American Council of Life Insurers 

101 Constitution Avenue, NW, Washington, DC 20001-2133

www.acli.com 

Steven Clayburn, FSA, MAAA 

Senior Actuary, Health Insurance & Reinsurance

December 11, 2017

Submitted Electronically via e-ORI@dol.gov

Office of Regulations and Interpretations

Employee Benefits Security Administration

Room N-5655

U.S. Department of Labor

200 Constitution Avenue NW.

Washington, DC 20210

Attention: Claims Procedure for Plans Providing Disability Benefits Examination

Subject: Claims Procedure for Plans Providing Disability Benefits; Extension of Applicability 

Date (RIN 1210-AB39) 

 

Dear Sir/Madam:

On behalf of the American Council of Life Insurers1 (ACLI), I appreciate the opportunity to provide 

data and additional comments in conjunction with the Department of Labor’s (“Department”)

extension of the applicability date, to April 1, 2018, of the final rule amending Section 2560.503-1 

of the Employee Retirement Income Security Act (“ERISA”), the claims procedure regulations

applicable to ERISA-covered employee benefit plans that provide disability income benefits (the 

“Final Rule”) published on December 19, 2016.

Pursuant to Executive Order 13777,2 the Department has concluded that it is appropriate to seek 

additional public input regarding the regulatory impact analysis in the Final Rule so that the 

Department may consider whether it supports regulatory alternatives other than those adopted in 

the Final Rule. Given the paucity of the data relied upon by the Department in promulgating the 

Final Rule, it is both necessary and appropriate for the Department to conduct such an examination. 

ACLI is confident that, after a full evaluation of the Final Rule and the data submitted by the ACLI, the 

Department will conclude that the costs imposed by the Final Rule outweigh its benefit to plan 

participants. 

 

1 The American Council of Life Insurers (ACLI) is a Washington, D.C.-based trade association with approximately 290 

member companies operating in the United States and abroad. ACLI advocates in federal, state, and international forums 

for public policy that supports the industry marketplace and the 75 million American families that rely on life insurers’ 

products for financial and retirement security. ACLI members offer life insurance, annuities, retirement plans, long-term 

care and disability income insurance, and reinsurance, representing 95 percent of industry assets, 93 percent of life 

insurance premiums, and 98 percent of annuity considerations in the United States.

2 Executive Order 13777, 82 Fed. Reg. 12285 (Mar. 1, 2017) is intended to reduce the regulatory burdens agencies place 

on the American people, and directs federal agencies to undertake specific activities to accomplish that objective, including 

evaluating existing regulations to make recommendations regarding those that can be repealed, replaced, or modified to 

make them less burdensome. 
Page 2 of 19

As detailed in both of our prior comment letters (attached as Exhibit B) and below, ACLI agrees that 

the full and fair administration of disability income claims is an important objective. However, we 

continue to have significant concerns that many provisions of the Final Rule will not advance that 

objective. These provisions will increase the administrative burden on insurers and other claims 

administrators without any tangible benefit to claimants. Further, contrary to the expressed 

justification for the Final Rule, some of the final changes will unnecessarily complicate and add to 

the costs of claims adjudication practices that have served both plans and claimants well for over a 

decade.

I. ACLI’s Disability Income Carrier Survey Illustrates Significant Errors in the Department’s 

Assumptions and Conclusions 

In promulgating the Final Rule, the Department acknowledged several areas where it had limited 

data or insufficient data about disability claims adjudication, including such essential areas as the 

numbers of claims filed, approved and denied. The consideration and evaluation of such data is 

critical to this rulemaking. ACLI committed to work with the Department to gather data to assist the 

Department in its examination of the Final Rule and consideration of regulatory alternatives to the 

Final Rule. Consistent with this commitment, ACLI conducted a survey of insurers who offer group 

disability income (DI) insurance. ACLI received survey responses from companies representing over 

80% of the group DI insured lives. The survey limited itself to only those DI policies that were subject 

to ERISA. To estimate the number of lives and plans covered under ERISA, the survey asked 

participants to provide the number of DI insurance policies issued, the number of plans for which the 

insurer was providing administrative services - only (ASO), the number of covered lives under 

insurance policies, and the number of lives covered under ASO plans. 

