The New DOL Rules on Claims Procedures and Fiduciaries

Transcription

1 The New DOL Rules on Claims Procedures and Fiduciaries Joshua Bachrach Wilson Elser Two Commerce Square 2001 Market Street, Suite 3100 Philadelphia, PA (215)

2 Joshua Bachrach is the chair of Wilson Elser s Life, Health, Disability & ERISA practice team. He represents clients in state and federal courts throughout the United States in litigation involving ERISA and non-erisa disability, life and health coverage disputes as well as disputes over pension benefits. Mr. Bachrach also represents insurers in coverage and bad-faith litigation. He is regarded as a valuable resource by clients and colleagues based on his knowledge of ERISA, life, health and disability law as well as his extensive appellate work. Mr. Bachrach is engaged nationally in litigation matters and frequently consulted to evaluate issues prior to the commencement of litigation. Since he began working on ERISA matters more than 20 years ago, he has personally handled approximately 1,000 ERISA cases nationally. Mr. Bachrach is a frequent speaker at national seminars on ERISA-related subjects and has written numerous articles on ERISA and related topics.

3 The New DOL Rules on Claims Procedures and Fiduciaries Table of Contents I. Introduction...5 II. Part I The Fiduciary Rule...5 III. Part II Changes to the Disability Claim Regulations...6 IV. The Amended Claim Procedures...8 A. Paragraph (b)(7) Independence and Impartiality...8 B. (g)(1)(vii)(a), (C) and (j)(6)(i) Disclosure Requirements...9 C. (h)(4) The Right to Review and Comment on New Information...10 D. (l) Deemed Exhaustion...11 E. (m)(4) Coverage Rescissions...12 F. (o) Culturally and Linguistically Appropriate Notice...12 G. (j)(4)(ii) Contractual Limitations Period...13 V. Conclusion...14 The New DOL Rules on Claims Procedures and Fiduciaries Bachrach 3

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5 The New DOL Rules on Claims Procedures and Fiduciaries I. Introduction Toward the end of President Obama s eight years in office, the Department of Labor ( DOL ) issued two significant rule changes. First, DOL expanded the definition of fiduciary under the Employee Retirement Income Security Act of 1974 ( ERISA ) to include investment advisors when they provide certain advise related to retirement plans. Along with this change in status come increased responsibilities and the potential for increased liability. However, as explained below, the Fiduciary Rule may never go into effect. The second rule change by DOL involves the manner in which disability claims are handled. The Department made sweeping changes to the ERISA claim regulation, especially regarding the information that must be disclosed to a claimant during an administrative appeal. In addition, the rule changes make it easier for a claimant to file a lawsuit before administrative remedies have been exhausted. These changes will not only have a major impact on the way claims are adjudicated but will also result in increased litigation costs for disability plans and their insurers. Therefore, it is important to understand and prepare for these rule changes before they go into effect on January 1, II. Part I The Fiduciary Rule The Department of Labor s new Fiduciary Rule was set to apply on April 10, That did not happen and the Rule may never go into effect, at least not in its current form. Nevertheless, it is important to understand the Rule in case it survives scrutiny. Simply put, the Rule classifies certain advisors and firms as fiduciaries under ERISA when providing advice related to retirement plans. The change in status is significant. Prior to the Rule, advisors were held to a suitability standard, meaning that recommendations had to meet the client s needs and objectives. As a fiduciary, the advisor must act in the best interest of the client. Moreover, a conflict of interest may exist, for example, if the advisor recommends a product which provides a higher commission. The likely result will mean more litigation. The Fiduciary Rule applies when an advisor makes investment recommendations for funds that are rolled over from a retirement plan or IRA. This includes advice to buy or sell securities or other properties as well as advice to hold funds or distribute them. The Rule even applies to the selection of another person to provide investment advice. Equally important is what the Rule does not cover. The Rule does not apply to educational materials about retirement savings. An advisor will not be considered a fiduciary when it sends marketing materials, newsletters, general market data or other general communications. The Rule also does not apply to investment recommendations to employees who only receive normal compensation for their work. A prominent feature of the Fiduciary Rule is the Best Interest Contract Exemption ( BICE ). BICE allows advisors to continue to receive commissions as long as the client receives a disclosure agreement clearly identifying all compensation being paid. It is also one of the most costly features of the Rule. DOL estimated that 86 million disclosures will be required in the first year and over 64 million each year thereafter. The cost associated with compliance is estimated to be nearly $80 million in the first year and $30 million after that. Between reduced commissions and increased administrative costs, there is speculation that many smaller advisors will stop providing investment services. In addition, the Rule could adversely impact middle to lower market investors to the extent advisors shift from commissions to fees. This has led to a number of legal challenges to the Rule. The New DOL Rules on Claims Procedures and Fiduciaries Bachrach 5

