EBSA Proposed Rules

Claims Procedure for Plans Providing Disability Benefits   [11/18/2015]
[PDF]
Federal Register, Volume 80 Issue 222 (Wednesday, November 18, 2015)
[Federal Register Volume 80, Number 222 (Wednesday, November 18, 2015)]
[Proposed Rules]
[Pages 72014-72028]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-29295]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

29 CFR Part 2560

RIN 1210-AB39


Claims Procedure for Plans Providing Disability Benefits

AGENCY: Employee Benefits Security Administration, Department of Labor.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document contains proposed amendments to claims procedure 
regulations for plans providing disability benefits under the Employee 
Retirement Income Security Act of 1974 (ERISA). The amendments would 
revise and strengthen the current rules primarily by adopting certain 
of the new procedural protections and safeguards made applicable to 
group health plans by the Affordable Care Act. If adopted as final, the 
proposed regulation would affect 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 that provide 
benefits to participants and beneficiaries of these plans.

DATES: Written comments should be received by the Department of Labor 
on or before January 19, 2016.

ADDRESSES: You may submit written comments, identified by RIN 1210-
AB39, by one of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Email: e-ORI@dol.gov. Include RIN 1210-AB39 in the subject 
line of the message.
     Mail: Office of Regulations and Interpretations, Employee 
Benefits

[[Page 72015]]

Security Administration, Room N-5655, U.S. Department of Labor, 200 
Constitution Avenue NW., Washington, DC 20210, Attention: Claims 
Procedure Regulation Amendment for Plans Providing Disability Benefits.
    Instructions: All submissions received must include the agency name 
and Regulatory Identifier Number (RIN) for this rulemaking. All 
comments will be available to the public, without charge, online at 
http://www.regulations.gov and http://www.dol.gov/ebsa, and at the 
Public Disclosure Room, Employee Benefits Security Administration, 
Suite N-1513, 200 Constitution Avenue NW, Washington, DC 20210.
    Warning: Do not include any personally identifiable or confidential 
business information that you do not want publicly disclosed. All 
comments are posted on the Internet exactly as received, and can be 
retrieved by most internet search engines. No deletions, modifications, 
or redactions will be made to the comments received, as they are public 
records.

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:

A. Executive Summary

    In accordance with Executive Order 13563, this section of the 
preamble contains an executive summary of the proposed rulemaking in 
order to promote public understanding and to ensure an open exchange of 
information and perspectives. Sections B through E of this preamble, 
below, contain a more detailed description of the regulatory provisions 
and need for the rulemaking, as well as its costs and benefits.

1. Purpose of Regulatory Action

    The purpose of this action is to improve the current procedural 
protections for workers who become disabled and make claims for 
disability benefits from an employee benefit plan. ERISA requires that 
plans provide claimants with written notice of benefit denials and an 
opportunity for a full and fair review of the denial by an appropriate 
plan fiduciary. The current regulations governing the processing of 
claims and appeals were published 15 years ago. Because of the volume 
and constancy of litigation in this area, and in light of advancements 
in claims processing technology, the Department recognizes a need to 
revisit, reexamine, and revise the current regulations in order to 
ensure that disability benefit claimants receive a fair review of 
denied claims as provided by law. To this end, the Department has 
determined to start by proposing to uplift the current standards 
applicable to the processing of claims and appeals for disability 
benefits so that they better align with the requirements regarding 
internal claims and appeals for group health plans under the 
regulations implementing the requirements of the Affordable Care 
Act.\1\ Inasmuch as disability and lost earnings can be sources of 
severe hardship for many individuals, the Department thinks that 
disability benefit claimants deserve protections equally as stringent 
as those that Congress and the President have put into place for health 
care claimants under the Affordable Care Act.
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    \1\ 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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2. Summary of Major Provisions

    The major provisions in the proposal largely adopt the procedural 
protections for health care claimants in the Affordable Care Act, 
including provisions that seek to ensure that: (1) Claims and appeals 
are adjudicated in manner designed to ensure independence and 
impartiality of the persons involved in making the decision; (2) 
benefit denial notices contain a full discussion of why the plan denied 
the claim and the standards behind the decision; (3) claimants have 
access to their entire claim file and are allowed to present evidence 
and testimony during the review process; (4) claimants are notified of 
and have an opportunity to respond to any new evidence reasonably in 
advance of an appeal decision; (5) final denials at the appeals stage 
are not based on new or additional rationales unless claimants first 
are given notice and a fair opportunity to respond; (6) if plans do not 
adhere to all claims processing rules, the claimant is deemed to have 
exhausted the administrative remedies available under the plan, unless 
the violation was the result of a minor error and other specified 
conditions are met; (7) certain rescissions of coverage are treated as 
adverse benefit determinations, thereby triggering the plan's appeals 
procedures; and (8) notices are written in a culturally and 
linguistically appropriate manner.

3. Costs and Benefits

    The Department expects that these proposed regulations would 
improve the procedural protections for workers who become disabled and 
make claims for disability benefits from employee benefit plans. This 
would cause some participants to receive benefits they might otherwise 
have been incorrectly denied absent the fuller protections provided by 
the proposed regulations. In other circumstances, expenditures by plans 
may be reduced as a fuller and fairer system of disability claims and 
appeals processing helps facilitate participant acceptance of cost 
management efforts. Greater certainty and consistency in the handling 
of disability benefit claims and appeals and improved access to 
information about the manner in which claims and appeals are 
adjudicated may lead to efficiency gains in the system, both in terms 
of the allocation of spending at a macro-economic level as well as 
operational efficiencies among individual plans.
    The Department expects the proposed regulations would impose modest 
costs on disability benefit plans, because many plans already are 
familiar with the rules that would apply to disability benefit claims 
due to their current application to group health plans. As discussed in 
detail in the cost section below, the Department quantified the costs 
associated with two provisions of the proposed regulations: the 
requirement to provide additional information to claimants in the 
appeals process ($1.9 million annually) and the requirement to provide 
information in a culturally and linguistically appropriate manner ($1.1 
million annually).

