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Re: Claims Procedure Regulations for Plans Providing Disability Benefits

RIN No.: 1210-AB39

Regulation: 29 C.F.R. §2560.503-1

Dear Assistant Secretary Borzi:

For eight years I represented claimants in ERISA benefit matters both in the internal 

appeal process and in litigation. The vast majority of my clients were seeking to reverse 

denials of disability claims. For the last 5 years I have worked as a consultant to other 

ERISA benefits attorneys. In that capacity I read hundreds of ERISA decisions and 

court filings each year. Most of these address full and fair review in some way. I must 

concur that disability claims administrators have become more clever and aggressive in

defending against claims. The requirements of full and fair review need to be refreshed 

to prevent further erosion of claimants’ rights to disability benefits and to prevent the 

promised disability benefits from becoming illusory. “ERISA and its regulations were 

not intended to be used ‘as a smoke screen to shield’ the plan from legitimate claims.” 

Abram v. Cargill, Inc., 395 F.3d 882, 886 (8th Cir. 2005)(quoting Richardson v. Cent. 

States Se. & Sw. Areas Pension Fund, 645 F.2d 660, 665 (8th Cir.1981)).

COMMENT I: What Time Limits Should Apply to the Claimant’s Right to 

Respond to New Evidence or Rationales? 

I am pleased that the EBSA is addressing one of the most common problems with 

ERISA disability benefit claims – that a claims administrator reviewing an appeal can 

come up with new support to deny a claim and then slam the door on the claimant by 

refusing to offer her an opportunity to respond. Abram v. Cargill solved this problem 

temporarily until the decision was reversed. Midgett Washington Group Int’l LTD Plan, 

561 F.3d 887, 894-96 (8th Cir. 2009).

The horror that some plan administrators have argued would result from permit claimant 

to respond is not based in reality. It will not lead to an endless or interminable appeal 

process. It is the claimant who has the greatest interest in the speedy resolution of the 

appeal, since it is the claimant who is going without benefits, without paying his 

mortgage, without being able to support his family, and without paying his health 

insurance premiums or bills. Additionally, the number of claimants who will realistically 

be able to participate in what the plan administrators predict will be an endless process 

with multiple iterations is limited by the out-of-pocket costs of doing so. 
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a) Right to Respond - Imagine a claimant in her fifties who has a potentially lifethreatening, chronic and progressive neurological disease that causes weakness, 

fatigue, pain, and vision problems. She can no longer perform her occupation. 

Every one of her multiple treating doctors say that she cannot work at any job. 

The insurer denies her claim for LTD benefits using a stock phrase like, 

“restrictions and limitations are not supported based on medical documentation 

submitted.” In an attempt to respond to the vague denial, the claimant appeals, 

submitting medical records, statements from her doctors, herself, her spouse, and 

her boss, all of which attest to her limitations. The insurer denies her appeal based 

on quotes from a medical report by a repeat player in the industry as well as a 

report of a vocational consultant who opines that the claimant can work at some 

jobs at which she can earn a small fraction of her former wages. She is informed 

that her opportunities to appeal have been exhausted and she can sue. However, 

when she receives her claim file, she discovers that the insurer’s medical review

contains falsehoods and inaccuracies and it is clear the reviewer was not supplied 

with critical information about some of her conditions. Additionally, the medical 

reviewer claims to have spoken with one her treating doctors, who agreed that she 

was capable of working. The claim file also reveals that the vocational consultant 

was not applying the proper wage threshold to her claim; her plan says that she is 

disabled if she is unable to earn more than 60% of her former wage. She writes to 

the insurer explaining that her doctor denies any such conversation with the 

company’s reviewer and explains that the reviewer missed key facts. She adds that 

the jobs they think she can perform don’t pay very much. The insurer explains that 

the appeal process is closed. Faced with the distortions and falsehoods that a judge 

might accept as true under the abuse of discretion standard of review, and the 

possibility that the lengthy litigation process would only result in a remand back 

to the plan that would elongate the process further, she settles with the insurer for 

30 cents on the dollar. 

There is nothing special about this fact pattern; it is so common as to be generic.

This is how a meritorious claim can be whittled down through sandbagging. 

Although there is supposedly a right to judicial review, that right is entirely 

undermined where the claims administrator refuses to entertain any rebuttals and 

the claimant is facing a lawsuit that is based on a record entirely engineered by the 

claims administrator. The opportunity to respond to new evidence or rationales 

before the final decision is crucial.

b) Timing - Meanwhile, I am concerned about the time constraints on the 

claimant’s right to respond. The claimant needs sufficient time to counter reports 

and rationales that the claims administrator has generated on appeal. As in the 
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scenario above, claims administrators employ different types of consultants. In 

order to effectively rebut their reports, the claimant must sometimes find her own

experts. Sometimes these professionals are busy. Even the claimant’s own 

physicians are busy and may not be immediately available to formulate a 

response. For this reason, I believe that a claimant should be provided at least 90 

days. This is fair, given that the plans usually take at least this long to make their 

determinations on appeal. If the claimant does not need this amount of time, he 

should be able to submit his response and expect a final determination within the 

period of time left over by the claims administrator. 

