Supp. 2d 346, 354 n. 7 (E.D.Pa.2001). Other courts have determined that the application of contra proferentem is inappropriate where a plan grants a plan administrator discretion to interpret plan provisions, given the tension between the doctrine’s preference for a construction favoring the claimant and the deference owed to the findings of the plan administrator under Firestone Tire. Fahringer v. Paul Revere Ins. Co., 317 F. Supp. 2d 504, 519 (D.N.J.2003); Murdock v. Unum Provident Corp., 265 F. Supp. 2d 539, 542 (W.D.Pa.2002); Friends Hosp. v. MetraHealth Serv. Corp., 9 F. Supp. 2d 528, 531 (E.D.Pa.1998).

In this case, there is no need for the court to determine whether contra proferentem should be applied, or to otherwise resolve the ambiguity created by the different limitations periods referenced in the language of the Plan. Even if it is assumed that judicial deference to the findings of Sedgwick and PNC is appropriate, the ninety-day limitations period was not relied upon as a basis for denying Haisley’s claim during the course of the administrative proceedings. Sedgwick initially approved Haisley’s application for LTD benefits in a letter from Graham dated November 30, 2007. When Haisley’s claim was later “suspended” as of December 1, 2007, “a lack of current treatment information on file supportive of continuing total disability” was given as the reason for the suspension. (AR0100.) Haisley was given until January 17, 2008, to submit additional information in support of her claim. The claim was formally denied on February 29, 2008, based on the opinions of Dr. Givens and Dr. Pemmaraju. On June 23, 2008, Haisley was told that the prior denial of her claim had been *48 upheld on appeal pursuant to the recommendations of Dr. Arbit and Dr. Goldman. At every step of the administrative process, Haisley’s claim was considered on substantive grounds. There would have been no need for Sedgwick to provide Haisley with an opportunity to submit additional medical evidence if the filing of her claim had been untimely in any event. Even if it is assumed that judicial deference to an administrator’s finding of untimeliness would normally be appropriate, no such finding was made in this case. Having declined to invoke the ninety-day limitations period as a basis for denying Haisley’s LTD claim during the course of the administrative proceedings, Sedgwick and PNC cannot turn around and rely on it as a basis for defeating Haisley’s claims under the ERISA. O’Hara v. Nat’l Union Fire Ins. Co. of Pittsburgh, 697 F. Supp. 2d 474, 478 (W.D.N.Y.2010) (holding that a plan administrator had waived the defense of untimeliness by failing to assert it as a basis for denying a claim for benefits under a plan). Accordingly, the court’s analysis will proceed.

2. The Application of the “Arbitrary and Capricious” Standard of Review
Since “benefits determinations arise in many different contexts and circumstances,” the factors to be considered from one case to the next are “varied and case-specific.” Estate of Schwing v. Lilly Health Plan, 562 F.3d 522, 526 (3d Cir. 2009). “[A]ny one factor will act as a tiebreaker when the other factors are closely balanced, the degree of closeness necessary depending upon the tiebreaking factor’s inherent or case-specific importance.” Glenn, 554 U.S. at 117, 128 S. Ct. 2343. The court will consider all factors relevant to this case to determine whether defendants’ decision to deny Haisley’s claim on the basis of the existing record was arbitrary and capricious.

In a letter dated November 30, 2007, Graham informed Haisley that Sedgwick had “approved” her application for LTD benefits. The letter stated that Haisley would receive a check in the amount of $6,154.54 for a period of disability commencing on October 3, 2007, and ending on November 30, 2007. In that letter, Graham stated:

On a periodic basis, we will need to verify your ongoing eligibility for benefits. We will be requesting information from you and your attending physicians. Please ensure that the necessary information is submitted on a timely basis to avoid any possible delay in your future benefit payments.
Our experience with disability claims has shown that many people are capable of returning to work activities within a short period of time after becoming disables [sic]. We will continue to monitor your medical condition with periodic updates to determine when return to work becomes a possibility. At that time, rehabilitation assistance may be available for you.
(ECF No. 63, Ex. K, BAH000127.) Although Haisley was informed that her “ongoing eligibility for benefits” would need to be verified in order for her to receive “future benefits payments,” she was not told that the information that she had already provided was insufficient to establish her initial entitlement to LTD benefits.

On December 20, 2007, Sedgwick informed Haisley that it “suspended” her claim as of December 1, 2007, due to “a lack of current treatment information on file supportive of continuing total disability.”[5]*49 (AR 0100.) Haisley learned of this decision by means of a letter authored by Graham. In the letter, Graham stated that Dr. White’s report of November 9, 2007, had not been supported by treatment records or details concerning Haisley’s medication regimen. The same report, however, had previously been deemed sufficient to justify an award of LTD benefits to Haisley. Indeed, Haisley’s recurrent major depression was specifically referenced in Graham’s letter of November 30, 2007, as Sedgwick’s principal basis for “approving” Haisley’s request for LTD benefits. When the claim was formally denied on February 29, 2008, Haisley was instructed to reimburse PNC for the LTD benefits that had already been paid to her. The United States Court of Appeals for the Third Circuit has remarked that a plan administrator’s “[i]nconsistent treatment of the same facts” should be “viewed with suspicion.” Pinto v. Reliance Standard Life Ins. Co., 214 F.3d 377, 393 (3d Cir. 2000). Having approved Haisley’s application, Sedgwick retroactively determined that an award of LTD benefits was not warranted in the first place. Such inconsistent treatment of the same medical information is a factor that weighs in Haisley’s favor. Post v. Hartford Ins. Co., 501 F.3d 154, 164-65 (3d Cir.2007) (referring to a “reversal of position without additional medical evidence” as being among “numerous procedural irregularities that can raise suspicion”). The court of appeals recently observed that “[a]n administrator’s reversal of its decision to award a claimant benefits without receiving any new medical information to support this change in position is an irregularity that counsels towards finding an abuse of discretion.” Miller v. American Airlines, Inc., 632 F.3d 837, 848 (3d Cir.2011),