B. Background

1. Section 503 of ERISA and the Section 503 Regulations

    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 to ``afford a reasonable 
opportunity to any participant whose claim for benefits has been denied 
for a full and fair review by the appropriate named fiduciary of the 
decision denying the claim.''
    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'').\2\ The Department 
revised and updated the

[[Page 72016]]

Section 503 Regulation in 2000 by improving and strengthening the 
minimum requirements for employee benefit plan claims procedures under 
section 503 of ERISA.\3\ 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. 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 apply to group health plans and 
to claims with respect to disability benefits.\4\
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    \2\ 42 FR 27426 (May 27, 1977).
    \3\ 65 FR 70246 (Nov. 21, 2000), amended at 66 FR 35887 (July 9, 
2001).
    \4\ 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. 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. 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. See 
FAQs About The Benefit Claims Procedure Regulation, A-9 (http://www.dol.gov/ebsa/faqs/faq_claims_proc_reg.html).
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2. The Affordable Care Act Additions to the Section 503 Regulations

    Section 715(a)(1) of ERISA, added by the Affordable Care Act, 
provides that certain provisions of the Public Health Service Act (PHS 
Act) apply to group health plans and health insurance issuers in 
connection with providing health insurance coverage as if the 
provisions were included ERISA . Such provisions include section 2719 
of the PHS Act which addresses among other items internal claims and 
appeals and processes for group health plans and health insurance 
issuers. Section 2719 of the PHS Act provides that group health plans 
must have in effect an internal claims and appeals process and that 
such plans must initially incorporate the claims and appeals processes 
set forth in the Section 503 Regulation and update such processes in 
accordance with standards established by the Secretary of Labor.
    On July 23, 2010, the Departments of Health and Human Services, 
Labor, and the Treasury (collectively the Departments) issued interim 
final regulations implementing PHS Act section 2719 and issued 
amendments to the IFR on June 24, 2011 (hereinafter ``the 2719 
IFR'').\5\ The 2719 IFR updated the Section 503 Regulation to ensure 
that non-grandfathered group health plans implement an effective 
internal claims and appeal process, in compliance with the Affordable 
Care Act.\6\
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    \5\ See 75 FR 37188 (June 28, 2010), 75 FR 43330 (July 23, 2010) 
and 76 FR 37208 (June 24, 2011).
    \6\ The requirements of the Affordable Care Act and the 2719 IFR 
do not apply to grandfathered health plans under section 1251 of the 
Affordable Care Act. The Department in conjunction with the 
Department of Health and Human Services and the Department of the 
Treasury published interim final regulations implementing section 
1251 of the Affordable Care Act. See 75 FR 34538 (June 17, 2010) and 
75 FR 70114 (Nov. 17, 2010). Elsewhere in today's version of the 
Federal Register, the Departments published final regulations 
implementing section 1251 of the Affordable Care Act.
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    Elsewhere in today's version of the Federal Register, the 
Departments published final regulations implementing section PHS Act 
section 2719 (regarding internal claims and appeals and external review 
processes) and PHS Act 2712 (regarding restrictions on rescissions) 
(collectively ``the 2719 Final Rule''). The 2719 Final Rule implements 
the requirements regarding internal claims and appeals and external 
review processes for group health plans and health insurance coverage 
in the group and individual markets under the Affordable Care Act.
    The 2719 Final Rule adopts and clarifies the new requirements in 
the 2719 IFR that apply to internal claims and appeals processes for 
non-grandfathered group health plans.

3. Substantial Litigation

    Even though fewer private-sector employees participate in 
disability plans than in other types of plans,\7\ disability cases 
dominate the ERISA litigation landscape today.\8\ An aging American 
workforce may likely be a contributing factor to the significant volume 
of disability cases. Aging workers initiate more disability claims, as 
the prevalence of disability increases with age.\9\ And as a result, 
insurers and plans looking to contain disability benefit costs are 
often motivated to aggressively dispute disability claims. This 
aggressive posture coupled with the inherently factual nature of 
disability claims highlight for the Department the need to review and 
strengthen the procedural rules governing the adjudication of 
disability benefit claims.
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    \7\ BLS National Compensation Survey, March 2014, at http://www.bls.gov/ncs/ebs/benefits/2014/ebbl0055.pdf.
    \8\ See Sean M. Anderson, ERISA Benefits Litigation: An 
Empirical Picture, 28 ABA J. Lab. & Emp. L. 1 (2012).
    \9\ See Francine M. Tishman, Sara Van Looy, & Susanne M. 
Bruyere, Employer Strategies for Responding to an Aging Workforce, 
NTAR Leadership Center (2012).
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4. ERISA Advisory Council Recommendations

    In 2012, the ERISA Advisory Council undertook a study on issues 
relating to managing disability in an environment of individual 
responsibility. The Advisory Council issued a report containing, in 
relevant part, recommendations for review of the Section 503 Regulation 
to determine updates and modifications for disability benefit claims, 
drawing upon analogous processes described in the 2719 IFR where 
appropriate, to address (1) what is an adequate opportunity to develop 
the record; and (2) content for denials of such claims.\10\
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    \10\ The report may be accessed at http://www.dol.gov/ebsa/publications/2012ACreport2.html.
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    Based on the foregoing, the Department believes that in order to 
afford claimants of disability benefits a reasonable opportunity to 
pursue a full and fair review, as required by ERISA section 503, 
modifications to the Section 503 Regulation, that align with the 
updated standards required by the Affordable Care Act and extended to 
non-grandfathered group health plans in paragraph (b) of the 2719 Final 
Rule at 29 CFR 2590.715-2719, are necessary.

C. Overview of Proposed Regulation

1. Independence and Impartiality--Avoiding Conflicts of Interest

    In order to ensure a full and fair review of claims and appeals, 
the Section 503 Regulation already contains certain standards of 
independence for persons making claims decisions, and the proposal 
would build on these standards by providing new criteria for avoiding 
conflicts of interest. In alignment with criteria in the 2719 Final 
Rule, paragraph (b)(7) of the proposal explicitly provides that plans 
providing disability benefits would have to ``ensure that all 
disability benefit claims and appeals are adjudicated in a manner 
designed to ensure the independence and impartiality of the persons 
involved in making the decision.'' The proposal also would require that 
decisions regarding hiring, compensation, termination, promotion, or 
similar matters with respect to any individual (such as a claims 
adjudicator or medical expert) must not be made based upon the 
likelihood that the individual will support the denial of disability 
benefits. For example, a plan would not be permitted to provide bonuses 
based on the number of denials made by a claims adjudicator. Similarly, 
a plan would not be permitted to contract with a medical expert based 
on the expert's reputation

[[Page 72017]]

for outcomes in contested cases, rather than based on the expert's 
professional qualifications. These added criteria address practices and 
behavior which, in the context of disability benefits, the Department 
finds difficult to reconcile with the ``full and fair review'' 
guarantee in section 503 of ERISA and which are questionable under 
ERISA's basic fiduciary standards.

