December 11, 2017

Submitted electronically via http://www.regulations.gov

Office of Regulations and Interpretations

Employee Benefits Security Administration

Room N-5655

U.S. Department of Labor

200 Constitution Avenue, N.W.

Washington, DC 20210

Re: Claims Procedure for Plans Providing Disability Benefits (RIN 1210–AB39)

Dear Sir or Madam:

We write on behalf of the American Benefits Council (“Council”) to provide 

comments regarding the notice of proposed rulemaking published in the Federal 

Register on October 12, 2017, by the Department of Labor (the “Department”) entitled 

“Claims Procedure for Plans Providing Disability Benefits; Extension of Applicability 

Date” (“Proposed Regulation”). 82 Fed. Reg. 47, 409 (October 12, 2017).

The Council is a public policy organization representing principally Fortune 500 

companies and other organizations that assist employers of all sizes in providing 

benefits to employees. Collectively, the Council’s members either sponsor directly or 

provide services to health and retirement plans that cover more than 100 million 

Americans.

The Proposed Regulation requests comments regarding the Department’s proposal 

to delay for ninety (90) days, through April 1, 2018, the applicability of the 

Department’s previously issued final rule amending the claims procedure requirements 

applicable to ERISA plans providing disability benefits (“Final Rule”). 81 Fed. Reg. 

92,316 (December 19, 2016). The Proposed Regulation also solicited comments related to 

the cost of coverage, including on the merits of rescinding, modifying or retaining the 

Final Rule.

The Council and its members are committed to ensuring that all American workers 
2

and their families have access to valuable health and retirement benefits. As discussed 

below, and as set forth in our prior comments to the Department,

1

the Council remains 

concerned that certain provisions of the Final Rule, if allowed to become applicable, will 

materially increase the costs of administering benefits for disability plans (or their 

service providers or carriers), with corresponding adverse effects to premium costs, 

coverage levels, and the uptake of disability income coverage by employees and 

employers. 

If the Final Rule is not revised or rescinded, the Council is concerned that it will 

impose significant and unnecessary burdens on the regulated community that are 

disproportionate to any benefits that would be achieved. Accordingly, and in 

furtherance of the President’s directive to the federal agencies in Executive Order 

137777 (February 24, 2017), we urge the Department to (1) delay the application of the 

Final Rule as long as needed to permit the Department to engage in fulsome analysis of 

the potential effects of the Final Rule’s provisions, and (2) take the necessary steps to 

strike a more appropriate balance between the goal of ensuring a full and fair review of 

all claims with the need for continued employee access to affordable disability 

coverage.

APPLYING EXPANDED CLAIMS RULES OF PHSA SECTION 2719 TO DISABILITY PLANS IS 

CONTRARY TO CONGRESSIONAL INTENT AND SHOULD BE AVOIDED

Per our comment letter to the Department dated January 19, 2016 (regarding the 

prior proposed regulation), ERISA section 503 provides the Department with a broad 

grant of rulemaking authority with respect to the establishment of appropriate and 

reasonable claims procedures regarding ERISA-governed benefit plans. Specifically, 

ERISA section 503 states:

In accordance with regulations of the Secretary, every employee benefit plan shall—

(1) 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

(2) 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.

While there can be no doubt that Congress intended to grant the Department broad 

 

1 American Benefits Council’s January 19, 2016, comment letter to Employee Benefits Security 

Administration: https://www.americanbenefitscouncil.org/pub/?id=97d4aabd-c602-4b61-fde3-

50f050fba30f .
3

authority to promulgate regulations as needed to ensure that participants receive 

“adequate notice” of a plan’s decision with respect to their claims, and that participants 

have a “reasonable opportunity” to seek a “full and fair review” of such decision by the 

plan’s named fiduciary, intervening Congressional acts indicate the Department’s Final 

Rule goes well beyond the scope of the Department’s intended authority.