COMMENT II: Should a Plan be Required to Notify The Claimant of an Internal 

Limitations Period?

a) Notification of the Internal Limitations Period - First, full and fair review 

should minimize the possibility that ERISA claims will be buried for reasons that 

have nothing to do with their merit. Notification of the plan’s time limits for filing 

suit protects the claimant from the loss of benefits because of a mere technicality.

Plan fiduciaries should be just as horrified by this possibility as I am. 

Next, given that the Heimeshoff decision makes it possible for plans to write their 

own rules about the time limits to bring suit, it is reasonable to require these plans 

to notify the claimant of such time limits. The agency is correct that the plans are 

in the best position to know the date. The final denial letter should include this 

date. 

I am particularly concerned about unrepresented claimants in this regard. ERISA 

contemplates a process that claimants can participate in without legal 

representation. I have known few claimants who would understand: 1) that they 

had to go looking for an internal limitations period; 2) where that would be 

located, or; 3) how to interpret the provision if it could be found. This is further 

justification for the notification requirement. 

b) Reasonable Limitations Period - Heimeshoff says nothing about what a 

“reasonable” limitations period is, but it allows as how there could be an 

unreasonable one. The agency should intervene here and set the standard for 

reasonableness, once again, keeping in mind the goal of minimizing the number of 

claims that are lost due to technicalities. The agency has created other minimum 

time limits, so the agency is no stranger to this type of rule.
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Of course, it would be beyond the imagination of any claimant that the internal 

limitations period could run before he had completed an appeal process, but there 

is still confusion around this absurd possibility. Accordingly, I am recommending 

2 fixes. 

First, the limitations period should not be able to run before the appeal process is 

complete. 

Second, an internal limitations period that is shorter than 2 years after the final 

appeal denial should be deemed to violate full and fair review. I recently 

encountered a Kodak plan that created a 90-day limitations period. 90 days in not 

enough time for a gob-smacked claimant to shop for an attorney who, in turn, will 

need to collect the claim file and other information before making a decision as to 

whether a lawsuit is in order. In other words, the plan’s notice to the claimant of 

the date by which she may bring suit is small comfort, where the time will expire 

before the filing of lawsuit it achievable. And there is some indication that a court 

could find this 90-day period to be reasonable. Davidson v. Wal-Mart Associates 

Health and Welfare Plan, 305 F. Supp. 2d 1059 (S.D. Iowa 2004) (upholding 45-

day contractual limitations period as reasonable). 

COMMENT III: Ensuring Independence and Impartiality of Persons Involved 

with Making the Decision. 

I am pleased that the agency is interested in addressing the widespread problem of 

ERISA disability benefit plans’ use of conflicted employees or consultants. However, 

the regulation could use some refinement in the form of greater specificity.

a) Independence and Impartiality of All Agents in All Fields - The regulation 

needs to make clear that contractors, agents, outside vendors, and their 

employees are all covered by the regulation. The disability plans do not 

directly employ or hire many of the people on whom they rely to deny claims, 

but all of the people and entities and individuals need to be free of bias or 

conflict. 

A typical example is a disability claim in which surveillance is used against the 

claimant. The claims administrator will have a contract with a surveillance 

company who will hire an investigator. Another individual, perhaps, will write 

the report describing the video. This video and report may be sent to yet 

another vendor who will contract with a medical reviewer to opine on what the 
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surveillance shows. This process is fraught with bias and conflict. See e.g. 

McKnight-Cameron v. Boston Mut. Life Ins. Co., No. 1:13-CV-01774-RLY, 

2015 WL 5775524, at *9 (S.D. Ind. Sept. 30, 2015); Frerichs v. Hartford Life 

& Acc. Ins. Co., 875 F. Supp. 2d 923, 948 (D. Minn. 2012)(noting that the 

interpretation of surveillance video is inherently subjective).

b) Clarification of “involved.” - The agency needs to make clear that what it 

means to be “involved with making the decision.” Insurers and plans regularly 

take the position that medical and other experts they rely upon are not making the 

decisions but are simply rendering opinions within their expertise so that claims 

handlers or other committees, who are the delegated decision-makers, can make 

the decisions. The industry makes this assertion in affidavits and depositions too 

numerous to count. In my experience, however, these assertions are disingenuous. 

A medical or vocational expert will make or break the claim, and the claims 

handler often adopts these opinions without question. This comes out in 

depositions of the claims handlers. In addition, because of how disability 

departments are structured there is often a supervisor, who may not make a 

decision, but may give final approval to that decision. Does this supervisor fall 

under the regulation? I would expect and argument that she does not. 

Given this quandary about who truly makes disability decisions, the agency needs 

to clarify that independence and impartiality applies to everyone who decides 

claims or appeals, approves or signs off on those decisions, or renders any opinion 

that is relied upon in the decision-making process, i.e. anyone who is consulted in 

the process is considered to be “involved” and is subject to the same standard of 

objectivity. 