2. Improvements to Basic Disclosure Requirements

    The proposal would amend the current disclosure requirements in 
three significant respects. First, adverse benefit determinations on 
disability benefit claims would have to contain a discussion of the 
decision, including the basis for disagreeing with any disability 
determination by the Social Security Administration (SSA), by a 
treating physician, or other third party disability payor, to the 
extent that the plan did not follow those determinations presented 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 doctor's opinion or their SSA award 
of disability benefits.\11\
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    \11\ See, e.g., McDonough v. Aetna Life Ins. Co., 783 F.3d 374, 
382 (1st Cir. 2015) (holding that ``Aetna's failure to articulate 
the contours of the own occupation standard, apply that standard in 
a meaningful way, and reason from that standard to an appropriate 
conclusion regarding the appellant's putative disability renders its 
benefits-termination decision arbitrary and capricious.''). See also 
Montour v. Hartford Life and Accident Ins. Co., 588 F.3d 623, 637 
(9th Cir. 2009) (``Hartford's 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.'').
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    Second, adverse benefit determinations would have to contain the 
internal rules, guidelines, protocols, standards or other similar 
criteria of the plan that were used in denying the claim (or a 
statement that these do not exist). Third, a notice of adverse benefit 
determination at the claim stage would have to contain a statement that 
the claimant is entitled to receive, upon request, relevant documents. 
Under the current Section 503 Regulation, such statement is required 
only in notices of an adverse benefit determination denied on appeal.
    These provisions would serve the purpose of ensuring that claimants 
fully understand why their disability benefit claim was denied so they 
are able to meaningfully evaluate the merits of pursuing an appeal.\12\ 
As described below, paragraph (p) of the proposal incorporates the 
provision from the 2719 Final Rule that requires notices to be written 
in a culturally and linguistically appropriate manner.
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    \12\ See, e.g., Bard v. Boston Shipping Ass'n., 471 F.3d 229, 
240 (1st Cir. 2006) (``in relying on the McLaughlin arbitration to 
reject Bard's claim, the Board relied on a rule, guideline, 
protocol, or other similar criterion[,] [y]et Bard was not notified 
of even a condensed version of this rule, nor does it appear that he 
was timely notified that the McLaughlin arbitrator's opinion existed 
at all.'') (internal quotation and citation omitted); Salomaa v. 
Honda Long Term Disability Plan, 642 F.3d 666, 679 (9th Cir. 2011) 
(``The review was not `fair,' as the statute requires, because the 
plan did not give Salomaa and his attorney and physicians access to 
the two medical reports of its own physicians upon which it relied, 
among other reasons. In addition, the plan administrator denied the 
claim largely on account of absence of objective medical evidence, 
yet failed to tell Salomaa what medical evidence it wanted.'').
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3. Right To Review and Respond to New Information Before Final Decision

    The proposal would add criteria to ensure a full and fair review of 
denied disability claims by explicitly providing that claimants have a 
right to review and respond to new 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. Specifically, the proposal provides that prior to a plan's 
decision on appeal, a disability benefit claimant must be provided, 
free of charge, with any new or additional evidence considered, relied 
upon, or generated by (or at the direction of) the plan in connection 
with the claim, as well as any new or additional rationale for a 
denial, and a reasonable opportunity for the claimant to respond to 
such new or additional evidence or rationale. See paragraph (h)(4)(i)-
(iii) of the proposal. Although these important protections are direct 
imports from the 2719 Final Rule, they would correct procedural 
problems evidenced in the litigation even predating the ACA.\13\ It is 
the view of the Department that claimants are deprived of a full and 
fair review, as required by section 503 of ERISA, when they are 
prevented from responding at the administrative stage level to evidence 
and rationales.\14\ Accordingly, adding these provisions to the Section 
503 Regulation would explicitly address this problem and redress the 
procedural wrongs evidenced in the litigation under the current 
regulation.
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    \13\ 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).
    \14\ 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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    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 by a medical specialist who was 
not involved with developing the first medical report. The proposal 
would require the plan to automatically furnish to the claimant any new 
evidence in the second report. The plan would have to furnish the new 
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 respond to the new 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 evidence, the plan would have to automatically furnish 
to the claimant any new evidence in the third report. The new 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 evidence in the third report.
    The right of disability benefit claimants to review new evidence or 
new rationales is a less meaningful right standing by itself than if 
accompanied by a right to respond to the new information. Consequently, 
the proposal would also grant the claimant a right to respond to the 
new information by explicitly providing claimants the right to present 
evidence and written testimony as part of the claims and appeals 
process. See paragraph (h)(4)(i) of the proposal.\15\
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    \15\ Consistent with paragraph (h)(2)(ii) of the Section 503 
Regulation (granting claimants the right to ``submit written 
comments, documents, records, and other information relating to the 
claim for benefits''), paragraph (h)(4)(i) of the proposal 
contemplates written evidence and testimony and therefore, in the 
Department's view, does not entitle the claimant to an oral hearing.

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[[Page 72018]]

    These new rights (i.e., review and response rights) are being 
proposed as an overlay to the detailed timing rules already in the 
Section 503 Regulation. In particular, the Section 503 Regulation 
already contains timing rules for disability claims that allow plan 
administrators extensions ``for special circumstances'' at the appeals 
stage, with a related tolling provision if the reason for an extension 
is ``due to a claimant's failure to submit information necessary to 
decide a claim.'' See 29 CFR 2560.503-1(i)(3)(i) and (i)(4). Comments 
are requested 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 dialog that is contemplated by the new review and response 
rights.
    For instance, is a special tolling rule like the one adopted today 
for group health plans under the 2719 Final Rule also needed for 
disability benefit appeals? The 2719 Final Rule, in relevant part, 
provides ``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.'' See 29 CFR 2590.715-
2719(b)(2)(ii)(C)(2). The proposal does not adopt this tolling 
provision from the 2719 Final Rule because, as noted above, the 
existing Section 503 Regulation already permits plans providing 
disability benefits to take extensions at the appeals stage. This 
special tolling provision under the 2719 Final Rule was needed for 
group health plans because the Section 503 Regulation generally does 
not permit them to take extensions at the appeals stage.