Additional survey data elements included the number of claims filed in a given year, the outcome of 

those claims, the number of denials appealed and the outcome of those appeals, information as to 

the reasons for benefit denials and terminations, the number of DI-related lawsuits and their 

average cost, the anticipated increase in litigation and associated litigation expenses as a result of 

the rule, and the estimated cost to bring administrator’s systems into conformance with the rule, and 

the anticipated annual, on-going cost to ensure conformity. Further, the survey asked insurers to 

estimate the number of claims that, prior to the Final Rule, would have been denied, but would now 

be approved solely because of the Final Rule; and we asked participants to provide an estimate of 

the price elasticity of DI insurance based on the survey participant’s experience and actuarial 

models.

ACLI’s Survey Results are attached as Exhibit A. All data represent estimates for total aggregate 

industry values.

ACLI’s Survey illustrates that many of the significant premises relied upon by the Department in its 

rulemaking are incorrect. For example:

• The Department maintains that the Final Rule will ensure that disability plan participants 

receive benefits that otherwise may have been denied by plan administrators in the absence 
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of the fuller protections it provides.3 ACLI’s survey found that the Final Rule will result in zero

additional claims being approved.

• The Department states in the preamble to the final rule that “Insurers and plans looking to 

contain disability costs may be motivated to aggressively dispute disability claims.”4 ACLI’s 

survey shows that an overwhelming majority of short-term and long-term disability claims are 

approved upon initial review. For example, in 2016, 85.8 percent of short-term disability 

claims and 67.5 percent of long-term disability claims were approved following initial review.

• The Department alleges that disability claims “dominate the ERISA litigation landscape 

today.”5 While it may be true, as the Department alleges, that during 2006-2010 long-term

disability claims accounted for 65.5 percent of all benefits litigation, the percent of disability 

claims actually subject to litigation is small. ACLI’s survey illustrates that in 2014, 0.05

percent of all disability claims were litigated. 

• The Department, by requiring that plans explain the basis for disagreeing with or not 

following disability determinations by the Social Security Administration (SSA), apparently 

believes that a majority of claimants deemed disabled by SSA are denied private long-term 

disability benefits, due to plan administrator “conflicts of interest.”

6 ACLI’s data shows that 

the vast majority of claimants who have been deemed disabled by the SSA are approved for 

long-term disability benefits by plans. Further, of those claimants who have been denied 

such benefits, ACLI’s survey shows that the overwhelming majority were denied benefits due 

to reasons other than a finding that the claimant was not disabled (such as not being eligible 

under the terms of the policy, pre-existing conditions, or failure to provide necessary 

information).

• The Department disagreed with stakeholder comments regarding the increased litigation 

associated with the Final Rule.7 ACLI’s survey illustrates that 100 percent of carriers 

anticipate an increase in litigation as a result of the Final Rule, and that litigation is expected 

to increase 39 percent. 

• Although the Department acknowledged that it lacked sufficient data to quantify many of the 

costs associated with the Final Rule,8 it disagreed with stakeholder comments regarding 

increases in costs.9 ACLI’s survey shows that the Final Rule will result in initial costs of 

$19.2 million and additional annual costs of $64.5 million.

• The Department disagreed that the Final Rule would discourage employers from sponsoring 

plans providing disability benefits.10 ACLI’s survey illustrates that for each 1 percent 

increase in the price of disability coverage, the number of covered lives is expected to 

decrease by 1.9 percent.

 

3 81 Fed. Reg. 92316 (Dec. 19,2016).

4 Id.

5 Id.

6 Id at 92322.

7 Id. at 92318.

8 Id. at 92338.

9 Id. at 92318.

10 Id.
Page 4 of 19

• The Department states that, based on discussions it has had with the regulated community, 

it understands that few plans base adverse benefit determinations on appeal on new 

evidence or rationales.11 ACLI’s survey illustrates that in 2016, 83.9 percent of short-term

disability claim appeals involved new information and 82.8 percent of long-term disability 

claim appeals involved new information.