As noted by the Department in the preamble to the Final Rule (as well as prior 

proposed rulemaking), Congress included new Public Health Service Act (“PHSA”) 

section 2719 when it enacted the Affordable Care Act (“ACA”). PHSA section 2719 

imposes an expanded set of claims and appeals procedures on group health plans that 

are subject to the ACA’s market reform provisions. PHSA section 2719 is incorporated 

by reference into ERISA section 715.

Had Congress intended for other ERISA-governed plans to be subject to such 

expanded claims rules, Congress would have amended ERISA to impose the same 

expanded claims and appeals rules of PHSA section 2719 to ERISA plans, or a subset 

thereof (such as disability plans), more generally. This is not what Congress did.

The Council remains concerned about the implications of applying the claims and 

appeals rules of PHSA section 2719 (or a variant thereof) to ERISA-governed disability 

plans. Disability plans are distinct from group health plans in many respects. Disability 

benefits are intended to replace lost income as a result of disability, whereas health 

benefits generally involve payment for a specific product or service.

Health claims decisions typically look only at whether a given medical product or 

service is a covered benefit under the terms of the group health plan and whether it is 

medically necessary or otherwise appropriate for the participant’s diagnosed condition.

In contrast, disability claims decisions require a much more complex determination of 

the claimant’s physical and mental condition. Unlike health benefits which are often

appropriate for automated processes, disability benefits are subject to very 

individualized determinations and often require a fair amount of manual processing. 

The government’s own programs recognize the inherent differences between health 

benefit and disability benefit claims. For example, the Social Security Administration 

(“SSA”) uses markedly different claims rules compared to the rules used by Medicare to 

process health claims. As but one example, the SSA indicates that it takes an average of 

110 days for the SSA to make a decision on an initial application for Social Security 

disability benefits for fiscal year 2016 (https://www.ssa.gov/open/data/CombinedDisability-Processing-Time.html). This is in marked contrast to the Medicare Claims 

Processing Payment Manual, which states that health claims normally should be paid 

within 30 days (https://www.cms.gov/Regulations-andGuidance/Guidance/Manuals/downloads/clm104c01.pdf).
4

As the above discussion highlights, the process for administering disability claims is, 

by necessity, markedly different than that which can apply for medical claims. Congress 

recognized this when, as part of the ACA, it chose to only amend PHSA section 2719 to 

apply expanded claims rules to certain group health plans. While Congress certainly –

back in 1974 – granted the Department broad rulemaking authority with respect to the 

promulgation of claims rules for ERISA-governed plans, more recent Congressional 

actions indicate that the Department’s Final Rule may go too far and in contravention of 

Congress’ intent.

THE DEPARTMENT’S ECONOMIC ANALYSIS FAILED TO ACCOUNT FOR FULL COST IMPACT 

OF THE FINAL RULE ON PLANS AND PARTICIPANTS

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 ... effects; 

distributive impacts; and equity).” 81 Fed. Reg. at 92,332. Additionally, as noted by the 

Department, “Executive Order 13563 emphasizes the importance of quantifying both 

costs and benefits, of reducing costs, of harmonizing rules, and of promoting 

flexibility.” See id.

Notwithstanding the express requirement to “assess all costs and benefits” and to 

“select regulatory approaches that maximize net benefits,” the Department 

acknowledges in the Final Rule that it only quantified the costs associated with two 

provisions of the Final Rule: (1) the requirement to provide additional information to 

claimants in the appeals process; and (2) the requirement to provide information in a 

culturally and linguistically appropriate manner. Id. at 92,334. 2

 

2 With respect to the two provisions of the Final Rule that were considered by the Department as part of 

its economic analysis, the Council believes the Department’s cost estimates seem to grossly underestimate 

the likely costs that will result to plans.

Regarding the requirement that plans provide certain additional information to claimants during the 

claims process (see Council comments above), the Department “assume[d] that this requirement will 

impose an annual aggregate cost of $1.9 million.” The Department then explained how it arrived at the 

$1.9 million figure, stating:

The Department estimated this 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, 30 minutes 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 30 percent of all mailings will be distributed electronically with no associated material, 

printing or postage costs.