4. Deemed Exhaustion of Claims and Appeals Processes

    The proposal would strengthen the deemed exhaustion provision in 
the Section 503 Regulation in three important respects. First, the more 
stringent standards in the 2719 Final Rule would replace existing 
standards for disability benefit claims in cases where the plan fails 
to adhere to all the requirements of the Section 503 Regulation. Thus, 
in this respect, the proposal would adopt the 2719 Final Rule's 
approach, including an exception in paragraph (l)(2)(ii) for errors 
that are minor and meet certain other specified conditions. Second, 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. Third, protection would be given to claimants whose attempts 
to pursue remedies in court under section 502(a) of ERISA based on 
deemed exhaustion are rejected by a reviewing tribunal.\16\
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    \16\ The deemed exhaustion provision in the proposal, if adopted 
in a final regulation, would supersede any and all prior 
Departmental guidance with respect to disability benefit claims to 
the extent such guidance is contrary to the final regulation, 
including but not limited to FAQ F-2 in Frequently Asked Questions 
About The Benefit Claims Procedure Regulation (http://www.dol.gov/ebsa/faqs/faq_claims_proc_reg.html).
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    The minor errors exception would operate as follows. The proposal 
would provide that any violation of the procedural rules in the Section 
503 Regulation would permit a claimant to seek immediate court action, 
unless 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. In 
addition, the claimant would be entitled upon request, to an 
explanation of the plan's basis for asserting that it meets this 
standard, so that claimant could make an informed judgment about 
whether to seek immediate review.
    Too often claimants find themselves without any forum to resolve 
their disputes if they prematurely pursued their claims in court before 
exhausting the plan's administrative remedies. To prevent this from 
happening to disability benefit claimants even more frequently due to 
the interplay between the strict compliance standard and the minor 
errors exception, the proposal contains a special safeguard for 
claimants who erroneously concluded their plan's violation of the 
Section 503 Regulation entitled them to take their claim directly to 
court. The safeguard provides that if a court rejects the claimant's 
request for immediate review on the basis that the plan met the 
standards for the minor errors exception, the claim would be considered 
as re-filed on appeal upon the plan's receipt of the decision of the 
court. In addition, within a reasonable time after the receipt of the 
decision, the plan would be required to provide the claimant with 
notice of the resubmission. At this point, the claimant would have the 
right to pursue the claim in accordance with the plan's provisions 
governing appeals, including the right to present evidence and 
testimony.
    The proposed standards set forth the Department's view of the 
consequences that ensue when a plan fails to provide procedures for 
disability benefit claims that meet the requirements of section 503 of 
ERISA as set forth in regulations. They reflect the Department's view 
that if the plan fails to provide processes that meet the regulatory 
minimum standards, and does not otherwise qualify for the minor errors 
exception, the disability benefit claimant should be free to pursue the 
remedies available under section 502(a) of ERISA 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. The Department's 
intentions in including this provision in the proposal are to clarify 
that the procedural minimums of the Section 503 Regulation are 
essential to procedural fairness and that a decision made in the 
absence of the mandated procedural protections should not be entitled 
to any judicial deference. In this regard, the proposal provides that 
if 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. 
Consequently, rather than giving special deference to the plan, the 
reviewing court should review the dispute de novo.

5. Coverage Rescissions--Adverse Benefit Determinations

    The proposal would add a new provision to address coverage 
rescissions not already covered under the Section 503 Regulation. For 
this purpose, a rescission generally is a cancellation or 
discontinuance of disability coverage that has retroactive effect. The 
Section 503 Regulation already covers a rescission if the rescission is 
the basis, in whole or in part, of an adverse benefit determination. 
For instance, if a plan were to deny a claim based on a conclusion that 
the claimant is ineligible for benefits due to a rescission of 
coverage, the claimant would have a right to appeal the adverse benefit 
determination under the plan's

[[Page 72019]]

procedures for reviewing denied claims. Other rescissions (those made 
in the absence of a claim, such as resulting from an internal audit), 
however, may not be covered by the Section 503 Regulation and, 
consequently, would not trigger the procedural protections of section 
503 of ERISA. Although many rescissions may be proper under the terms 
of the plan, some rescissions may be improper or erroneous. In the 
latter case, participants and beneficiaries may face dangerous and 
unwanted lapses in disability coverage without their knowledge, and 
without knowing how to challenge the rescission.
    Accordingly, the proposed rule would amend 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, whether or not, in connection with the 
rescission, there is an adverse effect on any particular benefit at 
that time. Thus, for example, a rescission of disability benefit 
coverage would be an adverse benefit determination even if the affected 
participant or beneficiary was not receiving disability benefits at the 
time of the rescission. The specific amendment would expand the scope 
of the current definition by expressly providing that an ``adverse 
benefit determination'' includes a rescission of disability coverage 
with respect to a participant or beneficiary, and define the term 
``rescission'' to mean ``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.'' This new definition is modeled on the definition of 
rescission in the 2719 Final Rule, but would not be limited to 
rescissions based upon fraud or intentional misrepresentation of 
material fact.\17\ Consequently, if a plan provides for a rescission of 
coverage for disability benefits if an individual makes a 
misrepresentation of material fact, even if the misrepresentation was 
not intentional or made knowingly, the rescission would be an adverse 
benefit determination under this proposal. This proposed change would 
not prohibit rescissions; rather, it would require plans to treat 
certain rescissions as adverse benefit determinations, thereby 
triggering the applicable procedural rights under the Section 503 
Regulation.
---------------------------------------------------------------------------

    \17\ The Affordable Care Act prohibits group health plans from 
rescinding coverage with respect to an individual once the 
individual is covered, except in the case of fraud or intentional 
misrepresentation of material fact. Consequently, the definition of 
adverse benefit determination in the 2719 Final Rule effectively is 
limited to these situations. See 75 FR 37188 and 75 FR 43330.
---------------------------------------------------------------------------

6. Culturally & Linguistically Appropriate Notices

    The proposal contains safeguards for individuals who are not fluent 
in English. The safeguards would require that adverse benefit 
determinations with respect to disability benefits be provided in a 
culturally and linguistically appropriate manner in certain situations. 
The safeguards include standards that illustrate what would be 
considered ``culturally and linguistically appropriate'' in these 
situations. The safeguards and standards are incorporated directly from 
the 2719 Final Rule and reflect public comment on that rule. The 
relevant standards are contained in paragraph (p) of the proposal.
    Under the proposed safeguards, 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.\18\ In addition, the plan would be required to 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. Oral language 
services includes answering questions in any applicable non-English 
language and providing assistance with filing claims and appeals in any 
applicable non-English language.
---------------------------------------------------------------------------