Another factor weighing in favor of Haisley is that she was never asked to undergo an independent medical examination. The Plan unambiguously provides the Plan Administrator with the authority to have a claimant examined by a physician “as often as reasonably required.” (AR0246.) Where the plan at issue specifically provides a plan administrator with the authority to request an independent medical examination, the failure of the plan administrator to procure such an examination before denying a particular claim may “raise questions about the thoroughness and accuracy of the benefits determination.” Calvert v. Firstar Fin., Inc., 409 F.3d 286, 295 (6th Cir.2005). Although the ERISA does not require a plan administrator to request that a claimant undergo a medical examination before denying his or her claim, the failure to procure such an examination may be unreasonable where the specific impairments or limitations at issue are not amenable to consideration by means of a file review. See Elliott v. Metro. Life Ins. Co., 473 F.3d 613, 621 (6th Cir.2006); Lamanna v. Special Agents Mut. Benefits Ass’n, 546 F. Supp. 2d 261, 296 (W.D.Pa.2008).

Dr. Majkic, Dr. White and Dr. Kasdan all believed Haisley to be disabled. Haisley was not examined by Dr. Givens, Dr. Pemmaraju, Dr. Arbit or Dr. Goldman. Because Haisley’s claim was based on a confluence of mental and physical impairments, it weighs against defendants for Sedgwick to place considerable weight on opinions expressed by medical professionals who never examined her. See Schwarzwaelder v. Merrill Lynch & Co., Inc., 606 F. Supp. 2d 546, 559-60 (W.D.Pa. 2009). Unlike types of physicians who can *50 “formulate medical opinions based upon objective findings derived from objective clinical tests,” a psychiatrist typically treats an individual’s “subjective symptoms.” Sheehan v. Metro. Life Ins. Co., 368 F. Supp. 2d 228, 255 (S.D.N.Y.2005). In contrast to some physical impairments, which can be verified or discounted solely by reference to reports of objective medical tests, mental impairments are generally identified on the basis of a psychiatric professional’s interactions with an impaired individual. Id. Moreover, Dr. Kasdan determined that Haisley was suffering from “multifocal motor neuropathy,” which he described as being difficult to diagnose. Although Haisley suffered from impairments that were not amenable to objective evaluation by means of a file review, she was not asked to undergo a physical or mental examination. Under these circumstances, Sedgwick’s reliance on the opinions of nonexamining medical consultants is a factor that weighs in favor of plaintiff.[6]See Lanier v. Metro. Life Ins. Co., 692 F. Supp. 2d 775, 787-89 (E.D.Mich.2010).

In the letter dated November 30, 2007, Graham informed Haisley that she needed to apply for social security disability benefits in order to avoid a reduction in the amount of LTD benefits that she was receiving. Haisley was awarded disability insurance benefits under Title II of the SSA on April 20, 2008. Information about the award was forwarded to Sedgwick in connection with Haisley’s appeal. Haisley’s receipt of Social Security disability benefits was not addressed in Sedgwick’s denial letter of June 23, 2008.

In Glenn, the Supreme Court remarked that a plan administrator’s failure to address a claimant’s award of social security disability benefits in denying a claim “suggested procedural unreasonableness” under circumstances in which the plan administrator had itself encouraged the claimant to apply for such benefits. Glenn, 554 U.S. at 118, 128 S. Ct. 2343. This is another factor which weighs in favor of Haisley’s argument that Sedgwick’s treatment of her claim was arbitrary and capricious. The court acknowledges that the standards applicable to social security disability benefits are not the same as those applicable to LTD benefits under the Plan. While a social security disability claim must be evaluated under “a uniform set of federal criteria,” “employers have large leeway to design disability and other welfare plans as they see fit.” Black & Decker Disability Plan v. Nord, 538 U.S. 822, 833, 123 S. Ct. 1965, 155 L. Ed. 2d 1034 (2003). The SSA’s standard for establishing the existence of a statutory disability is demanding. Title II of the SSA defines the term “disability” as the “inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.”[7] 42 U.S.C. § 423(d)(1)(A). Under the terms of the Plan, an individual may be deemed to be “totally disabled” for a period of twenty-four months if he or she “cannot perform each of the material *51 duties of his or her regular occupation.” (AR0234 (emphasis added).) It is only after an individual has received LTD benefits for a twenty-four-month period that he or she must demonstrate an inability to “perform each of the material duties of any gainful occupation for which he or she is reasonably fitted by training, education or experience.” (Id. (emphasis added).) Given that Haisley was required to apply for social security benefits and had satisfied the SSA’s standard for establishing the existence of a disability, it was unreasonable for Sedgwick to ignore the award of social security disability benefits in determining that she failed to surmount the significantly less demanding hurdle of establishing her inability to perform the duties of a particular job. Porter v. Broadspire, 492 F. Supp. 2d 480, 487 (W.D.Pa.2007).

