Procedures Must Be Included in SPD. A description of all claims procedures and applicable time frames must be included in any summary plan description for an employee benefit plan subject to ERISA. Where the plan is not required to provide a summary plan description (for example, a plan maintained for a select group of management or highly compensated employees; sometimes known as a "top hat" plan), such plan may satisfy this rule by taking steps to ensure that participants are made aware of the claims procedures and how to obtain such procedures when they enroll in the plan.

What is a Disability Benefit? As mentioned above, the new rules establish special procedures for disability claims. If the plan must make a determination of disability in order to decide a claim, the claim must be treated as a "disability claim" for purposes of these rules. Accordingly, two sets of claims procedures may apply in the case of a retirement plan that provides disability benefits, one for any disability claim and another for all other claims. While many employers and practitioners have complained to the Department of Labor about this added complexity, the DOL’s current policy appears to be that any plan that must make a determination of disability must maintain the special disability claims procedures. Accordingly, any pension plan that must make a determination of disability apparently must include such procedures. However, an important exception exists for many pension plans. When the finding of a disability is made by a party other than the plan, the plan would not be required to provide the special disability claims procedures. For example, if a pension plan provides that pension benefits will be paid to a person who has been determined to be disabled by the Social Security Administration or the employer’s long term disability plan, a claim for benefits under the pension plan based on a disability would be subject to the rules governing pension claims, not disability claims.

Manner and Content of Initial Determinations. Within certain time frames shown in the attached chart, the plan administrator must provide a claimant with written or electronic notice of any adverse benefit determination. The notice must set forth –

• The specific reason(s) for the adverse determination;
• Reference to the specific plan provisions on which the determination is based;
• A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of
• why such material or information is necessary;
• A description of the plan’s review procedures and the time limits applicable to such procedures, including a statement of the
• claimant’s right to bring a civil action under ERISA following an adverse benefit determination on review;
• For claims involving disability benefits,
  • If an internal rule, guideline, protocol or other similar criterion was relied upon in making the determination, then the notice must include the rule, guideline or protocol, or a statement that a copy of the rule, guideline or protocol will be provided free of charge upon request.
  • If the adverse determination is based on medical necessity, experimental treatment or a similar exclusion or limit, the notice must include the scientific or clinical judgment supporting the decision, or a statement that such explanation will be provided free of charge upon request.

Appeal Procedures. Every plan must make available to a claimant an opportunity to appeal an adverse determination under which there will be a "full and fair" review of the claim. These review procedures must:

• Allow at least 60 days to appeal,
• Allow for the submission of written comments, documents, records and other information relating to the claim for benefits,
• Allow for reasonable access to, and copies of all documents, records and other information relevant to the claim upon request and at no charge, and
• Take into account all comments, documents, records and other information submitted by the claimant without regard to whether such information was submitted or considered in the initial benefit determination.
  • For claims involving disability benefits, the following special rules apply:
  • The plan must provide for a 180 day period within which to appeal.
  • The review may not afford deference to the initial review (i.e., the reviewer must consider the full record of the claim and make an independent decision on whether it should be granted).
  • The review must be conducted by an appropriate named fiduciary who is neither the individual who initially made the adverse benefit determination, nor the subordinate of that individual.
  • In deciding an appeal that is based in whole or in part on a medical judgment, including determinations with regard whether a particular treatment, drug or other item is experimental, investigational or not medically necessary or appropriate, the appropriate named fiduciary must consult with a health care professional who has appropriate training and experience in the field of medicine involved in the medical judgment.
  • The procedures must provide for the identification of medical or vocational experts whose advice was obtained on behalf of the plan in connection with the claimant’s adverse benefit determination without regard to whether the advice was relied upon in making that benefit determination.
  • The procedures must ensure that the health care professional retained in connection with the appeal is not the same individual who was consulted in connection with the adverse benefit determination that is the subject of the appeal, nor the subordinate of such individual.

Decision on Appeal. Again, within certain time frames (see chart), the plan administrator must provide the claimant with written or electronic notice of a plan’s benefit determination on review. In the case of an adverse benefit determination, the notice must set forth -

• The specific reason(s) for the adverse determination.
• Reference to the specific plan provisions on which the benefit determination is based.
• 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.
• A statement describing any voluntary appeal procedures offered by the plan and the claimant’s right to obtain the information about such procedures, and a statement of the claimant’s right to bring an action under Section 502(a) of ERISA.
• For plans providing disability benefits,
  • If an internal rule, guideline, protocol, or other similar criterion was relied upon in making the determination, either the specific rule, guideline, protocol or other similar criterion; or a statement that such rule was relied on in making the adverse determination and that a copy of the rule will be provided free of charge upon request.
  • If the adverse determination is based on a medical necessity or experimental treatment or similar exclusion, either an explanation of the scientific or clinical judgement for the determination, applying the terms of the plan to the claimant’s medical circumstances, or a statement that such explanation will be provided free of charge upon request must be provided.
  • Finally, the notice must provide the following statement:

"You and your plan may have other voluntary alternative dispute resolution options, such as mediation. One way to find out what may be available is to contact your local U.S. Department of Labor office and your state insurance regulatory agency."

Consequences of Failure to Follow Procedures. One of the most significant aspects of these new rules is the consequence for failure to comply. If the plan fails to establish or follow claims procedures consistent with the new regulations, the claimant is deemed to have exhausted all administrative remedies under the plan. Accordingly, the claimant can go directly to court and none of the plan administrator’s decisions with respect to the participant’s claims are entitled to any judicial deference. Most benefit claims can be handled by means of adequate internal procedures and without resort to costly litigation. Thus, the employer can minimize its overall employee benefit costs by maintaining claims procedures that are up-to-date and compliant with these new rules.

What Actions Should Employers Take? The new rules are applicable to all retirement plan claims or claims involving disability benefits filed on or after January 1, 2002. The rules applicable to group health plans are effective on the first day of the plan year beginning after July 1, 2002, but in no event later than January 1, 2003. If employers have not already done so, they should review their current claims procedures with knowledgeable advisors and update their plans, procedures and summary plan descriptions as necessary.