    \18\ The Department provides sample sentences in Model Notices 
at www.dol.gov/ebsa/healthreform/regulations/internalclaimsandappeals.html.
---------------------------------------------------------------------------

    Two hundred and fifty-five (255) U.S. counties (78 of which are in 
Puerto Rico) meet the 10 percent threshold at the time of this 
proposal. The overwhelming majority of these are Spanish; however, 
Chinese, Tagalog, and Navajo are present in a few counties, affecting 
five states (specifically, Alaska, Arizona, California, New Mexico, and 
Utah). A full list of the affected U.S. counties is available on the 
Department's Web site and updated annually.\19\
---------------------------------------------------------------------------

    \19\ https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/2009-13-CLAS-County-Data.pdf.
---------------------------------------------------------------------------

D. Miscellaneous

1. Technical Correction

    The Department has determined that a minor technical fix to the 
Section 503 Regulation is required with respect to disability claims. 
The Department proposes 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. Accordingly, the proposal would 
amend paragraph (i)(3) to correctly refer to the appropriate 
subparagraph in (i)(1) of the Section 503 Regulation.

2. Request for Comments--Statute of Limitations

    ERISA does not specify the period after a final adverse benefit 
determination within which a civil action must be filed under section 
502(a)(1)(B) of ERISA. Instead, 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. Plan documents and insurance contracts sometimes have 
limitations periods which may override analogous state laws. These 
contractual limitations periods are not uniform and the events that 
trigger their running vary. In addition, claimants may not have read 
the relevant plan documents or the documents may be difficult for 
claimants to understand. The Supreme Court recently upheld the use of 
contractual limitations periods so long as they are reasonable.\20\
---------------------------------------------------------------------------

    \20\ Heimeshoff v. Hartford Life & Accident Ins. Co., 134 S.Ct. 
604, 611 (2013).
---------------------------------------------------------------------------

    A separate issue, not before the Supreme Court in Heimeshoff v. 
Hartford Life & Accident Ins. Co., is whether plans should provide 
participants with notice with respect to contractual limitations 
periods in adverse benefit determinations on review. The courts of 
appeals are currently in disagreement on whether plans should provide 
such notice under the Section 503 Regulation.\21\ Inasmuch

[[Page 72020]]

as plans are responsible for implementing contractual limitations 
provisions, plans may be in a better position than claimants to 
understand and to explain what those provisions mean.\22\ In addition, 
it could prove costly to a participant to hire a lawyer to provide an 
interpretation that should be readily available to the plan at little 
or no cost. Accordingly, the Department solicits 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.
---------------------------------------------------------------------------

    \21\ Compare 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) with Wilson v. Standard Ins. Co., 
613 F. App'x 841, 844 n.3 (11th Cir. 2015) (per curiam) (``We are 
not persuaded by the Sixth Circuit's conclusion that a claims 
administrator's interpretation of the ambiguous Sec.  2560.503-
1(g)(1)(iv) not to require notice in the claim denial letter of the 
contractual time limit for judicial review necessarily amounts to a 
failure to comply with Sec.  1133 that renders the contractual 
limitations provision unenforceable.'').
    \22\ Cf. Moyer, 762 F.3d at 507 (``The exclusion of the judicial 
review time limits from the adverse benefit determination letter was 
inconsistent with ensuring a fair opportunity for review and 
rendered the letter not in substantial compliance.'')
---------------------------------------------------------------------------

E. Effective Date

    The Department proposes to make this regulation effective 60 days 
after the date of publication of the final rule in the Federal 
Register.

F. Economic Impact and Paperwork Burden

1. Background and Need for Regulatory Action

    As discussed in Section B of this preamble, the proposed 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 Affordable Care Act, 
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 Section 503 Regulation. The 
enactment of the ACA and the issuance of the implementing interim final 
regulations resulted in disability benefit 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 more stringent procedural 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 proposed regulation. This will help alleviate the financial and 
emotional hardship suffered by many individuals when they lose earnings 
due to their becoming disabled. The proposed rule also should help 
limit the volume and constancy of disability benefits litigation.
    The Department has crafted these proposed 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 proposed regulations.

2. Executive Order 12866 and 13563--Department of Labor

    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 
these proposed rules pursuant to the Executive Order. The Department 
provides an assessment of the potential costs and benefits of proposed 
rule below, as summarized in Table 1, below.

[[Page 72021]]



                                            Table 1--Accounting Table
----------------------------------------------------------------------------------------------------------------
                    Category                         Estimate       Year dollar    Discount rate  Period covered
----------------------------------------------------------------------------------------------------------------
Benefits--Qualitative...........................  The Department expects that these proposed regulations would
                                                  improve the procedural protections for workers who become
                                                  disabled and make claims for disability benefits from employee
                                                  benefit plans. This would cause some participants to receive
                                                  benefits they might otherwise have been incorrectly denied
                                                  absent the fuller protections provided by the proposed
                                                  regulations. In other circumstances, expenditures by plans may
                                                  be reduced as a fuller and fairer system of disability claims
                                                  and appeals processing helps facilitate participant acceptance
                                                  of cost management efforts. Greater certainty and consistency
                                                  in the handling of disability benefit claims and appeals and
                                                  improved access to information about the manner in which
                                                  claims and appeals are adjudicated may lead to efficiency
                                                  gains in the system, both in terms of the allocation of
                                                  spending at a macro-economic level as well as operational
                                                  efficiencies among individual plans.
----------------------------------------------------------------------------------------------------------------
Costs
    Annualized..................................      $3,019,000            2015              7%       2016-2025
     Monetized..................................      $3,019,000            2015              3%       2016-2025
----------------------------------------------------------------------------------------------------------------
Qualitative.....................................  These requirements would impose modest costs on plan, because
                                                  many plans already are familiar with the rules that would
                                                  apply to disability benefit claims due to their current
                                                  application to group health plans. As discussed in detail in
                                                  the cost section below, the Department quantified the costs
                                                  associated with two provisions of the proposed regulations:
                                                  the requirement to provide additional information to claimants
                                                  in the appeals process and the requirement to provide
                                                  information in a culturally and linguistically appropriate
                                                  manner.
----------------------------------------------------------------------------------------------------------------

3. 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. All ERISA-covered welfare benefit plans with 
more than 100 participants 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 2013 Form 5500 indicates that there are 34,300 plans 
covering 52.2 million participants reporting a code indicating they 
provide temporary disability benefits, and 26,400 plans covering 46.9 
million participants reporting a code indicating they provide long-term 
disability benefits. To put these numbers in perspective, using the CPS 
and the MEPS-IC, the Department estimates that there are 140,000 large 
group health plans and 2.2 million small group health plans.