The Supreme Court has consistently recognized that a plan administrator’s conflict of interest constitutes a factor relevant to whether a decision denying a claimant’s application for benefits is arbitrary and capricious. Glenn, 554 U.S. at 111, 128 S. Ct. 2343; Firestone Tire, 489 U.S. at 115, 109 S. Ct. 948. In Glenn, the Supreme Court clarified that such a conflict exists where a plan administrator “both evaluates claims for benefits and pays benefits claims.” Glenn, 554 U.S. at 112, 128 S. Ct. 2343. PNC established a “Group Benefits Trust” to fund LTD disability payments made pursuant to the Plan. As the Plan Administrator, PNC has the power “[t]o determine the eligibility and status of any [e]mployee with respect to Plan participation.” (AR0233, AR0245.) The Service Agreement delegates to Sedgwick the responsibility for administering LTD claims under the Plan. While the parties dispute the extent to which PNC exercises control over LTD benefits determinations, the record contains a declaration from Kerry A. Allen (“Allen”), PNC’s Vice President and Benefits Manager of Corporate Retirement Plans, explaining the manner in which PNC finances and administers the Plan. (AR0333-34.) In her declaration, which was signed on September 11, 2009, Allen explained:

5. The Plan is a fully self-funded employee welfare benefit plan as defined in the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The Plan provides long term disability benefits for eligible employees of PNC. A third party does not insure the Plan. It is self-funded by means of a separate trust established by PNC solely for the purpose of providing benefits. The Trust is known and referred to as the “Group Benefits Trust” (the “GBT”).
6. PNC makes fixed, periodic cash contributions to the GBT based on calculations and projections of its future long term disability liability performed by an independent actuary. PNC holds no residual interest in the assets of the GBT. Rather, any and all monies in the trust are contributed without condition at all times and at all times must be used for the exclusive benefit of Plan participants or beneficiaries.
7. Long term disability benefits determined to be payable under the terms of the Plan are paid from the GBT.
(AR0334.) Haisley points to no evidence which directly contradicts Allen’s declaration.[8] Therefore, the court considers Allen’s statements to be true. Wang v. Lake *52 Maxinhall Estates, Inc., 531 F.2d 832, 835, n. 10 (7th Cir.1976).

Since PNC both funds the Plan and serves as the Plan Administrator, a conflict of interest exists. Glenn, 554 U.S. at 115, 128 S. Ct. 2343. The significance of this conflict, however, is in dispute. Id. In Post v. Hartford Insurance Co., 501 F.3d 154 (3d Cir.2007), the United States Court of Appeals for the Third Circuit expressed “particular concern” about plans that are “funded on a case-by-case basis” and plans that are “funded and administered by an outside insurer.” Post, 501 F.3d at 163. Where an administrator “pays claims out of its operating budget” on a case-by-case basis “rather than from segregated monies that the employer sets aside according to an actuarial formula,” “each dollar paid out is a dollar out of the administrator’s pocket,” thereby giving the administrator “a financial incentive to deny claims.” Id. “This concern is compounded when it is an outside insurer, rather than the employer, that funds and administers the plan,” since an employer which is “a step removed from the process” is not likely to suffer “the full effects of employee dissatisfaction” resulting from poor claims handling. Id. at 163-64. Allen declared that PNC makes “fixed, periodic cash contributions” to the Group Benefits Trust, making it clear that LTD claims are not funded on a case-by-case basis. (AR0334.) She clarified that the Plan is not insured by a third party. (Id.) Thus, the specific concerns expressed by the court of appeals in Post are not present in this case.[9]

In Glenn, the Supreme Court observed that a conflict of interest would be of minimal importance where a plan administrator “has taken active steps to reduce potential bias” and “promote accuracy” “by walling off claims administrators from those interested in firm finances, or by imposing management checks that penalize inaccurate decisionmaking irrespective of whom the inaccuracy benefits.” Glenn, 554 U.S. at 117, 128 S. Ct. 2343. Under the Service Agreement, PNC is responsible for providing Sedgwick with sufficient funds to cover LTD claims, and Sedgwick is expressly relieved of the obligation to advance its own funds to cover such claims. (AR0273.) Hence, PNC has taken some steps to ensure that the administration of LTD claims is not influenced by collateral financial considerations.

Under the present circumstances, the presumed conflict of interest resulting from PNC’s dual status as a Plan Administrator and a provider of funds is of minimal importance. Since the other factors are not closely balanced, however, the nature of PNC’s conflict of interest is not dispositive in this case. Glenn, 554 U.S. at 117, 128 S. Ct. 2343. Because Sedgwick rendered inconsistent decisions during the initial stages of the application process, rejected the opinions of three treating health-care providers, relied on the opinions of four nonexamining physicians (even though Haisley’s specific impairments were not amenable to evaluation by means of a file review), failed to request an independent medical examination, and ignored *53 Haisley’s receipt of social security disability benefits (after having required her to apply for them), the court concludes that the decision denying Haisley’s application for LTD benefits was arbitrary and capricious even if no significance is placed on PNC’s conflict of interest.[10]

The ERISA 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. . . .” 29 U.S.C. § 1133(1). Regulations promulgated to implement this statutory mandate require a letter denying a claim to include, inter alia, “[a] description of any additional information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary. . . .” 29 C.F.R. § 2560.503-1(g)(iii). In her letter denying Haisley’s claim on February 29, 2008, Graham referenced Dr. Givens’ view that there was “no specific testing of cognitive functioning in the records but only subjective complaints of difficulty with concentration and memory.” (AR0134.) The letter apparently placed Haisley on notice that she needed to submit objective evidence of her mental limitations in order to establish her entitlement to LTD benefits under the Plan. Haisley responded by securing Dr. White’s letter of April 3, 2008, which expressly referenced “two objective mini-mental status exams” conducted on March 17, 2008, and March 25, 2008. (ECF No. 63, Ex. K, BAH000378.)

The parties vehemently dispute whether Dr. White’s report of April 3, 2008, was submitted to Sedgwick in connection with Haisley’s appeal. (ECF No. 96 ¶¶ 51-69.) Dr. White testified that he gave a hard copy of the report to Haisley, but did not send it directly to Sedgwick. (ECF No. 58-2 at 4.) Haisley testified that she delivered that same copy to Kessler’s office, with the understanding that it would be forwarded to Sedgwick for consideration. (ECF No. 58-3 at 3.) When questioned about the report during his own deposition, Kessler stated that it was his practice to “send in everything.” (ECF No. 1 at 6.) According to Prater, the “paper file” for Haisley’s appeal was destroyed after being converted into an “electronic file,” making it difficult to track a misplaced document that was never electronically recorded. (ECF No. 58-5 at 7-8.) Ericka McGrew (“McGrew”), an appeals manager employed by Sedgwick, acknowledged that only the contents of the electronic file was considered. (ECF No. 58-8 at 3.) Sedgwick’s internal records indicate that Haisley’s appellate submission, which was received on May 16, 2008, included a total of 54 pages.[11] (ECF No. 63, Ex. K, BAH000173.) Only 50 pages of the submission *54 appear in the administrative record. (AR0141-90.) Dr. White’s letter was four pages long. (ECF No. 63, Ex. K, BAH000376-79.) It is not clear whether the letter was lost or misplaced.