6 At least three lawsuits were filed in 2016 to stop the Fiduciary Rule. The lawsuit filed by the U.S. Chamber of Commerce and several financial industry groups was the first to be decided. In an 81 page ruling, Chief Judge Barbara Lynn of the U.S. District Court for the Northern District of Texas concluded that DOL acted within its statutory authority in enacting the Rule and entered judgment in favor of DOL. That ruling has been appealed to the Fifth Circuit. A decision by the Fifth Circuit may not be needed. On February 3, 2017, President Trump issued a Memorandum for the Secretary of Labor. In it, the President directed DOL as follows: to examine the Fiduciary Duty Rule to determine whether it may adversely affect the ability of Americans to gain access to retirement information and financial advice. As part of this examination, you shall prepare an updated economic and legal analysis concerning the likely impact of the Fiduciary Duty Rule, which shall consider, among other things, the following: (i) Whether the anticipated applicability of the Fiduciary Duty Rule has harmed or is likely to harm investors due to a reduction of Americans access to certain retirement savings offerings, retirement product structures, retirement savings information, or related financial advice; (ii) Whether the anticipated applicability of the Fiduciary Duty Rule has resulted in dislocations or disruptions within the retirement services industry that may adversely affect investors or retirees; and (iii) Whether the Fiduciary Duty Rule is likely to cause an increase in litigation, and an increase in the prices that investors and retirees must pay to gain access to retirement services. If DOL concludes that the Fiduciary Rule is contrary to these considerations or others, then DOL shall publish for notice and comment a proposed rule rescinding or revising the Rule, as appropriate and as consistent with law. The Department took the first step in responding to President Trump s Memorandum on March 1, 2017 when it proposed a 60 day extension of the April 10, 2017 applicability date. Comments on the proposed extension were due within 15 days of public notice and the deadline for comments on the President s Memorandum due 45 days after March 1. As of this date, there is no way to state with certainty whether the Fiduciary Rule will survive; however, it faces many challenges. III. Part II Changes to the Disability Claim Regulations On January 1, 2018, major changes are coming to the regulations applicable to ERISA disability claims. The new protections and safeguards, as described by the Department of Labor, are based on rules already applicable to health claims under the Affordable Care Act. According to DOL, the manner in which health claims are handled could serve as an appropriate model to improve the claim process for disability claims. But there are significant differences between health and disability claims. Medical claims typically do not involve the degree of analysis required of a disability claim. Medical claims involve a discrete set of records instead of thousands of pages of records from many sources as is typical of a disability claim. And most disability claims require consultation with an outside medical expert which is not the case with most medical claims. The differences described above were identified in DOL s Summary to the amended regulation but dismissed as unimportant. The Department emphasized that the changes were needed to help alleviate the 6 Life, Health, Disability and ERISA April 2017

7 financial and emotional hardship suffered by many individuals when they lose earnings due to their becoming disabled. But the real question is whether these rules will in fact increas[e] the accuracy of disability determinations under ERISA plans. See, Black & Decker Disability Plan v. Nord, 538 U.S. 822, 832 (2003). Regardless, unless they are repealed or successfully challenged in court, they will apply to disability claims filed on or after January 1, Therefore, it is necessary to understand and begin implementation of these changes now. The current version of the claim regulation has been around for nearly twenty years. Still, there are disputes as to what is required under them. Therefore, before addressing what is new, it is important to understand what is already required when deciding disability claims. Under the current version of the regulation, a plan must make an initial benefit determination within 45 days after receipt of the claim. 29 C.F.R (f)(3). The deadline for an initial claim decision can be extended for up to 30 days provided that the plan administrator both determines that such an extension is necessary due to matters beyond the control of the plan and notifies the claimant, prior to the expiration of the initial 45-day period, of the circumstances requiring the extension of time and the date by which the plan expects to render a decision. Another 30-day extension can be taken if needed due to matters beyond the control of the plan and provided that the plan administrator notifies the claimant, prior to the expiration of the first 30-day extension period, of the circumstances requiring the extension and the date as of which the plan expects to render a decision. The notice must specifically explain the standards on which entitlement to a benefit is based, the unresolved issues that prevent a decision on the claim, and the additional information needed to resolve those issues, and the claimant shall be afforded at least 45 days within which to provide the specified information. Id. Section (g) of the regulation identifies information that must be included in an adverse benefit determination/denial letter. There are additional requirements in the new regulation which will be discussed below. In the current version, a disability denial letter must: Provide claimants with at least 180 days to appeal the decision; Provide claimants the opportunity to submit written comments, documents, records, and other information relating to the claim for benefits; Notify the claimant that, upon request and free of charge, they will be given copies of all documents records and other information relevant to the claimant s claim for benefits. 29 C.F.R (h). In the event the claimant appeals, a decision normally must be made within 45 days after the appeal is filed. 29 C.F.R (i). If special circumstances prevent the plan from making a decision within 45 days, the deadline may be extended an additional 45 days so long as the initial notice is sent to the claimant indicat[ing] the special circumstances requiring an extension of time and the date by which the plan expects to render the determination on review. This notice must be sent before the expiration of the first 45 days. Finally, the regulation permits tolling of an appeal deadline due to a claimant s failure to submit information necessary to decide a claim. Tolling runs from the date the notification is sent to the claimant until the date on which the claimant responds. Id. Note that tolling only applies to a claimant s failure to provide information. If a treating doctor fails to respond to a request for records, tolling does not apply. However, if you simultaneously request the same records from the claimant, it does. Is a request for an examination information for purposes of tolling? In Bruce v. Hartford, No , 2014 U.S. Dist. LEXIS (E.D. Va. July 10, 2014), the court held that tolling does apply to a plan s request to conduct an IME. The New DOL Rules on Claims Procedures and Fiduciaries Bachrach 7