Summary of Survey Results – Short-term Disability Claims 

 

2014 2015 2016

Claims Submitted 1,917,745 2,009,803 2,077,288

Percent Approved During Initial Review 87.1 86.2 85.8

Average Number of Days to Process Claim 13 13.3 13.5

Number of STDI Claims Appealed 11,925 13,574 16,148

Percent of STDI Claims Appealed 0.6 0.7 0.8

Percent Appeals Involving New Information12 87.3 87.9 83.9

Percent of Appeals Denied 62.1 63.3 62.6

Percent of Appeals Approved 37.9 36.7 37.0

Summary of Survey Results – Long-term Disability Claims 

 

2014 2015 2016

Claims Submitted 280,179 277,826 279,950

Percent Approved During Initial Review 68.3 68.1 67.5

Average Number of Days to Process Claim 39 39 39

Number of LTDI Claims Appealed 15,440 14,779 14,335

Percent of LTDI Claims Appealed 5.5 5.3 5.1

Percent Appeals Involving New Information13 83.5 83.0 82.8

Percent of Appeals Denied 62.8 61.8 61.8

Percent of Appeals Approved 36.9 37.8 37.8

Summary of Survey Results - Litigation Frequency and Costs – Short-term Disability Claims 

2012 2013 2014

Percent of Claims Litigated *14 *15 0.01

Percent of Litigated Claims Upheld 16.2 17.9 19.8

Percent of Litigated Claims Overturned 6.8 2.6 3.8

Percent of Litigated Claims Settled 73.5 67.9 67.9

 

 

 

 

 

11 Id. At 92334.

12 Includes new information submitted by claimant and/or developed by insurance carrier.

13 Includes new information submitted by claimant and/or developed by insurance carrier.

14 2012 and 2013 data on the percent of claims litigated are unavailable because litigation data was collected for the 

years 2012-2014 and claims data was collected for the years 2014-2016.

15 Id. 
Page 5 of 19

Summary of Survey Results - Litigation Frequency and Costs – Long-term Disability Claims 

2012 2013 2014

Percent of Claims Litigated *16 *17 0.4

Percent of Litigated Claims Upheld 6.3 6.3 6.3

Percent of Litigated Claims Overturned 3.3 2.0 1.8

Percent of Litigated Claims Settled 82.5 82.2 78.8

Estimated Start-Up Costs to Conform with Final Rule: $19.2 million

Estimated Total Annual Additional Labor Costs to Conform with Final Rule: $32.9 million

Percent of Companies Expecting Lawsuits to Increase as a Result of Final Rule: 100

Estimated Annual Percentage Increase in Litigation: 39

 

Estimated Annual Increase in Litigation Cost: $31.6 million

Estimated Elasticity Impact: ACLI’s survey indicates that for each 1 percent increase in the price of 

disability coverage, the number of covered lives is expected to decrease by 1.9%. 

II. The Department Should Repeal the Final Rule and Consider Regulatory Alternatives 

 

A. The Vast Majority of Disability Claims are Paid Upon Initial Adjudication

 

In estimating long-term disability claim denial rates, the Department relied upon the 75 percent of 

denied claims for the Social Security Disability Insurance Program. 18 The Department noted, 

however, that using the SSDI denied claims rate as a proxy for the ERISA-covered plan claims denial 

rate may overstate the number of private-long-term disability plan denied claims. ACLI’s data 

illustrates the extent of this overstatement and illustrates that the overwhelming majority of carrier 

DI claims are approved upon initial review. Based on ACLI’s survey data, in 2016, 67.5 percent of 

long-term disability claims were approved upon initial review. Further, of those claims denied upon 

initial review, the majority were denied for reasons other than a determination that the claimant was 

not disabled - for example, the claimant was not covered or eligible for benefits under the terms of 

the plan, or failed to provide necessary information to substantiate their claim. Further, based on 

ACLI’s survey, in 2016, 85.8% of short-term disability claims were approved during initial 

adjudication. These statistics overwhelmingly rebut any erroneous impression that most disability 

claims are denied, and indeed, illustrate that the majority of short-term and long-term disability 

claims are approved upon initial review. We urge the Department to use the 90-day extension to 

fully re-examine its rationale for promulgating the Final Rule, given that ACLI’s survey disputes many 

of the premises and conclusions the Department relied upon during the rulemaking process.