While the parties dispute whether Dr. White’s report was submitted to Sedgwick, they apparently agree that, for one reason or another, the report was never considered by Sedgwick. In the report, Dr. White referred to “two objective mini-mental status exams” conducted on March 17, 2008, and March 25, 2008. (ECF No. 63, Ex. K, BAH000378.) According to Dr. White, these examinations confirmed the accuracy of Haisley’s “subjective complaints of difficulty with memory and concentration.” (Id.) Kessler specifically referred to Dr. White’s examination findings in the letter commencing Haisley’s appeal. (AR0143.) When Dr. Goldman rendered his consultative opinion, he stated that Dr. White’s letters did “not contain sufficient objective or observable data to establish significant psychopathology that would preclude worker functionality.” (ECF No. 63, Ex. K, BAH000200.) A careful review of Dr. Goldman’s report reveals that he read only Dr. White’s letters dated November 9, 2007, and December 31, 2007, both of which predated the objective testing of March 17, 2008, and March 25, 2008. (ECF No. 63, Ex. K, BAH000198-99.) Dr. Goldman’s report did not indicate he was aware of Dr. White’s letter dated April 3, 2008, which described the nature of the objective testing that had been conducted in March 2008.[12]

In his letter to Sedgwick, Kessler stated that Haisley’s short-term memory problems had been “evidenced by clinical mental status examinations” conducted on March 17, 2008, and March 25, 2008. (AR0143.) Although the letter mentioned Dr. White’s report dated November 9, 2007, it did not explicitly reference the report dated April 3, 2008. (Id.) It is arguable that Kessler’s reference to the mental status examinations was sufficient to put Sedgwick on notice that important information may have been missing from the appellate record. (ECF No. 96 ¶ 54.) If it was, Sedgwick’s failure to retrieve that information was unreasonable. The court need not confront that issue, since the actions of Sedgwick in this case already were found to be arbitrary and capricious for other reasons. For present purposes, it suffices to say that if the report had been properly considered by Sedgwick in the first instance, Haisley’s administrative appeal may have been successful.[13]

*55 3. The Appropriate Remedy
In determining whether to declare Haisley’s entitlement to benefits under the Plan as a matter of law or remand the case to Sedgwick and PNC for further consideration, the court must consider the situation that Haisley was in before the arbitrary and capricious conduct of defendants took place. In Miller, the United States Court of Appeals for the Third Circuit explained:

In deciding whether to remand to the plan administrator or reinstate benefits, we note that it is important to consider the status quo prior to the unlawful denial or termination. See Hackett [v. Xerox Corp. Long-Term Disability Income Plan], 315 F.3d [771, 776 (7th Cir. 2003)]. As such, an important distinction emerges between an initial denial of benefits and a termination of benefits after they were already awarded. In a situation where benefits are improperly denied at the outset, it is appropriate to remand to the administrator for full consideration of whether the claimant is disabled. To restore the status quo, the claimant would be entitled to have the plan administrator reevaluate the case using reasonable discretion. In the termination context, however, a finding that a decision was arbitrary and capricious means that the administrator terminated the claimant’s benefits unlawfully. Accordingly, benefits should be reinstated to restore the status quo.
Miller, 632 F.3d at 856-57 (3d Cir.2011). The reasoning employed by the court of appeals in Miller governs the fashioning of the remedy in this case.

Defendants contend that Haisley “automatically and conditionally began receiving LTD benefits” upon Sedgwick’s receipt of her application, and that Sedgwick “expressly reserved the right to review and make a determination regarding her claim for LTD benefits.” (ECF No. 96 ¶ 27.) This assertion, however, is contradicted by the documentary record. In a letter dated October 16, 2007, Graham acknowledged Sedgwick’s receipt of Haisley’s application for LTD benefits. (AR0032-33.) The letter stated that claim determinations were typically reached within an average of thirty days. (AR0032.) Graham’s letter informing Haisley about the approval of her application was dated November 30, 2007, which was more than thirty days after the earlier letter. (ECF No. 63, Ex. K, BAH000125.) The letter dated November 30, 2007, informed Haisley that she would receive future benefit checks on the last business day of each ensuing month. (ECF No. 63, Ex. K, BAH000126.) Haisley was provided with a check in the amount of $6,154.54 covering the period commencing on October 3, 2007, and ending on November 30, 2007. (Id.) She was advised that Sedgwick would need to verify her “ongoing eligibility for benefits,” and that any requested information needed to be “submitted on a timely basis to avoid any possible delay in [her] future benefit payments.” (ECF No. 63, Ex. K, BAH000127 (emphasis added).) Graham’s letter dated November 30, 2007, did not reflect a conditional approval of Haisley’s *56 application. Although the letter made clear that Sedgwick would need additional information in the future, the import of the letter was that such information would relate solely to Haisley’s entitlement to future benefit payments. (Id.) There was no suggestion that her existing entitlement to LTD benefits was subject to further review.

On December 20, 2007, Haisley was informed that her entitlement to LTD benefits was “formally suspended” as of December 1, 2007. She was instructed to submit additional evidence in support of her claim. When the claim was ultimately denied on February 29, 2008, Haisley was instructed to reimburse PNC for the payment that she had already received. Based upon the direction to reimburse PNC for the payment that she already received under the terms of the Plan, an argument could be made that Sedgwick’s decision denying her claim constituted a “revocation” of its earlier decision to grant benefits, rather than simply a “termination” of continuing benefits. Whether called a revocation or termination of benefits the action was improper and a restoration of those benefits is necessary under these circumstances. Cf. Sanford v. Harvard Indus., Inc., 262 F.3d 590, 599 (6th Cir.2001).