8 What happens if the claimant fails to respond to a request made in a tolling letter? Is the appeal tolled indefinitely? No. DOL has stated that the tolling period is limited to 45 days. Moreover, if a claimant notifies the plan within 45 days that the requested information will not be provided, this is considered a response and tolling ends. Whether the claimant affirmatively fails to provide the requested information or just ignores a request, this may provide a new basis for denying the claim, assuming the information is necessary for a decision. Since this is a new basis for denying the claim, the letter should include appeal rights limited to the failure to respond. The letter should also identify all of the provisions in the plan/policy that require a participant s cooperation and place the burden of proof on the claimant. In most cases, the resulting appeal decision letter should still address the merits of the appeal. Now is a good time for decision-makers to also review their procedures for incoming appeals. Who receives them? How soon after receipt of the appeal is the acknowledgment letter sent and is it assigned to a specialist? With the new regulation requirements, there is no time to delay considering an appeal and requesting needed information. IV. The Amended Claim Procedures A. Paragraph (b)(7) Independence and Impartiality New paragraph (b)(7) states as follows: 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. In its Summary, DOL noted that many disability plans have already taken steps to ensure the independence and impartiality of those involved with claim decisions. Most decision-makers do not receive bonuses based on claim results. In fact, to avoid any questions, they probably should not receive any type of bonus or special compensation. Likewise, physicians and vocational experts should not be selected based on the likelihood that they will support a claim denial. The rule goes even farther, however. According to DOL, the new rule requires plans to monitor their vendors and those professionals the vendors select. Specific reference is made to service contracts with vendors in the Summary. It is anticipated that counsel representing claimants will rely on this language to request sweeping discovery. Some may even request information on experts during the appeal. To prepare for the inevitable, plans should make sure that they have agreements in place with all vendors and separately retained experts. Those agreements should specify that hiring and compensation decisions are not based on the likelihood of a favorable opinion. While not mentioned by DOL, it is also suggested that agreements specify that any retained doctor should be board certified and maintain a practice seeing patients. In other words, providing medical opinions for disability insurers should not be their primary source of income. According to DOL, the duties of a plan under paragraph (b)(7) extend to monitoring vendors. Therefore, plans should be familiar with agreements between vendors and the physicians on their panel. During litigation, claimants will probably ask for information on the number of other claims that were denied by the 8 Life, Health, Disability and ERISA April 2017