81 Fed. Reg. at 92,340.

While the Department’s cost estimates regarding this provision were adjusted upwards in apparent 
5

In numerous instances throughout the economic analysis, the Department 

acknowledges that it lacked data to properly quantify the costs associated with various 

aspects of the rulemaking. Here are but a few examples:

 “The Department also agrees that making the new or additional information 

or rationale available to the claimant may trigger a response from the 

claimant. However, the Department does not have sufficient data to 

estimate the number of claimants that will respond with information that the 

insurer or TPA will need to evaluate or how much time will be required to 

evaluate the information.” 81 Fed. Reg. 92,335 (emphasis added).

 “The requirement does impose an additional burden on plans that do not 

allow claimants to respond to the new information or rationale, but the 

Department does not have sufficient data to estimate the increased costs.” 

See id (emphasis added).

 “Thus, while the Department agrees that there could be added burden 

imposed on plans to provide this discussion in adverse benefit 

determinations, the Department is unable to estimate the burden because it 

does not have sufficient data on the number or percent of claims that would 

need to contain this discussion.” Id. at 92,336 (emphasis added).

 

response to stakeholder comments regarding the Department’s initial cost estimate as contained in the 

prior proposed regulations, the Council continues to believe the cost estimate grossly underestimates the 

time and costs associated with this new procedural requirement.

As evidenced by the Department’s own factual example in the preamble to the prior proposed 

regulations, as discussed above, the claims and appeals process as set forth in the Final Rule would surely 

require plans to expend more than a mere additional five minutes per claim. Certainly by the time the 

“third medical report” is drafted and provided to the claimant, as contemplated by the Department’s own 

example, a plan will have spent more than five minutes complying with the new requirement – more 

likely several, if not dozens, of additional hours. Accordingly, the Council is concerned that the 

Department’s economic analysis, at least in this respect, was materially flawed in providing an 

appropriate estimate of the costs that would be borne by plans as a result of the complex and protracted 

claims process envisioned by the Proposed Regulations. 80 Fed. Reg. 72,017.

The Final Rule also would require plans to provide notices of adverse benefit determinations in a 

culturally and linguistically appropriate manner, using the standards imposed with respect to PHSA 

section 2719 relating to group health plans. The Department stated that it discussed this requirement 

“with the regulated community,” and based upon statements from “industry experts,” estimates that the 

cost of complying with this requirement is $533 per document. 81 Fed. Reg. 92,338. The Department used 

the $533 figure to conclude that the expected costs in the aggregate and across all plans are a mere $1.1 

million. See id. The Council remains similarly concerned that the Department’s estimate in this regard 

underestimates the actual costs that will be borne by plans as a result of the new requirement to provide 

adverse benefit determinations in a culturally and linguistically appropriate manner.
6

 “The Department acknowledges that it is likely that more claimants will 

request this information when they are informed of their right to receive it; 

however, the Department does not have sufficient data to estimate the 

number of requests that will be made.” Id. (emphasis added).

 “The Department did not have sufficient data to quantify other costs 

associated with the final rule.” Id. at 92,338 (emphasis added).

As discussed in greater detail below, the Final Rule will impose a host of additional 

costs on plans – many of which were not accounted for by the Department as part of its 

quantitative economic analysis. In issuing the Proposed Regulation the Department is 

seeking stakeholder comment to attempt to further understand and better quantify the 

actual costs that are likely to be borne by plans as a result of the Final Rule, as well as 

the expected effects of these additional costs on the uptake of disability plans and 

coverage by employers and employees.

Employer plan sponsors develop comprehensive benefit strategies to address the 

needs of their employee populations and to attract and retain a productive workforce.

They strive to provide benefit offerings to protect employees (and their families) against 

unexpected risk of loss, as well as the attendant financial consequences, and to help 

them remain productive and at work – for example through the provision of major 

medical coverage, dental and vision coverage, and disability income protection, to 

name just a few of the benefits offered.

Employers generally have finite resources or “benefit dollars” to spend. The 

practical effect is that when employers are confronted with a cost increase in one aspect 

of their benefits offering, they are generally compelled to seek corresponding benefit 

savings elsewhere. This can take the form of reduced coverage levels, increased 

employee coinsurance or premium shares, or the cessation of employer sponsorship of a 

given benefit plan altogether.