As noted earlier, the Plan’s definition of “total disability” becomes more restrictive after a claimant has received LTD benefits for a period of twenty-four months. Subject to certain exceptions, payments for a disability attributable to “mental illness” are limited to the first twenty-four months of a claimant’s “total disability.” (AR0242.) Graham’s letter dated November 30, 2007, expressly stated that Haisley’s entitlement to LTD benefits could not extend beyond October 2, 2009, given that her disability was mostly based on a mental impairment. (BAH000127.) Since the standards for determining whether Haisley was “totally disabled” under the terms of the Plan changed on October 3, 2009, she is entitled only to an award of benefits covering the period of time commencing on October 3, 2007, and ending on October 2, 2009.[14]Gessling v. Group Long Term Disability Plan, 693 F. Supp. 2d 856, 873 (S.D.Ind.2010). Such an award will put her in the same position that she would have been in had her LTD benefits not been unlawfully “terminated,” “revoked,” or “rescinded.” (ECF No. 56 ¶ 13.)

On March 27, 2008, Dr. Kasdan opined that Haisley was “disabled” due to “multifocal motor neuropathy.” (AR0145.) In his letter dated April 3, 2008, Dr. White stated that Haisley’s disability was attributable to a “convergence” of physical and mental impairments, and not simply to “cognitive impairments.” (ECF No. 63, Ex. K, BAH000378-79.) Dr. Majkic informed Dr. Arbit on June 4, 2008, that Haisley’s neuropathy was adversely impacting her ability to sit, stand or walk for more than thirty minutes at a time. (ECF No. 63, Ex. K, BAH000193.) Hence, the record contains some evidence linking Haisley’s disability to her physical impairments. This issue was not considered by Sedgwick or PNC and the case must be remanded to PNC and Sedgwick for a determination concerning Haisley’s potential entitlement to LTD benefits under the terms of the Plan for the period of time postdating October 2, 2009. (ECF No. 56 ¶ 15.)

V. Conclusion
Although Haisley’s three treating health-care providers consistently maintained *57 that she was unable to perform the duties of her job, her claim for LTD benefits was denied solely on the basis of reports submitted by nonexamining medical consultants. The circumstances surrounding this denial were particularly questionable in light of Sedgwick’s initial determination that Haisley was entitled to LTD benefits. After considering that factor and other relevant factors, this court concludes defendants’ decision denying Haisley’s claim was arbitrary and capricious. The motion for summary judgment filed by Haisley will be granted in part, and the motion for summary judgment filed by the defendants will be denied. The Plan will be required to pay Haisley LTD benefits for the period commencing on October 3, 2007, and ending on October 2, 2009. The case will be remanded for PNC and Sedgwick to determine whether Haisley is entitled to benefits after October 2, 2009. Haisley will be permitted to submit a fee petition itemizing the interest, attorney’s fees and costs to which she is entitled pursuant to 29 U.S.C. § 1132(g). (ECF No. 56 at ¶ 16.)

Eighth Circuit: Hartford Case Involving SSD Offsets

SLOAN v. HARTFORD LIFE AND ACCIDENT INSURANCE COMPANY

United States Court of Appeals,Eighth Circuit.

Claud SLOAN, Appellee, v. HARTFORD LIFE AND ACCIDENT INSURANCE COMPANY, Appellant.

No. 06-2796.

    Decided: January 29, 2007

In 1983, Claud Sloan began working for the ANG Coal Gasification Company, which subsequently provided him with long-term disability benefits under an ERISA plan issued by Confederation Life Insurance Company (Confederation).   On December 31, 1985, a hydraulic door came down on the back of his head and neck and fractured his C3 vertebrae. After rehabilitation, he tried returning to work.   On February 5, 1987, unable to continue working because of his accident, he applied for disability benefits.The plan provided for twenty-four months of disability benefits if Sloan was unable to perform the duties of his “own occupation.”   After twenty-four months, he could receive benefits only if he was “unable to perform the essential duties of any occupation[.]”  He received twenty-four months of benefits under the “own occupation” standard.   Confederation initially denied benefits under the “any occupation” standard, but reversed its decision following Sloan’s administrative appeal.   The letter informing him of his right to long-term disability benefits stated:

You have made a strong case for Total Disability which could translate well into a Social Security pursuit.   Our definition of Total Disability after 24 months is very similar to the definition used by Social Security.   Since we are admitting Mr. Sloan as Totally Disabled from all occupations, he should reapply for Social Security Disability benefits and pursue it to all levels if necessary.

Sloan applied for social security disability benefits in 1988, 1990, and 1995.   Each time he was denied.

Sloan continued receiving long-term disability benefits for several years while the plan was administered by Confederation.   In 1997, the administration and liability of the plan transferred from Confederation to Hartford.   After the transfer, Hartford decided to review Sloan’s claim, which included asking him to undergo an independent functional capacity evaluation, reviewing his medical records, interviewing him and his treating physicians, and performing surveillance on him.   On November 22, 2000, following its review, Hartford terminated his disability benefits.   He filed an administrative appeal.   On May 14, 2001, Hartford upheld the decision to terminate Sloan’s benefits.

After being terminated from long-term disability benefits, Sloan tried to work part-time as a courtesy driver beginning in August 2001.   He worked until March 2002, but quit due to continued pain and fatigue, telling his treating physician he “just could not keep doing what he was doing” and “could not live like that.”   After a full examination, his treating physician’s notes state, “I don’t see that [Sloan] needs to focus on getting work right now as this would be very difficult for him.   He is easily overwhelmed;  in fact, I don’t see him as ever working as gainfully employed.”

