Apr 12, 2018

New disability claims procedures required for certain benefit plans

Effective April 1, 2018, a U.S. Department of Labor (DOL) Final Rule (Rule) requires changes to the claims procedures of many ERISA-covered benefit plans. Disability, retirement and non-qualified deferred compensation plans that provide benefits in the event of a participant’s disability or that credit vesting of benefits based upon an individual’s disabled status may be impacted by this Rule.

The new Rule applies to any ERISA-covered plan which provides that a plan’s fiduciary (e.g., employer, trustee, Plan Administrator, etc.) may determine the disability status of any participant. If the new disability claims procedure Rule applies to a plan, such a plan is required to operationally apply the new procedures to any disability claim made on or after April 1, 2018. However, the deadline for modifying and distributing a plan’s written claims procedures remains unclear.

What actions should an employer take at this time?

  1. Review your benefit plans (including employment, retirement, life insurance and deferred compensation plans) to determine whether any such plans are covered by ERISA.
  2. If so, are any benefits paid under such plans conditional upon a determination of disability?
  3. If the answer to question 2 is yes, does a plan fiduciary have discretion to determine such disability?
  4. If the answer to question 3 is yes, the new claims procedures apply and your plan(s) will likely require amendments.

However, if your executive compensation or severance plans are subject to Code section 162(m) deduction limits, be careful not to amend your plan too quickly. Delaying such amendment may allow you to preserve a grandfathered exemption allowed only for plans that have not been modified in any material respect.

If you have questions with respect to whether this new Rule applies to any of your benefit plans, please contact a Chuhak & Tecson Tax & Employee Benefits attorney who will be happy to discuss the issue with you. 

This Chuhak & Tecson, P.C. communication is intended only to provide information regarding developments in the law and information of general interest. It is not intended to constitute advice regarding legal problems and should not be relied upon as such.

Client alert authored by: Patricia Cadagin O'Brien, Principal

This alert originally appeared in the April 2018 Employment Focus newsletter.