In designing employee benefits plans, employers must also take into account the 

extent to which employees value or otherwise appreciate a given benefit or offering.

Notably, in a 2014 study of working consumers by the Council on Disability Awareness 

(“CDA”), the CDA found that while 82% of the respondents indicated that their health 

was one of the “most important things to protect,” only 28% said the same with respect 

to their income. 3 One of the principal reasons that the American worker may 

undervalue disability coverage is because it appears the typical American worker may 

fail to understand the real risk of becoming disabled during the course of his or her 

working life. Per the CDA and the U.S. Social Security Administration, 64% of wage 

earners believe they have only a 2% or less chance of being disabled for 3 months or 

 

3

“2014 Disability Awareness Study: America’s Income Protection Picture,” Council for Disability 

Awareness, at 5 (hereinafter “CDA Study”).
7

more during their working career. However, the actual odds that a worker entering the 

workforce today will become disabled are much greater, at about 25%.4 Another 

contributing factor appears to be price alone. The CDA Study notes that “41% of 

working adults would consider buying [disability income protection] if it was less 

expensive.”5

The CDA’s study’s findings are reflected in the overall enrollment rates nationally 

by the American worker. Recent data from the U.S. Bureau of Labor Statistics indicates 

that only 33 percent of private industry workers participate in long-term disability 

insurance programs, with only 39 percent enrolled in short-term disability plans.6

As a whole, the above data indicates that, at least when compared to health 

coverage, the average American worker is much more price sensitive when deciding 

whether to enroll in, or maintain, disability income coverage.

Lastly, we note that unlike health care, which may be subsidized, in part, from 

various sources, such as state and local governments, the U.S. Treasury via federal 

premium tax credits, and/or employers, the American worker may not have available 

the same extent of subsidies with respect to disability income coverage. Thus, any 

additional costs resulting from the Final Rule are very likely to be borne to a greater 

extent by the American worker. Perhaps most significantly, unlike health coverage 

which must be offered by “applicable large employers” to full-time employers subject 

to specific requirements, or risk penalty consistent with the Affordable Care Act, there 

is no legal requirement that employers provide, or financial penalties for failing to 

provide, disability coverage. Thus, employers who offer disability benefits do so on a 

purely voluntary basis and will be sensitive to increases in premium costs. 

In light of the foregoing, it is very important that the Department reconsider its Final 

Rule and better quantify the full costs that are likely to be borne by the system as a 

result of the procedural changes reflected in the Final rule. Otherwise, there is 

significant risk that the Final Rule, if made applicable in its current form, will result in 

increased costs and reduced coverage (both in terms of benefit levels and covered lives).

REQUIREMENT TO INCLUDE BASIS FOR DISAGREEMENT WITH THIRD PARTY DISABILITY 

DETERMINATION

 

4

“Disability Statistics,” Council for Disability Awareness, July 2013, at 2 (citing U.S. Social Security 

Administration, Fact Sheet, February 7, 2013).

5 CDA Study at 8.

6

“Workers with Disability Insurance Plans,” The Economics Daily, U.S. Bureau of Labor Statistics, March, 

4, 2015, accessed at: http://www.bls.gov/opub/ted/2015/disability-insurance-plans-for-workers.htm.
8

One provision of the Final Rule that is particularly concerning is the requirement 

that any adverse benefit determination include a discussion of the decision, “including 

the basis for disagreeing with any disability determination by the SSA ..., or any views 

of health care professionals treating a claimant to the extent the determination or views 

were presented by the claimant to the plan.” 81 Fed. Reg. 92,321.

The Council remains concerned that this new requirement improperly places the 

plan administrator’s focus beyond the four corners of the ERISA plan. As the 

Department is well aware, the plan administrator’s obligation is to properly administer 

the plan in accordance with its terms. Specifically, ERISA section 404(a)(1)(D) states that 

a fiduciary must “discharge his duties with respect to a plan solely in the interest of the 

participants and beneficiaries ... and in accordance with the documents and instruments 

governing the plan.”