COMMENT IV: Explaining Why the Administrator Does not Agree with Other 

Payers of Disability Benefits

Perhaps the most astounding practice by claims administrators is to entirely discount a 

favorable Social Security decision in disability benefit denials. The claims 

administrators doggedly pursue Social Security benefits on behalf of the ERISA 

claimants, since most ERISA disability benefits are reduced by the amount of these 

benefits. In many cases plans hire representatives to advocate for claimants before the 

Social Security Administration, which advocacy entails taking that the position that the 

claimant is disabled in a way that more severe than almost any LTD plan would require. 

Once the money-saving Social Security award is obtained (and the plan has perhaps 
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recouped the benefits), the LTD claim is then denied and the plan does an about face on 

the disability question. (This inconsistency was described and criticized in Metropolitan 

Life v. Glenn, although the decision does not appear to have changed claims practices

very much.) 

The explanation for rejecting or ignoring the favorable Social Security decision, if one is 

attempted, is often boilerplate and goes something like, “[w]e realize that you obtained 

a favorable ruling from the Social Security Administration. The SSA’s decision is not 

binding on us. The difference between our decision and SSA’s may be driven by the 

regulations that govern the Social Security system.” There is no explanation that is 

pertinent to the specific claim at hand. If the proposed regulation intends to render such 

an explanation insufficient to satisfy the rule, the agency should clarify this by including 

language as follows: (A) A discussion of the decision, that is pertinent to the specific 

claim or appeal under consideration, . . .”

To require this level of analysis from plan is to require nothing more than a “deliberate, 

principled reasoning process,” which a plan fiduciary is already obligated to provide. 

Glenn v. MetLife, 461 F.3d 660, 666 (6th Cir. 2006) aff'd sub nom. Metro. Life Ins. Co. 

v. Glenn, 554 U.S. 105, 128 S. Ct. 2343, 171 L. Ed. 2d 299 (2008).

COMMENT IV: Effective Date of the Final Regulations

The previous revision of the ERISA claims regulations applied to new claims filed on or 

after January 1, 2002. Since then there have been cases decided on the “old regs” and 

other on the “new regs.” Insurers and plans have applied one set of standards to some 

claims and another set to others. This is not ideal. It leads to confusion in the case law 

and unfairness, especially where the regulations could be seen as clarifications instead of 

amendments. For example, see Abram v. Cargill, 395 F.3d. 882 (8th Cir. 2005) as 

compared to Midgett Washington Group Int’l LTD Plan, 561 F.3d 887, 894-96 (8th Cir. 

2009).

I suggest that the agency minimize this patchwork effect by making the final rules apply

to all claims “pending on or after” the effective date. 

COMMENT V: Deemed Exhaustion Procedure

I commend the agency’s effort to set out a procedure for deemed denied claims for those 

claimants needing to by-pass claims administrators who are committing serious 

procedural violations. However, some additional clarification is necessary. 
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a) Clarifying De Novo Review - The regulation indicates that a deemed exhausted 

claim will be decided by the court “without the exercise of discretion by an 

appropriate fiduciary.” The agency should clarify that the court “shall not defer to 

the decision in any way but shall apply de novo review to all questions whether 

factual or interpretive.” I feel that this added language is needed because some 

courts applying de novo review will still defer to the claims administrators’ factual 

determinations. See Pierre v. Connecticut General Life Insurance Co., 932 F.2d 

1552 (5th Cir.1991). A large swath of the country, in which there are certainly 

many ERISA claimants, contends with this bizarre variant of de novo review. 

Without spilling too much ink on how the jurisprudential anomaly came to pass, 

this variant of de novo review should not be applied where the claim lands in 

court due to the fault of the claims administrator. I believe this small change will 

help to carry out what the agency is intending with its regulation. 

b) Supplementing the Record Before the Tribunal - Where a claim is accepted for 

review by the court, it is important to remember that the procedural irregularities 

may have prevented the claimant from including his best evidence in the record. 

The agency should add some language to the regulation providing that a claimant 

can supplement the record under this scenario. While some courts applying de 

novo review might permit this, many would not. Without this addition, a deemed 

exhausted plaintiff may be worse off than he was before. 

c) Supplementing the Record Re-filed on Remand – Likewise, the regulations 

should provide for supplementation of the record on remand. As I understand it, 

where the court determines that the violation the claimant complained of was di 

minimis, the claim is remanded to the plan as if it were an appeal. However, a 

claim that is re-filed with the claims administrator may not have been fully 

developed and the claimant should be given an opportunity to supplement the 

record so that the claims administrator has enough evidence on which to decide 

the merits of the claim. The claims administrator’s notice to the claimant should 

therefore include notice of the right to submit additional information before the 

claim is re-reviewed. 

Thank you kindly for considering my comments,

Sally Mermelstein, Attorney at Law