4. Benefits

    In developing these proposed 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 proposed regulations due to data 
limitations and a lack of effective measures. Therefore, the Department 
provides a qualitative discussion of the benefits below.
    These proposed regulations would implement a more uniform and 
rigorous system of disability claims and appeals processing that 
conforms to the rules applicable to group health plans. In general, the 
Department expects that these proposed regulations would improve the 
procedural protections for workers who become disabled and make claims 
for disability benefits from 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 by plans may 
be reduced as a fuller and fairer system of claims and appeals 
processing helps facilitate participant acceptance of cost management 
efforts. Greater certainty and consistency in the handling of 
disability benefit claims and appeals and improved access to 
information about the manner in which claims and appeals are 
adjudicated may lead to efficiency gains in the system, both in terms 
of the allocation of spending at a macro-economic level as well as 
operational efficiencies among individual plans. This certainty and 
consistency can also be expected to benefit, to varying degrees, all 
parties within the system and to lead to broader social welfare gains, 
particularly for participants.
    The Department expects that these proposed regulations also will 
improve the efficiency of plans providing disability benefits by 
enhancing their transparency and fostering participants' confidence in 
their fairness. The enhanced disclosure and notice requirements of 
these proposed regulations would benefit participants and beneficiaries 
better understand the reasons underlying adverse benefit determinations 
and their appeal rights.
    For example, the proposed regulations would require adverse benefit 
determinations to contain a discussion of the decision, including the 
basis for disagreeing with any disability determination by the Social 
Security Administration (SSA), a treating physician, or other third 
party disability determinations, to the extent that the plan did not 
follow those determinations presented by the

[[Page 72022]]

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 doctor's opinion or their SSA award of disability benefits.
    Under the proposal, adverse benefit determinations would have to 
contain the internal rules, guidelines, protocols, standards or other 
similar criteria of the plan that were used in denying the claim (or a 
statement that these do not exist), and a notice of adverse benefit 
determination at the claim stage would have to contain a statement that 
the claimant is entitled to receive, upon request, relevant documents. 
These provisions would benefit claimants by ensuring that they fully 
understand why their claim was denied so they are able to meaningfully 
evaluate the merits of pursuing an appeal.
    The proposal also would require adverse benefit determinations for 
certain participants and beneficiaries that are not fluent in English 
to be provided in a culturally and linguistically appropriate manner in 
certain situations. 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 would 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. The proposal also would provide claimants with the right to 
review and respond to new 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 current 
regulation. Specifically, the proposal provides that prior to a plan's 
decision on appeal, a disability benefit claimant must be provided, 
free of charge, with new or additional evidence considered, relied 
upon, or generated by (or at the direction of) the plan in connection 
with the claim, as well as any new or additional rationale for a 
denial, and a reasonable opportunity for the claimant to respond to 
such new or additional evidence or rationale. 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. With workers unwilling to bear the full cost of the 
benefit, fewer benefits will be provided. To the extent that workers 
perceive that these proposed regulations, supported by enforcement 
authority, reduces the risk of inappropriate denials of disability 
benefits, the differential between the employers' costs and workers' 
willingness to accept wage offsets is minimized.
    These proposed 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 proposal would prohibit hiring, 
compensation, termination, promotion, or other similar decisions with 
respect to any individual (such as a claims adjudicator or medical 
expert) to be made based upon the likelihood that the individual will 
support the plan's benefits denial. This would enhance participants' 
perception that their disability plan's claims and appeals processes 
are operated in a fair manner.
    The proposal would add criteria to ensure a full and fair review of 
denied claims by making it explicitly clear that claimants have a right 
to review and respond to new evidence or rationales developed by the 
plan during the pendency of the appeal rather than only after the claim 
has already been denied on appeal, as some courts have held under the 
current regulation. Specifically, the proposal would require a 
disability benefit claimant to be provided, free of charge, with new or 
additional evidence considered, relied upon, or generated by (or at the 
direction of) the plan in connection with the claim, as well as any new 
or additional rationale for a denial, and a reasonable opportunity for 
the claimant to respond to such new or additional evidence or rationale 
before issuing an adverse benefit determination on review.
    Providing a more formally sanctioned framework for adjudicating 
disability claims and appeals facilitates the adoption of cost 
containment programs by employers who, in the absence of a regulation 
providing some guidance, may have opted to pay questionable claims 
rather than risk alienating participants or being deemed to have 
breached their fiduciary duty.
    In summary, the proposed rules provide more uniform standards for 
handling disability benefit claims and appeals that are comparable to 
the rules applicable to group health plans. These rules would 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 proposed regulations would 
enhance the efficiency of labor and insurance markets. The Department 
therefore concludes that the economic benefits of these proposed 
regulations will justify their costs.

5. Costs and Transfers

    The Department has quantified the primary costs associated with 
these proposed 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 manger. 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 a notice of adverse benefit determination on review on a 
disability benefit claim, these proposed regulations would 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 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 rationale 
sufficiently in advance of the due date of the response to an adverse 
benefit determination on review. This requirement increases the 
administrative burden on plans to

[[Page 72023]]

prepare and deliver the enhanced information to claimants. 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.
    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. The Department assumes 
that this requirement will impose an annual aggregate cost of $1.9 
million. The Department estimated this cost by assuming that compliance 
will require medical office staff, or other similar staff in other 
service setting with a labor rate of $30, five minutes \23\ 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 75 percent of all mailings will be distributed 
electronically with no associated material, printing or postage 
costs.\24\
---------------------------------------------------------------------------

    \23\ The Department's estimated 2015 hourly labor rates include 
wages, other benefits, and overhead are calculated as follows: mean 
wage from the 2013 National Occupational Employment Survey (April 
2014, Bureau of Labor Statistics http://www.bls.gov/news.release/archives/ocwage_04012014.pdf); wages as a percent of total 
compensation from the Employer Cost for Employee Compensation (June 
2014, Bureau of Labor Statistics http://www.bls.gov/news.release/archives/ecec_09102014.pdf); overhead as a multiple of compensation 
is assumed to be 25 percent of total compensation for 
paraprofessionals, 20 percent of compensation for clerical, and 35 
percent of compensation for professional; annual inflation assumed 
to be 2.3 percent annual growth of total labor cost since 2013 
(Employment Costs Index data for private industry, September 2014 
http://www.bls.gov/news.release/archives/eci_10312014.pdf).
    \24\ This estimate is based on the methodology used to analyze 
the cost burden for the Section 503 Regulation (OMB Control Number 
1210-0053).
---------------------------------------------------------------------------