The Final Rule would require a plan administrator to not only consider the terms of 

the governing plan instrument, but also to expend time, resources and attention in 

considering the findings of the SSA, or views of a treating physician – all of which could 

be based upon entirely different standards than the standard that is solely relevant to 

the plan’s findings.

We understand the Department’s believes 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 treating professional’s opinion or their SSA award of disability benefits.” 81 Fed. 

Reg. 92,333. This concern, however, is misplaced at the expense of the ERISA plan and 

its participants who will now face increased coverage costs as a result. The plan 

administrator’s role should be focused primarily on determining a claimant’s eligibility 

for a given benefit and should not be expanded to impose a time intensive and costly 

requirement to explain why one or more third party’s determinations are not binding 

upon the plan (since they are not, by reason of ERISA section 404(a)(1)(D), as set forth 

above)
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RIGHT TO REVIEW AND RESPOND TO NEW INFORMATION AND RATIONALE 

The Final Rule would also require that claimants have a right to review and respond 

to new evidence or rationales developed by the plan during the pendency of the appeal.

Specifically, the Final Rule provides 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 ... to give the claimant a reasonable opportunity to respond prior to that 

date.” 81 Fed. Reg. 92,342.

While the Council is supportive of all participants having a full and fair review of 

their claim or appeal, we are concerned that this aspect of the Final Rule could result in 

protracted and drawn out claims processes that will result in unnecessary costs for 

plans (and indirectly, plan participants).

The example in the preamble language to the 2015 proposed regulation is itself 

perhaps the best evidence of the costly and protracted process that could occur as a 

result of the Proposed Regulation. Specifically, the preamble states that, “[i]f the 

claimant’s response happened to cause the plan to generate a third medical report

containing new information, the plan would have to automatically furnish to the 

claimant any new evidence in the third report.” 80 Fed. Reg. 72,017. It then goes on to 

state that, “[t]he 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 evidence in the third report.” See id. But what then if the 

claimant provides further evidence after the third report? It appears the plan would be 

required to issue a fourth report... and so on... and so on.... Accordingly, the Council is 

very concerned that the contemplated rule will result in a very protracted, costly, and 

cumbersome process that will adversely affect the pricing and uptake of disability 

income protection.

This aspect of the Final Rule is wholly inconsistent with the Department’s prior 

statements regarding the importance of providing for a “faster” and “more efficient” 

claims process. More specifically, in the preamble to the Department’s revisions in 2000 

to the existing claims procedures, the Department makes several express references to 

the need for a “faster” and “more efficient” claims process for participants and 

beneficiaries. 65 Fed. Reg. 70,247 (November 21, 2000). For example, the Department 

notes that its rules are intended to “ensure that benefit claimants, at least in ERISAcovered plans, are provided faster, fuller, and fairer decisions on their benefit claims” 

(emphasis added). The Department then goes on to state, “that speedy decisionmaking 

is a crucial protection for claimants who need either medical care or the replacement 

income that disability benefits provide,” and that “[b]y limiting the reasons for which 

decisions may be delayed, the regulation also requires prompt decisionmaking when 
10

appropriate.” 65 Fed. Reg. at 70,247-249. Requiring a plan to engage in potentially 

unlimited back-and-forth with the claimant as is contemplated by the 2015 proposed 

regulation seems contrary not only to the Department’s prior statements, but to sound 

public policy, and, thus, should be avoided. 

Additionally, the Council notes that many plans currently provide for a voluntary 

“second level” of appeal. The Council is concerned that plans may be compelled as a 

result of this new requirement to eliminate any current voluntary second level of appeal 

in order to ensure that their claims processes, in its entirety, will continue to be able to 

meet the requisite timing requirements or as a means to minimize costs in light of the 

new requirements. Under the Final Rule, “[t]he plan would have to furnish the new 

evidence to the claimant before the expiration of the 45-day period,” and “[t]he 

evidence would have to be furnished as soon as possible and sufficiently in advance of 

the applicable deadline ... in order to give the claimant a reasonable opportunity to 

respond to the new evidence.” 81 Fed. Reg. 92,325.