9 expert. In the past, a number of courts refused discovery on this topic. See, Holmstrom v. Metropolitan Life Ins. Co., 615 F.3d 758, 768 (7th Cir. 2010) (referring to sampling problems that exist when an attempt is made to draw conclusions from an insurer s batting average ); Geiger v. Pfizer, Inc., et al., 2012 U.S. Dist. LEXIS (S.D. Ohio Jan. 31, 2012) (refusing to allow requests seeking statistical data); Branch v. Life Ins. Co. of N. Am., 2009 WL , at *5 (M.D. Ga. 2009); Howard v. Hartford Life & Acc. Ins. Co., Case No. 3:10-cv-192, 2011 WL (M.D. Fla. June 27, 2011) ( the figures are based on such a broad variety of factors as to render any conclusion(s) drawn therefrom to be meaningless. Specifically, such figures would not take into account the individualized circumstances of each case ). Courts may be willing to allow this discovery now that the regulation imposes a duty to monitor. B. (g)(1)(vii)(a), (C) and (j)(6)(i) Disclosure Requirements These requirements are fairly self-explanatory. 29 C.F.R (g)(1)(vii)(A) states that a disability benefit adverse determination letter must include: 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 Similarly, under 29 C.F.R (j), an appeal decision must include: 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. Note that the rule not only requires a plan to explain why it disagrees with a claimant s medical or vocational expert but also the basis for disagreeing with the opinion of any expert retained by the plan. At times an expert will make a recommendation to obtain certain records or for the claimant to be evaluated by a different specialty. If the plan does not follow the recommendation, the letter needs to explain the reason. The rule also requires a plan to explain why it disagrees with or is not following the decision of the Social Security Administration. The letter may not simply state that SSA relies on different definitions, evidence and assumptions (such as the treating physician rule). The plan may and should place the burden on the claimant to provide the complete SSA record. If the claimant fails to provide complete information, the letter should state so. Usually, a request for SSA information provides special circumstances allowing for both an extension of time for a decision and tolling of the deadlines. The New DOL Rules on Claims Procedures and Fiduciaries Bachrach 9

10 Next, paragraph (c) requires the following in an initial decision letter: 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; In its current format, the regulation already requires a plan to provide notice of the right to receive copies of internal guidelines, rules, protocols, etc. that were relied on in denying the claim. Under the new rule, the plan must include these rules, etc. with the adverse benefit determination if they were relied on in making the decision. And if no rule or guideline was utilized, the plan must say so in its decision letter. Plan insurers should use this time before the new rules go into effect to review their manuals and guidelines. The first question to ask is whether some or all of them are even necessary. Moreover, if they exist in different documents, they should be consolidated. C. (h)(4) The Right to Review and Comment on New Information Courts in every circuit to address the issue have held that a plan is under no duty to provide a claimant with new reports obtained during the appeal so they can comment on them prior to a final decision. See, Metzger v. UNUM Life Ins. Co. of Am., 476 F.3d 1161, 1166 (10th Cir. 2007); Balmert v. Reliance Standard Life Ins. Co., 601 F.3d 497, 502 (6th Cir. 2010); Glazer v. Reliance Std. Life Ins. Co., 524 F.3d 1241, 1245 (11th Cir. 2008); Silver v. Executive Car Leasing Long-Term Disability Plan, 466 F.3d 727, 731 n.2 (9th Cir. 2006). DOL disagreed with these decisions. Under the new rule, when considering a disability claim appeal, the plan must: 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 claimant, 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. Not only does this rule require a plan to give the claimant a reasonable opportunity to comment on new evidence, if the claimant s new evidence results in a new report for the plan, it must also be sent to the claimant with an opportunity to respond prior to the final decision. The courts cited above recognized that allowing claimants to comment on every new piece of evidence would result in an endless cycle of review and re-review. DOL disagreed, stating that at some point, these submissions would become repetitive. This is not the reality that we face. The new regulation does not explain how plans can satisfy the review and comment requirement and still issue a decision within 45 days. Presumably, tolling applies (as well as the 45-day extension unless it was already taken). Therefore, when the new evidence is sent to the claimant, the cover letter should explain 10 Life, Health, Disability and ERISA April 2017

11 that it is being provided in accordance with the ERISA regulations and the time for a decision is tolled until a response is received. D. (l) Deemed Exhaustion According to DOL, the claim regulations were enacted to help reduce lawsuits and provide a nonadversarial method of reviewing and settling claims. It is difficult to reconcile that notion with the new deemed exhausted provision, which states: (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. While this change to the regulation will likely have the most impact on disability claims, DOL devoted relatively little space to discussing it. More so than any other provision, this rule will result in a significant increase in litigation. While DOL did not affirmatively say so, it suggests in the Summary that a deemed exhausted claim is not entitled to deference. For this reason alone, claimants will have incentive to challenge whether exhaustion is required in a particular case. And if they are wrong, there are no adverse consequences. The claim is simply considered re-filed on appeal. The New DOL Rules on Claims Procedures and Fiduciaries Bachrach 11