    The Department lacks 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 (119 million) \25\ that participate in short- 
and long-term disability programs (approximately 39 and 33 percent 
respectively).\26\ 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 (two percent of covered individuals). 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 of 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.
---------------------------------------------------------------------------

    \25\ BLS Employment, Hours, and Earnings from the Current 
Employment Statistics survey (National) Table B-1.
    \26\ ``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.
---------------------------------------------------------------------------

    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 Social Security Disability Insurance Program (75 
percent). For short-term disability, the estimate of denied claims 
(three percent) is from the 2012 National Compensation Survey: Employee 
Benefits in Private Industry in the United States. 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                  63            21                463           154                526           175           701
 Additional Information................
Mailing cost per event.................              $0.00         $0.99              $0.00         $0.99              $0.00         $0.99  ............
                                        ================================================================================================================
Total Mailing Cost.....................              $0.00        $21                 $0.00       $153                 $0.00       $173          $173
Preparation Cost per event.............              $2.50         $2.50              $2.50         $2.50              $2.50         $2.50         $2.50
Total Preparation cost.................            $157           $52             $1,156          $385             $1,313          $438        $1,751
                                        ================================================================================================================
    Total..............................            $157           $73             $1,156          $538             $1,313          $611        $1,925
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Providing Notices in a Culturally and Linguistically Appropriate 
Manner: The proposed regulations 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. These proposed 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 that translation services are 
available. Plans also must provide, upon request, a notice in any 
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. Based on the 2013 ACS data, the Department estimates that 
there are

[[Page 72024]]

about 11.4 million individuals living in covered counties that are 
literate in a non-English Language.\27\ To estimate the number of the 
11.4 million individuals that might make a request, the Department 
estimates the number of workers in each state with access to short-term 
and long-term disability insurance (total population in county* state 
labor force participation rate* state employment rate).28 29 
The number of employed workers then was multiplied by an estimate of 
the share of workers participating in disability benefits, 39 percent 
for short-term and 33 percent for long term disability.\30\
---------------------------------------------------------------------------

    \27\ http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/2009-13-CLAS-County-Data.pdf. http://www.dol.gov/ebsa/pdf/coveragebulletin2014.pdf Table 1C.
    \28\ Labor force Participation rate: http://www.bls.gov/lau/staadata.txt Unemployment rate: http://www.bls.gov/lau/lastrk14.htm.
    \29\ 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.
    \30\ ``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.
---------------------------------------------------------------------------

    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 
these proposed regulations, and the demographics for California do not 
match other counties, for purposes of this analysis, the Department 
uses this percentage to estimate of the number of translation service 
requests that plans could expect to receive. As there are fewer 
disability claims than health claims, the Department believes that this 
estimate significantly overstates the cost. Industry experts also told 
the Department that while the cost of translation services varies, $500 
per document is a reasonable approximation of translation cost.
    Based on the foregoing, the Department estimates that the cost to 
provide translation services will be approximately $1.1 million 
annually (23,206,000 lives * 0.098/1000 * $500).

6. Regulatory Flexibility Act--Department of Labor and Department of 
Health and Human Services

    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 proposal is not 
likely to have a significant economic impact on a substantial number of 
small entities, section 603 of the RFA requires the agency to present 
an initial regulatory flexibility analysis (IRFA) of the proposed rule. 
The Department's IRFA of the proposed rule is provided below.
    Need for and Objectives of the Rule: As discussed in section B of 
this preamble, the proposed 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 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 proposed regulation. 
This will help alleviate the financial and emotional hardship suffered 
by many individuals when they lose earnings due to their becoming 
disabled. The proposed rule also should help limit the volume and 
constancy of disability benefits litigation.
    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. All ERISA-covered welfare 
benefit plans with more than 100 participants 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 2013 Form 5500 indicates that there are 34,300 plans 
covering 52.2 million participants reporting a code indicating they 
provide temporary disability benefits, and 26,400 plans covering 46.9 
million participants reporting a code indicating they provide long-term 
disability benefits. To put these numbers in perspective, using the CPS 
and the MEPS-IC, the Department estimates that there are 140,000 large 
group health plans and 2.2 million small group health plans.
    Impact of the Rule: The Department has quantified the primary costs 
associated with these proposed 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 manger. 
These requirements and their associated costs are discussed in the 
Costs and Transfers section above.
    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, these proposed regulations would 
require 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 rationale 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, five minutes \31\ to

[[Page 72025]]

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 75 percent of all mailings will be distributed 
electronically with no associated material, printing or postage costs.
---------------------------------------------------------------------------

    \31\ The Department's estimated 2015 hourly labor rates include 
wages, other benefits, and overhead are calculated as follows: mean 
wage from the 2013 National Occupational Employment Survey (April 
2014, Bureau of Labor Statistics http://www.bls.gov/news.release/archives/ocwage_04012014.pdf); wages as a percent of total 
compensation from the Employer Cost for Employee Compensation (June 
2014, Bureau of Labor Statistics http://www.bls.gov/news.release/archives/ecec_09102014.pdf); overhead as a multiple of compensation 
is assumed to be 25 percent of total compensation for 
paraprofessionals, 20 percent of compensation for clerical, and 35 
percent of compensation for professional; annual inflation assumed 
to be 2.3 percent annual growth of total labor cost since 2013 
(Employment Costs Index data for private industry, September 2014 
http://www.bls.gov/news.release/archives/eci_10312014.pdf).
---------------------------------------------------------------------------

    Providing Notices in a Culturally and Linguistically Appropriate 
Manner: The proposed regulations would require that notices of adverse 
benefit determinations with respect to disability benefits 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. These proposed regulations also require 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, $500 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 
these proposed regulations, 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 proposed actions 
would conflict with any relevant regulations, federal or other.
    Based on the foregoing, the Department hereby certifies that these 
final regulations will not have a significant economic impact on a 
substantial number of small entities.