As the above-referenced example demonstrates, it should be expected that the Final 

Rule, if allowed to take effect, will greatly extend the period of time during which an 

appeal will need to be considered by the plan. Additionally, given the increased 

complexity of claims administration resulting from this new requirement, plans will 

need sufficient time to ensure they are able to give proper and full review of all newly 

submitted information by a claimant. Unless plans are provided sufficient time and 

flexibility to carrying out these new obligations, many plans may feel compelled to 

eliminate their voluntary “second level” appeals processes. Notably, even if more time 

is provided to plans and claimants as part of the claims/appeals process, it seems likely 

that some plans, in an effort to control overall plan costs, may nonetheless feel 

compelled to eliminate their voluntary second levels appeals process.

If plans feel compelled to eliminate their voluntary second levels appeals processes, 

participants will lose access to a meaningful and affordable venue for requesting 

reconsideration of an adverse benefit determination. The claimant would instead have 

to go to federal court and incur the related legal expenses, or accept the plan’s first level 

appeals determination. To ensure that participants continue to have access to the plan 

as a cost-effective venue for resolving their claims, we urge the Department to 

reconsider its Final Rule in this regard.

IMPOSITION OF A STRICT ADHERENCE REQUIREMENT

The existing Department regulations provide, in part:

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 
11

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.

29 C.F.R. 2560.503-1 (emphasis added). This regulatory language is more commonly 

referred to as the “deemed exhaustion” provision.

The Final Rule amends these existing regulations to provide that “if a plan fails to 

adhere to all the requirements in the claims procedure regulation, the claimant would 

be deemed to have exhausted administrative remedies,” and could proceed 

immediately to litigation, “with a limited exception where 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” 81 Fed. Reg. 92,327 

(emphasis added). The claimant would be entitled to request, and receive, an 

explanation as to the plan’s basis for asserting that it meets this standard.

In addition to the above, the Final Rule provides that if a court rejects a claimant’s 

request for immediate judicial review on the basis that the plan met the standards for 

the “minor exception” rule described above, the claim needs to be considered by the 

plan as re-filed on appeal on the date the plan received the decision of the court.

Lastly, the Final Rule provides that if a claimant chooses to go to court to pursue his 

or her claim on the basis that the procedural requirements have not been strictly 

followed by the plan unless there was a minor exception, “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.”

The imposition of a strict adherence rule on disability plans, especially given the 

complex and protracted claims procedures contemplated by the Final Rule, continues to 

raise serious concerns for plan sponsors. Most importantly, the application of a strict 

adherence rule inappropriately encourages claimants to abandon the plan’s internal 

claims and appeals process. This is especially so given the Final Rule would effectively 

give claimants another chance for an internal appeal by the plan if a court decides that 

the plan’s errors were only “minor” and, thus, the claimant is not deemed to have 

exhausted his or her administrative remedies before the plan.

The federal courts have consistently recognized the strong policy behind requiring 

exhaustion of administrative remedies with respect to ERISA plans. As stated by the 

Ninth Circuit in Amato v. Bernard, 618 F.2d 559, 567-68 (9th Cir. 1980):

[T]he institution of . . . administrative claim-resolution procedures was 

apparently intended by Congress to help reduce the number of frivolous 
12

lawsuits under ERISA; to promote the consistent treatment of claims for benefits; 

to provide a nonadversarial method of claims settlement; and to minimize the 

cost of claims settlement for all concerned ... Moreover, the trustees of covered 

benefit plans are granted broad fiduciary rights and responsibilities under ERISA 

... and implementation of the exhaustion requirement will enhance their ability to 

expertly and efficiently manage their funds by preventing premature judicial 

intervention in their decision-making processes. 

See also e.g., Kross v. W. Elec. Co., 701 F. 2d 1238, 1244-45 (7th Cir. 1983).

The Final Rule fails to take account of well-accepted legislative history, and judicial 

precedent, by encouraging claimants to circumvent a plan’s claims and appeals process.

