New Rules for Disability Claims Take Effect April 1, 2018

On April 1, 2018, new Department of Labor regulations regarding short-term and long-term disability plans covered by the Employee Retirement Income Security Act (ERISA) go into effect.  Employers must make sure that they and their plan administrators and third party administrators are ready to comply with the new regulations.

Affected Benefit Plans

ERISA generally covers all STD and LTD plans established and insured or funded by an employer.  Regular payroll practices (such as continuing to keep an employee on the books and pay his or her salary while he or she is absent due to a disability) are not covered by ERISA. 

The new regulations affect the administration of STD and LTD insurance plans, as well as 401Ks and pension plans, where receiving the benefit is conditioned on disability, and where the particular 401K or pension plan (not the Social Security Administration or a long-term disability plan) determines whether the employee is disabled.


On December 19, 2016, the DOL issued regulations, known as the Final Rule, regarding ERISA-covered STD and LTD plans.  The Final Rule was effective January 18, 2017, but its applicability was delayed until January 1, 2018 to allow employers, insurers, and third party administrators to come into compliance.

President Trump issued an executive order on February 24, 2017, creating a Regulatory Reform Task Force that would examine existing regulations.  In the summer of 2017, the DOL began revisiting the Final Rule and on October 12, 2017, the DOL issued a Notice of Proposed Rulemaking, delaying the applicability of the Final Rule by 90 days.  By giving notice and delaying the applicability date, the DOL allowed affected parties and the public to submit comments, opinions, and research regarding the potential impact of the Final Rule.

The DOL’s intention behind the Final Rule was to give employees more protection in the claims process of their STD and LTD plans.  But employers and members of Congress opposed the Final Rule, argued that the regulations would backfire by raising costs and increasing litigation, thereby reducing employees’ access to benefits.

The DOL has now confirmed that no further delay to applicability of the Final Rule will occur, and employers, plan administrators, and third party administrators are expected to comply with the new regulatory changes as of April 1, 2018.


The new regulations bring about three major changes in the administration of disability plans.  

1.      Establish criteria for conflict of interest.

2.      Expand benefit denial notice

3.      Change procedures for responding to the denial of an appeal

Conflict of Interest

Employers, plan administrators, and third party administrators should take steps to ensure that their vendor contracts and employment relationships do not connect financial incentives to claim outcomes.  Claims adjudicators, service providers, and vendors must be impartial.  The employment status and compensation of a claims adjudicator or a medical or vocational expert cannot be tied to the number or rate of denied claims, for example.

Benefit Denial Notice

·         Plan administrators must now include the following in all benefit denial notices:

·         A description of the limitation period for bringing a lawsuit and the calendar expiration date

·         An explanation as to why the plan disagreed with the physician/vocational specialist/Social Security Administration

·         A notice of the claimant’s right to access the file

·         The internal rules or guidelines used to make the denial

·         Notice that oral or written translation will be provided to non-English speakers upon request

Appeal Denial Procedures

Claimants must have notice of any new evidence or reasoning is used to deny the appeal of a denial of benefits, as well as an opportunity to respond to the new information.  If the plan does not follow its own claims procedure, the claimant is not barred from filing a lawsuit before exhausting all levels of the claims procedure.  A retroactive rescission of coverage is considered a denial that triggers the appeals process.  The plan should always follow its own claims procedures and avoid retroactively rescinding coverage.

What You Should Do

Employers should communicate with plan administrators and third party administrators to make sure their plans are in compliance with the new regulations.  Most importantly, having legal counsel is critical.  Employers always should consult with legal counsel for essential assistance in reviewing plan documents, revising notices, and understanding and successfully implementing up to date laws and regulations.

Department of Labor Increases Labor Penalties for 2018


While the Department of Labor is still waiting for the administration to fill a number of positions, it did not wait to announce an increase in penalties for employment law violations, and it is still enforcing federal labor laws.  Most employers will see penalties increase at 2%, as federal law requires agencies to adjust civil monetary penalties annually for inflation.

The new penalties will be as follows:

  • The maximum penalty for violating minimum wage and overtime rules has increased from $1,925 to $1,964.
  • Maximum penalties for violating child labor laws has increased from $12,278 to $12,529.
  • Maximum penalties for violating anti-retaliation and discrimination laws under visa programs has increased from $20,111 to $20,521.
  • Maximum penalties for workplace injuries or deaths of child workers has increased from $55,808 to $56,947.
  • Maximum penalties for the willful replacement of American workers under the H-1B visa program has increased from $51,588 to $52,641.

Misuse of Biometric Information Costs Corporations Millions

What do you need in your HR toolbox that Facebook, Google, United Airlines, Snapchat, and Shutterfly wish they would have had?  You may not know it yet, but a biometric information policy could be standing between you and millions of dollars in liability. 

Illinois passed the Biometric Information Privacy Act (BIPA) in 2008 to regulate the collection and use of biometric information.  Biometric information includes any personally unique physical characteristic used to identify an individual, including fingerprints, hand scans, and retinal scans.  BIPA permits an Illinois resident to sue any entity that collects his or her biometric information without following BIPA’s notice, disclosure, and consent provisions.  Washington and Texas have passed similar laws, and legislation in other states is on the horizon.

A grocery store chain and its timeclock manufacturer that used fingerprint-enabled time clocks without following BIPA’s disclosure and consent provisions are currently facing a lawsuit that could cost them up to $10 million in damages.  If you use or are considering using fingerprints, hand scans, or other biometric information to track or identify your employees, consult with myHRcounsel to ensure that you have an up-to-date, legally compliant policy that protects you and your employees.   

Remain Alert and Stay Diligent: Employer Shared Responsibility Provision Enforcement to Go into Effect by Late 2017

With all the confusion and ambiguity surrounding the current state of the ACA provisions and enforcement, one thing that seems to have remained consistent is the enforcement of the Individual and Employer Mandates.

Earlier this week, the IRS made revisions to their Employer Shared Responsibility FAQ that leave little doubt that enforcement of the Employer Mandate will move forward.

What Does This Mean for Employers?

For the 2015 calendar year, the IRS plans to issue Letter 226J informing Applicable Large Employers (ALEs, with 50 full time employees, including full-time equivalents)  of their potential liability for an employer shared responsibility payment, if any, in late 2017.  ALEs can expect to receive a letter (226J) from the IRS informing them of their potential responsibility payment. The enforcement will begin with year 2015, which is the first year the Employer Mandate was put into effect.