7. Paperwork Reduction Act

    As part of its continuing effort to reduce paperwork and respondent 
burden, the Department conducts a preclearance consultation program to 
provide the general public and Federal agencies with an opportunity to 
comment on proposed and continuing collections of information in 
accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 
3506(c)(2)(A)). This helps to ensure that the public understands the 
Department's collection instructions, respondents can provide the 
requested data in the desired format, reporting burden (time and 
financial resources) in minimized, collection instructions are clearly 
understood, and the Department can properly assess the impact of 
collection requirements on respondents.
    As discussed above, these proposed regulations would require plans 
providing disability benefits to meet additional requirements when 
complying with the Department's claims procedure regulation. Some of 
these requirements would require disclosures covered by the PRA. These 
requirements include disclosing information to ensure a full and fair 
review of a claim or appeal, and the content of notices of benefit 
determinations.
    Currently, the Department is soliciting 60 days of public comments 
concerning these disclosures. The Department has submitted a copy of 
these proposed regulations to OMB in accordance with 44 U.S.C. 3507(d) 
for review of the information collections. The Department and OMB are 
particularly interested in comments that:
     Evaluate whether the collection of information is 
necessary for the proper performance of the functions of the agency, 
including whether the information will have practical utility;
     Evaluate the accuracy of the agency's estimate of the 
burden of the collection of information, including the validity of the 
methodology and assumptions used;
     Enhance the quality, utility, and clarity of the 
information to be collected; and
     Minimize the burden of the collection of information on 
those who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology, for example, by 
permitting electronic submission of responses.
    Comments should be sent to the Office of Information and Regulatory 
Affairs, Attention: Desk Officer for the Employee Benefits Security 
Administration either by fax to (202) 395-7285 or by email to 
oira_submission@omb.eop.gov. A copy of the ICR may be obtained by 
contacting the 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. Email: ebsa.opr@dol.gov. ICRs submitted to OMB also 
are available at reginfo.gov (http://www.reginfo.gov/public/do/ 
PRAMain).
    ERISA-covered group health plans already are required to comply 
with the requirements of the Section 503 Regulation. The Section 503 
Regulation requires, among other things, plans to provide a claimant 
who is denied a claim with a written or electronic notice that contains 
the specific reasons for denial, a reference to the relevant plan 
provisions on which the denial is based, a description of any 
additional information necessary to perfect the claim, and a 
description of steps to be taken if the participant or beneficiary 
wishes to appeal the denial. The regulation also requires that any 
adverse decision upon review be in writing (including electronic means) 
and include specific reasons for the decision, as well as references to 
relevant plan provisions.
    With the implementation of the ACA claims regulations, participants 
of disability plans receive fewer procedural protections than 
participants in group health plan participants, while they experience 
similar if not significantly more issues with the claims review 
process. These proposed regulations would reduce the inconsistent 
procedural rules applied to health and disability benefit plan claims 
and provide similar procedural

[[Page 72026]]

protections to both groups of plan participants.
    The burdens associated with this proposed regulatory requirements 
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: 5,961,000.
    Total Responses: 311,867,000.
    Frequency of Response: Occasionally.
    Estimated Total Annual Burden Hours: 515,000.
    Estimated Total Annual Burden Cost: $654,579,000.

8. Congressional Review Act

    These proposed regulations are 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, if finalized, would be 
transmitted to Congress and the Comptroller General for review. The 
proposed 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.

9. Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4) requires each Federal agency to prepare a written statements 
assessing the effects of any Federal Mandate in a proposed or final 
agency rule that may result in annual expenditures of $100 million (as 
adjusted for inflation) in any one year by State, local and tribal 
governments, in the aggregate, or the private sector. Such a mandate is 
deemed to be a ``significant regulatory action.'' These proposed 
regulations are not a ``significant regulatory action.'' Therefore the 
Department concludes that these proposed regulations would not impose 
an unfunded mandate on State, local and tribal governments, in the 
aggregate, or the private sector.

10. Federalism Statement

    Executive Order 13132 outlines fundamental principles of 
federalism, and 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 Departments of Labor's view, these proposed 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 proposal. 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 welcomes input from affected States, including the National 
Association of Insurance Commissioners and State insurance officials, 
regarding this assessment.

List of Subjects in 29 CFR Part 2560

    Claims, Employee benefit plans, Pensions.

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

PART 2560--RULES AND REGULATIONS FOR ADMINISTRATION AND ENFORCEMENT

0
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).

0
2. Section 2560.503-1 is amended by:
0
a. Adding paragraph (b)(7).
0
b. Revising paragraph (g)(1)(v) introductory text.
0
c. Adding paragraphs (g)(1)(vii) and (viii).
0
d. Revising paragraphs (h)(4), (i)(3)(i), and (j)(5) introductory text.
0
e. Adding paragraphs (j)(6) and (7).
0
f. Revising paragraphs (l) and (m)(4).
0
g. Adding paragraphs (m)(9) and (p).
    The revisions and additions read as follows:


Sec.  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 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, to the extent that the 
plan did not follow or agree with the views presented by the claimant 
to the plan of health care professionals treating a claimant or the 
decisions presented by the claimant to the plan of other payers of 
benefits who granted a claimant's similar claims (including disability 
benefit determinations by the Social Security Administration), the 
basis for disagreeing with their views or decisions;
    (B) 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
    (C) 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 (p) of this section).
* * * * *

[[Page 72027]]

    (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) Allow a claimant to review the claim file and to present 
evidence and testimony as part of the disability benefit claims and 
appeals process;
    (ii) 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 (or at the direction of the plan) 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
    (iii) 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.
* * * * *
    (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) * * *
    (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, to the extent that the 
plan did not follow or agree with the views presented by the claimant 
to the plan of health care professionals treating a claimant or the 
decisions presented by the claimant to the plan of other payers of 
benefits who granted a claimant's similar claims (including disability 
benefit determinations by the Social Security Administration), the 
basis for disagreeing with their views or decisions; and
    (ii) 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 (p) 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 ERISA 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 ERISA 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

[[Page 72028]]

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.
* * * * *
    (9) The term ``claim file'' means the file or other compilation of 
relevant information, as described in paragraph (m)(8) of this section, 
to be considered in the full and fair review of a disability benefit 
claim.
* * * * *
    (p) 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 (p)(1) of this section with respect 
to the applicable non-English languages described in paragraph (p)(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.

    Signed at Washington, DC, this 6th day of November, 2015.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits Security Administration, U.S. 
Department of Labor.
[FR Doc. 2015-29295 Filed 11-13-15; 4:15 pm]
BILLING CODE 4510-29-P