Under the terms of the Final Rule, there is little, if any, downside to a claimant 

proceeding directly to federal court and bypassing the plan’s claims process. This is 

because if the court disagrees with the claimant’s assertion that he or she is entitled to 

immediate and de novo judicial review as a result of the alleged procedural errors by 

the plan, the Final Rule effectively provides the claimant with a “second bite at the 

appeal” (sic). Accordingly, it should be expected that this requirement, if allowed to go 

into effect, would increase unnecessary litigation, resulting in material economic costs 

on plans, with corresponding adverse effects to employers and employees (such as 

increased premium costs, reduced coverage levels, and/or reduced uptake or 

maintenance of plans or coverage). 

NOTICE OF APPLICABLE CONTRACTUAL LIMITATIONS PERIOD

The Final Rule requires that that each notice of an adverse benefit determination 

“must include a description of any applicable contractual limitations period and its 

expiration date.” 81 Fed. Reg. 92,331. The stated basis for this new requirement is that 

some claimants may not have read or understood the relevant plan documents 

containing the statutes of limitations, and that plans may be in a better position than 

claimants to understand and explain any time limits.

The Council continues to believe that a notice requirement is unnecessary as this 

information is generally already included in, and readily available to participants via, 

the applicable plan documents (e.g., the summary plan description (SPD)). Such a 

requirement could impose significant administrative burden to determine each 

claimant’s applicable limitations period and expiration date for the particular claim at 

issue and then provide an update should that expiration date be tolled or otherwise 

change due to some intervening event. Additionally, many plans utilize third party 

administrators to administer their claims and appeals procedures. These service 

providers typically provide administrative services to tens of thousands of ERISA plans.

In many instances, these service providers may not know the contractual limitations 

period that apply with respect to a given plan.
13

A more appropriate rule, one that better balances the interests of the plan (and its 

participants) with that of the claimant, would be to require that the notice of final 

adverse benefit determination include a statement alerting participants that they should 

review the terms of the applicable plan documents to determine any deadline by which 

they must file a civil action and the circumstances in which the deadline could be tolled 

or otherwise change. Such a rule would notify the claimant that there may be an 

applicable contractual limitations period that he or she should be aware of, and direct 

them to the appropriate documentation, without imposing unnecessary and material 

additional costs on plans (and indirectly, their participants).

CLAIMS FOR PENSION BENEFITS BASED ON THIRD-PARTY DISABILITY DETERMINATIONS 

The Council supports the clarification provided by the Department in the preamble 

to the Final Rule7, which excepts pension plans from the disability claims rules where 

the plan provides pension benefits to or on behalf of a person who has been determined 

to be disabled by the Social Security Administration, under the employer’s long-term 

disability plan, or by some other third party. We urge that any future rulemaking retain 

this clarification.

EFFECTIVE DATE OF ANY NEW RULE SHOULD PROVIDE SUFFICIENT TIME FOR 

IMPLEMENTATION

As noted above, the Council supports the Department’s reconsideration of its Final 

Rule and efforts to more fully evaluate the potential costs associated with 

implementation of the Final Rule. To the extent that the Department promulgates a 

revised rule, the Council requests that this new rule also be issued in proposed form 

and allow for public comment.

To ensure that plans have the time they need to comply with any new revised rule, 

the Council requests that any final rule be made effective no sooner than the first day of 

the plan year beginning twelve months following publication of the final rule in the 

Federal Register. And to minimize confusion for plans and claimants, as well as to ensure 

that plans are not required to expend additional plan resources to reconsider claims 

already under review (or reviewed) by the plan, any new final rule should continue to 

only apply to new, initial claims filed on or after the effective date of a new final rule. 

* * *

Thank you for considering these comments submitted in response to the Proposed 

 

7

81 Fed. Reg. 92,316 at FN 3. 
14

Regulations. If you have any questions or would like to discuss these comments further, 

please contact us at (202) 289-6700.

Sincerely,

Kathryn Wilber

Senior Counsel, Health Policy