 

16 Id.

17 Id.

18 81 Fed. Reg. at 92336.
Page 6 of 19

B. The Final Rule Will Harm Disability Claimants

Significantly, the amended regulations will result in prolonged, arduous and labor-intensive disability

claim processing, delayed claim decisions, and premature and lengthy litigation unduly focused on 

alleged procedural issues, none of which serve the interests of disability claimants. Based on our 

survey, with respect to short-term disability claims, the Final Rule will increase the average number 

of days to make an initial claims determination by 3.3 days and will increase the number of days to 

make a final appeals decision by 35.5 days. With respect to long-term disability claims, the Final 

Rule will increase the average number of days to make an initial claims determination by 6.9 days 

and will increase the number of days to make a final appeals decision by 47.3 days. Further, based 

upon the statistics we have compiled from our survey it is highly likely that the amended regulations 

will increase the cost of disability coverage. Based on our survey, the estimated total additional 

annual labor costs associated with the Final Rule will be $32.9 million. Increased costs will either be 

passed on to employees, or employers will choose to reduce or discontinue disability income 

insurance altogether.19 The demand for employer-sponsored disability insurance is highly elastic 

and, accordingly, minor price increases could have a significant negative impact on coverage. Based 

on our survey, for each 1% increase in price, the number of covered lives is expected to decrease by 

1.9%.

In sum, the reason for amending the regulations was based upon several incorrect and false 

premises. Further, the Final Rule will have unintended adverse consequences that will not advance 

the interests of disability claimants. We believe that the amendments relating to the exhaustion of 

administrative remedies (29 CFR § 2560.503-1(l)(2)) as well as the right to review and respond to 

new information (29 CFR § 2560.503-1(h)(4)) should be rescinded. While the Final Rule, as a 

whole, is unnecessary and is unlikely to advance the Department’s objectives, these two provisions 

are the most harmful to both plans and plan participants and are the most likely to increase 

administrative costs and litigation.

If the Department does determine that changes are needed, we provide suggested alternative 

revisions to the Final Rule that would improve the cost-benefit calculus. 

C. The Department Should Appropriately Evaluate the Impact of the Amendments 

In the preamble to the Final Rule, the Department refers to its “experience since 2000 with the 

section 503 Regulation...”20, cites advancements in claims processing technology, and cites to a 

single article purporting to document the volume and constancy of litigation in disability income 

claims21 as rationales for the Final Rule amendments. The ACLI contests the accuracy of the article, 

and in fact, the statistics provided by the ACLI contradict the premises and conclusions made by the 

 

19 “Employers or other plan sponsors are generally free under ERISA, for any reason at any time, to adopt, modify, or 

terminate welfare plans.” Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 78 (1995).

20 See 81 Fed. Reg. at 92316.

21 See footnote 5 to the preamble citing Sean M. Anderson, ERISA Benefits Litigation: An Empirical Picture, 28 ABA J. Lab. 

& Emp. L. 1 (2012). Significantly, this article does not even attempt to explain the reasons for disability claims litigation 

rates from 2006-2010. The period encompasses the worst of the economic recession. Yet, although it is well established 

that disability claims spike during periods of plant closures, layoffs and the like, there was no attempt to investigate 

whether the recession influenced the increase in litigation.
Page 7 of 19

author. ACLI’s survey data illustrates that, in 2014, just 0.05 percent of all disability claims decisions 

were litigated. In short, the cited rationales simply do not provide a valid basis for amending the 

disability income insurance claims regulations as proposed. The Department’s “experience” with the 

regulations is not identified. In addition, the qualitative benefits were not identified or discussed, nor 

was the cost of the proposed regulations quantified, a long-standing prerequisite of Federal agency 

rulemaking.