12 There are additional reasons why claimants will have incentive to cut off the administrative process. They have already submitted their new evidence and in most circuits, the court is limited to the evidence that was before the plan at the time of the final decision. Based on this law, they will likely ask courts to close the record as of the date the appeal is deemed exhausted. But they cannot have it both ways. Under de novo, whether based on a loss of discretion due to a late decision or no discretion in the plan documents, most courts will allow new evidence if it is necessary to conduct an adequate review. The rule provides an exception for de minimis violations so long as they do not cause, and are not likely to cause, prejudice or harm to the claimant and there is good cause, such as an ongoing, good faith exchange of information. This vague standard will likely be the subject of dispute between plans and participants as well as conflicting court interpretations. Also, the de minimis exception does not apply if the violation is part of a pattern or practice of violations by the plan. Claimants will probably seek discovery related to practices and violations when the exception is invoked, further escalating costs and distracting the court s attention from the real issue, which is whether the claimant is disabled. If a claimant believes that there has been a violation, the claimant may request a written explanation. The plan must respond to such a request within 10 days. The response must explain why the plan s administrative remedies should not be deemed exhausted. It is unclear why a claimant would follow this elective process instead of simply filing a lawsuit when they believe the claim is deemed exhausted. As explained above, there is no penalty to the claimant if they are wrong. The appeal is simply returned to the administrator for a decision. The vast majority of attorneys representing claimants want a decision based on a full and fair review of the claim. Unfortunately, there are a small number out there who will turn this section of the regulation into a game whose purpose is to drive up litigation costs and become such a nuisance that the plan will want to settle regardless of the merits of the claim. E. (m)(4) Coverage Rescissions The regulation was amended to add to what is meant by an adverse benefit determination in the context of disability claims. Under the new rule: 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 of 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. It is not clear why this language was added to the regulation and the Department s Summary provides no insight or explanation as to its applicability. It is a rare case in which there is a retroactive cancellation of coverage, especially for an individual claimant and in the absence of a claim. If a retroactive cancellation happens, presumably it would impact all plan participants. A plan insurer will rarely have the names and addresses of all plan participants to send adverse benefit determinations as now required. Note also that this rule does not apply to rescissions based on the failure of the sponsor to pay premiums. F. (o) Culturally and Linguistically Appropriate Notice The new rule applies to initial decision letters and paragraphs (g)(1)(vii)(c) (adverse benefit determinations) and (j)(7) (appeal decisions), and provides as follows: 12 Life, Health, Disability and ERISA April 2017

13 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. As DOL succinctly stated in its Summary, 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. Toward that end, if a claimant resides in a county where 10 percent or more of the population is literate only in the same non-english language, the letter must include a prominent statement in that language regarding the availability of language services. Also, upon request, the plan must provide copies of letters or notices in that language and provide oral language services. Note that this rule does not require a plan to provide a summary plan description in a foreign language. G. (j)(4)(ii) Contractual Limitations Period Under new paragraph (j), an appeal decision letter must not only include a statement of the claimant s right to bring an action under section 502(a) of ERISA but it must 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. Compliance with this rule may require some additional training. There is no standard language for when the contractual limitations period begins to run (or ends) on a disability claim. Some policies state that suit must be brought within so many years of the date proof of loss is required. Others refer to the date proof of loss is given. The starting date for the limitations period in other policies is the date of loss. Starting to count from the date of loss is easy. It is the onset date for the disability claim. Other deadlines are less clear. For example, the following language is typical of disability policies: LEGAL ACTIONS No action may be brought after three (3) years from the time written proof of loss is required to be submitted. PROOF OF LOSS For any covered loss, written proof must be sent to us within ninety (90) days. If it is not reasonably possible to give proof within ninety (90) days, proof must be sent as soon as possible but no later than one year. The New DOL Rules on Claims Procedures and Fiduciaries Bachrach 13

14 Does the limitation period begin to run 90 days after the date of loss? One year? Is it the actual date the claimant submits the claim? Or does the limitation period begin to run from the date an appeal from the denial is submitted? While an argument can be made for each, in the above situation, using the date of the appeal submission is the fairest to the claimant and the least likely to be challenged. In light of these questions, it is understandable that the rule requires the final decision letter to include the actual date the limitations period expires. Most of us would like to see the changes to the disability claims regulation suffer the same fate that appears to await the Fiduciary Rule. Just as trade organizations provided comments in opposition to the proposed changes, they are now fighting its enactment. Unfortunately, disability plans do not have the luxury of waiting too long before they need to begin making changes to comply with the new rules. V. Conclusion Following DOL s adoption of the Fiduciary Rule last year, many firms and advisors took steps to ensure compliance prior to the effective date of April 10, However, not only has the effective date been extended, the Rule may never go into effect. Now it is the turn of disability plans to prepare for change. The DOL changes to the ERISA disability claims regulation scheduled to go into effect on January 1, 2018 are sweeping and will significantly impact not only claims handling but also litigation and associated costs. While there is a possibility that these rule changes will be pulled before next year, it is not a certainty and plans must begin their preparations and training. 14 Life, Health, Disability and ERISA April 2017