On January 25, 2002, Sloan filed his fourth application for social security disability benefits.   He also commenced an action against Hartford in state court seeking reinstatement of his long-term disability benefits.   Hartford removed the action to federal district court.   Sloan and Hartford agreed to dismiss the federal action, however, to allow him to pursue his Social Security appeal because Hartford was entitled to offset social security benefits he might receive from any disability benefits that may be owed under the plan.   Following the stipulation, the district court dismissed the action without prejudice.

Sloan’s fourth application for social security benefits was initially denied, but after multiple appeals, was ultimately reopened.   At an administrative hearing, he introduced a letter from Dr. Roger Kennedy dated March 26, 2003.   The letter was generated in response to a questionnaire sent to the doctor by Sloan’s attorney.   Dr. Kennedy’s letter states in relevant part:

# 1 I was Claud’s treating physician from 1/23/86 through 10/2/89.

#  2 I did understand that Claud’s work was sedentary but was scheduled in 12-hr shifts with his being able to sit and stand at will.   I couched “other work restrictions” in some specifics to exclude anything other than sedentary work.   I also understood that he could only work for very short periods of time without making his pain intolerable.   He was able to work approximately 50% of the expected work shift.

# 3 At no time since 3/5/87, has Claud been able to perform even sedentary work on a regular daily basis for 40hrs/week because of his disabling pain.

# 4 His complaints of pain, though unusually severe, seem credible and quite reasonable when related to the unusually severe neck injury which he sustained.   Some injuries simply cause persistent, disabling pain which may not be amenable to treatment.   The mechanism of his injury would seem quite consistent with soft-tissue injury to his neck skeletal structures and swallowing mechanism-all of which show relatively little structural changes on exams, X-rays and scans.

#  5 Prescription narcotic medications certainly can dull people’s thought processes, memory and judgment which in turn can endanger themselves and others.   I really can’t speak specifically about this in Claud’s case.

# 6 Yes. Even frequent position changes at will did not seem to effectively alleviate his pain.

#  7 Lifting any significant amount of weight, if it increases his pain and interferes with his work ability is considered contraindicated, simply as another means of making his pain manageable enough that he could continue to work.

# 9 The need for rest and frequent change of position seems credible and reasonable.

Sloan also testified before the Administrative Law Judge (ALJ) at the hearing, describing how his injuries and resulting pain affected his ability to work.   Following the hearing, the ALJ issued a decision finding him disabled as of February 5, 1987, giving great weight to Dr. Kennedy’s letter and finding Sloan’s testimonial allegations of pain “credible and persuasive.”   The favorable award entitled him to social security disability benefits retroactive to January 2001, or 12 months prior to his last application for social security benefits.   See 20 C.F.R. § 404.621 (indicating a successful claimant “may receive benefits for up to 12 months immediately before the month in which your application is filed”);  42 U.S.C. § 423(b) (same).

On January 28, 2005, armed in part with the favorable social security decision, Sloan refiled suit against Hartford in federal district court seeking reinstatement of his long-term disability benefits retroactive to November 1, 2000, the effective date of Hartford’s termination.   Both parties filed motions for summary judgment, which the district court denied.   The district court set the case for a bench trial, but the parties agreed to forego a bench trial in favor of proceedings on the briefs and a stipulated fact record.

Sloan filed a motion for introduction of additional evidence outside the administrative record, i.e., the favorable social security decision and the medical records contained in the social security administrative record.   The district court granted his motion, finding good cause existed under the circumstances present in this case.  Sloan v. Hartford Life & Accident Ins. Co., 433 F.Supp.2d 1037, 1039 (D.N.D.2006).

Because the plan did not grant Hartford discretion to interpret plan language or determine eligibility for benefits, the district court applied de novo review to determine whether Sloan qualified for long-term disability benefits.  Id. at 1047-48.   Under that standard, the district court determined he was entitled to disability benefits.   The district court based its decision, in part, on a conclusion the plan was ambiguous with respect to whether long-term disability benefits were owed only to a claimant who could not engage in any work-whether part-time or full-time-or whether a claimant who could work part-time was still entitled to benefits.   The district court construed the ambiguity against Hartford and concluded the plan provided benefits to a claimant who could work part-time.   In the alternative, the district court found as a matter of fact that Sloan could not engage in even part-time work, basing its finding upon the medical evidence in the record, the favorable social security decision, and Sloan’s failed attempt to work part time in late 2001 and early 2002.  Id. at 1049-50.

Because Hartford was allowed to offset the social security disability benefits Sloan was entitled to receive as of January 2001, the district court calculated the amount of past due disability benefits Hartford owed after offsetting social security benefits, as follows:

• From November-December 2000, the full amount of LTD benefits amounts to $1,701 per month for a total of $3,402;

•  Beginning January 2001, through May 2006, Hartford Life owed the sum of $443 per month (original LTD benefits of $1,701 less monthly Social Security disability benefits of $1,258), which equates to 65 months at $443 per month for a total of $28,795;

• The total award of past due disability benefits owed from October 1, 2000, through May 31, 2006, amounts to the sum of $32,197.

Id. at 1051.

Hartford filed a timely appeal.   On appeal, Hartford contends the district court abused its discretion in admitting evidence outside the administrative record, erred in determining the Plan was ambiguous with respect to the issue of part-time work, and clearly erred in determining Sloan was totally disabled from performing even part-time work.   Finally, Hartford contends that, even if the district court correctly determined he was totally disabled, it erred by calculating the past due benefits instead of remanding the claim to allow Hartford to calculate the amount of the social security offset.

II

We first examine the district court’s decision to admit Sloan’s favorable social security decision.   In a de novo ERISA case, we review a decision to consider evidence outside the administrative record for an abuse of discretion, noting “the district court should not exercise this discretion absent good cause to do so.”  Donatelli v. Home Ins. Co., 992 F.2d 763, 765 (8th Cir.1993).   In determining whether good cause exists, we have focused in large part on whether the claimant had an opportunity to present the additional evidence during the administrative proceedings.   An opportunity and failure to present the additional evidence shows a lack of good cause.  Davidson v. Prudential Ins. Co., 953 F.2d 1093, 1095 (8th Cir.1992).

Sloan did not have an opportunity to present the favorable social security decision during the administrative proceedings because the ALJ did not issue its decision until December 2003, well after the final administrative decision was made in May 2001.   Hartford complains the district court admitted medical evidence included in the social security record that was in existence before the close of the administrative proceedings, and thus Sloan had an opportunity to present this evidence in the administrative proceedings.   Hartford’s argument fails, however, because the medical evidence referenced actually was submitted in the administrative proceedings;  thus, the district court’s admission of it as part of the social security record was merely duplicative.   As to the duplicative medical evidence contained in both the administrative record and the social security record, the district court did not abuse its discretion.

Turning to the nonduplicative new evidence considered by the district court, the district court gave four reasons for admitting the additional evidence:  1) Hartford stipulated to the dismissal of the first federal court action for the specific purpose of allowing Sloan to pursue his social security claim;  2) the social security definition of disability is very similar to the definition of disability in the plan;  3) the district court considered the ALJ’s credibility determinations regarding Sloan’s subjective complaints of pain to be highly probative of the ultimate question of disability;  and 4) equity weighed in his favor because he had received disability benefits for nearly thirteen years before Hartford’s termination.  Sloan, 433 F.Supp.2d at 1038.

The second and third reasons given by the district court are sufficient to support its decision.   As acknowledged by Confederation in the letter informing Sloan of his right to long-term disability benefits, the plan’s “definition of Total Disability after 24 months is very similar to the definition used by Social Security.”   A social security disability determination is generally admissible evidence to support an ERISA claim for long-term disability benefits. See Riedl v. Gen. Am. Life Ins. Co., 248 F.3d 753, 759 n. 4 (8th Cir.2001).   In the absence of Sloan’s opportunity to present this relevant evidence during the administrative proceedings, we are hard-pressed to conclude the district court abused its discretion in considering it, especially when Hartford has not referred us to anything in particular about this case which would make consideration of relevant evidence an abuse of discretion.   In addition, because the parties agreed to forego a bench trial in favor of proceeding on the briefs and a stipulated fact record, we understand why the district court would consider the ALJ’s view of Sloan’s credibility to be highly probative, because the district court did not have its own opportunity to evaluate his credibility in a full bench trial.   Finally, we see nothing improper about the first and fourth reasons given by the district court for admitting the evidence.   We therefore conclude the district court did not abuse its discretion by considering the additional evidence.

We turn next to the district court’s finding that Sloan qualifies for long-term disability benefits.   Hartford challenges both the district court’s determination the plan was ambiguous as to whether a claimant could receive long-term disability benefits when able to work part-time, and the district court’s ultimate determination he qualified for disability benefits in any event because he could not even work part-time.   If the district court’s ultimate determination is sound, it will be unnecessary to address any alleged ambiguity about part-time work, and thus we first address Hartford’s second challenge.

The district court’s finding that Sloan qualifies for long-term disability benefits is a finding of fact subject to the clearly erroneous standard of review.  Donatelli, 992 F.2d at 765.  “This standard plainly does not entitle a reviewing court to reverse the finding of the trier of fact simply because it is convinced that it would have decided the case differently.”  Anderson v. City of Bessemer City, N.C., 470 U.S. 564, 573, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985).  “The reviewing court oversteps the bounds of its duty under Rule 52(a) if it undertakes to duplicate the role of the lower court.”  Id.

If the district court’s account of the evidence is plausible in light of the record viewed in its entirety, the court of appeals may not reverse it even though convinced that had it been sitting as the trier of fact, it would have weighed the evidence differently.   Where there are two permissible views of the evidence, the factfinder’s choice between them cannot be clearly erroneous.  ․ Duplication of the trial judge’s efforts in the court of appeals would very likely contribute only negligibly to the accuracy of fact determination at a huge cost in diversion of judicial resources.   In addition, the parties to a case on appeal have already been forced to concentrate their energies and resources on persuading the trial judge that their account of the facts is the correct one;  requiring them to persuade three more judges at the appellate level is requiring too much.  ․ [T]he trial on the merits should be the main event rather than a tryout on the road.

Id. at 573-75 (internal quotations and citations omitted).

The outcome in this case is driven by the applicable standard of review.   Under the clear error standard, there is enough evidence to support the district court’s findings.   Sloan was considered eligible for long-term disability benefits for an uninterrupted period of almost thirteen years.   The recent finding of disability under the rigorous social security standard, with a disability onset date of February 1987, confirms the validity of his eligibility for benefits during that period of time.   The ALJ found his subjective complaints of disabling pain credible, as did his treating physicians.   His reported daily activities were consistent with an inability to maintain a job on a regular basis, even a part-time job.   He tried to go back to work part-time in late 2001 and early 2002, and the medical evidence in the record indicates he was unable to sustain the part-time job.   All of this evidence supports the district court’s factual determinations.   Although Hartford can point to evidence in the record which tends to show he was not disabled, that is not enough for us to conclude the district court clearly erred.   See Anderson, 470 U.S. at 574, 105 S.Ct. 1504 (“Where there are two permissible views of the evidence, the factfinder’s choice between them cannot be clearly erroneous.”).

Finally, we address Hartford’s contention the district court erred by calculating the amount of past due benefits instead of remanding the case to give Hartford the first opportunity to calculate the amount administratively.   In its calculations, the district court offset social security disability benefits beginning in January 2001, when Sloan actually began receiving those benefits.   Hartford contends the plan may permit it to offset social security benefits even before he began receiving them, and thus Hartford should have been given the first opportunity to interpret the plan and calculate the offset.

The plan language upon which Hartford relies states Hartford’s monthly obligation to pay long-term disability benefits may be offset by the amount of social security benefits “paid, payable, or for which there is a right.”   Hartford further relies on the district court’s statement:  “Sloan was entitled to disability benefits beginning on February 5, 1987.”  Sloan, 433 F.Supp.2d at 1038.   Putting this statement together with the plan language, Hartford contends it may be entitled to offset social security disability benefits dating as far back as February 5, 1987 (even though Sloan never received social security disability benefits between February 1987 and January 2001) because the plan allows Hartford to offset social security benefits “for which there is a right” even if the benefits were not received.

We reject Hartford’s argument out of hand because it is based on a flawed premise.   The district court misspoke when it said Sloan was entitled to social security benefits beginning on February 5, 1987.   What it meant to say was he had a disability onset date of February 5, 1987.   The district court made this clear later in its decision.   Compare Sloan, 433 F.Supp.2d at 1038 (referring to the “favorable Social Security decision ․ finding that Sloan was entitled to disability benefits beginning on February 5, 1987”) with id. at 1047 (referring to the ALJ’s finding that Sloan “has been under a disability as defined by the Social Security Act and Regulations since February 5, 1987”).

A disability onset date is not always the same as the date a claimant has the right to receive benefits.   Sloan made three unsuccessful applications for social security disability benefits in 1988, 1990, and 1995.   His unsuccessful applications clearly precluded him from having a “right” to receive benefits during that period of time.   Under the pertinent social security statute and regulation, he only had a “right” to social security disability benefits dating back twelve months from his fourth and only successful application for benefits, which was filed January 25, 2002.   See 20 C.F.R. § 404.621 (indicating a successful claimant “may receive benefits for up to 12 months immediately before the month in which your application is filed”);  42 U.S.C. § 423(b) (same).

Because there is simply no legitimate basis for Hartford’s contention regarding a potential offset of social security benefits at a point in time earlier than January 2001, the district court committed no error when it failed to remand the case to allow Hartford the first opportunity to calculate the offset administratively.

III

We affirm the district court’s well-reasoned decision in all respects.

FOOTNOTES

1.   The Honorable Daniel L. Hovland, Chief Judge, United States District Court for the District of North Dakota.

2.    The district court’s decision is reported at Sloan v. Hartford Life & Accident Insurance Co., 433 F.Supp.2d 1037 (D.N.D.2006).

BYE, Circuit Judge.

– See more at: http://caselaw.findlaw.com/us-8th-circuit/1369715.html#sthash.y9q4qX01.dpuf

An Artice from the Richmond Times-Dispatch

This week, an update on disability insurance. You may remember a column on that topic a few months ago. Well, after that piece was published, I received a comment on my website (JeanChatzky.com) from a reader named Bob who wanted to share his story. He, like many people, had relied on disability coverage through his employer. In my column, I noted that this coverage, while helpful and cheap (sometimes free), is typically not enough.

Bob experienced that — and then some. To make a long and painful story short, he said he had to produce “reams of documentation regarding every test and office visit with five doctors.” His insurer also required policyholders to acquire the maximum amount of Social Security Disability Insurance, which his disability policy then supplemented.

This requirement is common with group coverage: Your policy may call for replacement of a percentage of your income — in most cases, 60 percent. If you are approved for SSDI, your benefit covers what SSDI does not. Say 60 percent of your income is $3,000 a month, and you qualify for $1,800 from SSDI. Your insurer would then provide only the remaining $1,200 a month. And approval for SSDI is by no means guaranteed. According to a 2010 report by the Social Security Administration, about 75 percent of people who apply are turned down the first time around; half eventually get approved after appealing, which can take three or four years.

It’s important to understand that disability insurers do approve the majority of claims they receive, says Whit Cornman, a spokesman for the American Council of Life Insurers. “A 2010 industry study, conducted by Gen Re and representing the majority of group disability carriers, indicated that 75.9 percent of submitted long-term disability claims were approved,” he says. “Of those claims not approved, 23 percent were not paid because the claimant had never met the elimination period.” That is to say, they recovered or returned to work before the insurance was set to kick in.

But there are key differences between individual and group coverages. One of these discrepancies has to do with a policyholder’s consumer rights, says Frank Darras, an insurance attorney in California. If an individual disability insurer wrongfully denies or delays benefits, in some states you can sue for damages or emotional distress — which is important because in many cases if your benefits are delayed, you may not be able to pay your monthly bills. This can have long-term ramifications, ranging from a tarnished credit report to foreclosure.

Under ERISA (the Employee Retirement Income Security Act of 1974), that’s not true in the case of most group policies, Cornman explains. “While ERISA limits punitive damages in cases that are decided in the courts, it does allow judges the discretion to award attorney fees.” Whether your group plan is governed by ERISA is based on how your employer sets it up.

Here’s the thing, though: For many, group disability is the only affordable option. If you can afford an individual policy, by all means, look into one. If you can’t, take the group coverage. And if you need to invoke it, and you’re denied, appeal — the right way.

Here are a few tips:

  • Gather and submit copies of your documentation, outlining your medical testing, treatment and prescription drugs, along with the required statement from your doctor proving your inability to work. Note that I said copies; keep the originals on file, since you’ll likely need them.
  • If you can afford it, hire a vocational expert who can clarify your job demands. (“You better believe the insurance company has one,” says Darras.) You can find one through the American Board of Vocational Experts (abve.net).
  • Get some help understanding the policy terms. If you can’t afford a lawyer, many — including Darras — offer free consultations. Beyond that, see if you qualify for assistance from an organization such as Legal Aid.
  • Finally, know that if your claim is denied, you have the right to have it reviewed by your state insurance department. You can find contact information for your state through the National Association of Insurance Commissioners (naic.org).