Further, as we have noted in both our January 19, 2016 comment letter and our October 27, 2017 

comment letter22, the complexity of disability claims does not permit the “auto-adjudication” typical 

of the healthcare claim determination process. As such, technology advances that have expedited 

processing of healthcare claims (e.g., the update of ICD-10 codes to insurers and medical offices 

systems) do not apply to disability income claim adjudication. Finally, we disagree that the proposed 

regulations will decrease the number of potential litigated cases. To the contrary, ACLI’s survey data 

reflects that many of the amendments virtually guarantee an increase in litigated claims. 

 

III. ACLI’s Specific Concerns with the Final Rule 

 

ACLI maintains, and ACLI’s survey demonstrates, that the basic assumptions and conclusions relied 

upon by the Department during the rulemaking process were flawed and incorrect. ACLI’s data 

illustrates that (1) Existing safeguards are robust and properly designed for disability claims; (2) 

Certain provisions of the Final Rule will cause delays ultimately harmful to claimants; and (3) the 

Final Rule will increase administrative and litigation costs and adversely impact the affordability of 

disability coverage. Accordingly, the Department should repeal the Final Rule and determine if 

regulatory alternatives are necessary.

In the event that the Department determines to retain the Final Rule, we provide below our specific 

concerns with certain of the Final Rule’s provisions and suggested recommendations for 

improvement.

 

A. Exhaustion of Administrative Remedies

Section 2560.503-1(l) pertaining to the exhaustion of administrative remedies entitles a claimant to 

file suit if the plan “fails to strictly adhere to all the requirements” before an appeal decision has 

been made and regardless of whether that decision would have been ultimately favorable to the 

claimant. This provides a perverse incentive to bring suit before the administrative process is 

completed even if the alleged procedural violation does not materially impact the claim. While 

lengthy and costly litigation is guaranteed if this section goes into effect, there is no such guarantee 

of any benefit to the claimant. To the contrary, prolonged litigation (including lengthy discovery 

disputes and arguments over whether the plan’s failure was de minimis) guarantee that a claims 

decision (whether by the court or by the administrator on remand) will be substantially delayed. 

ACLI’s survey indicates that carriers anticipate a 39 percent increase in litigation as a result of this 

section, and that litigation costs will increase by $31.6 million annually. Thus, this amendment

 

22 January 19, 2016 and October 27, 2017 ACLI comment letters attached in Exhibit B.
Page 8 of 19

should be reviewed and rescinded. Maintaining the integrity of the administrative review process - as 

opposed to immediately litigating benefit disputes - serves the Congressional purposes of reducing 

the number of frivolous lawsuits under ERISA; promoting the consistent treatment of claims for 

benefits; providing for a non-adversarial and speedy method of claims settlement; and minimizing 

the cost of claims settlement for all involved. See, e.g., Kross v. W. Elec. Co., 701 F.2d 1238, 1244-

45 (7th Cir. 1983). The doctrine of exhaustion of administrative remedies also enables the Plan to 

obtain full information about a claim and make a reasoned decision based on the information. “The 

process is of substantial benefit to reviewing courts, because it gives them a factual predicate upon 

which to proceed.” Chorosevic v. MetLife Choices, 600 F.3d 934, 941 (8th Cir. 2010), further 

citations omitted. 

The Final Regulation does not require the claimant to have any communication with the plan once 

the claimant believes a procedural violation occurred. Because many (and maybe most) procedural 

violations could be addressed through an interactive dialogue with the plan, it would make far more 

sense for the claimant to be required to seek resolution of the issue with the plan rather than being 

able to immediately proceed to file a lawsuit for any procedural violation regardless of impact. 

Under the Final Rule, the de minimis violation exception applies if the alleged procedural violation:

• was de minimis and did not, or was not likely to cause, prejudice or harm to the claimant;

• was for good cause or matters beyond the control of the plan;

• occurred in the context of an ongoing good faith exchange of information between the plan 

and the claimant; and,

• was “part of a pattern or practice of violations by the plan.”

This will require courts to determine:

• whether the alleged procedural violation was de minimis;

• what degree of prejudice or harm is required;

• whether the harm or prejudice should only be considered in terms of the claimant’s ability to 

obtain a full and fair review;

• whether the violations are excusable for “good cause”;

• whether an ongoing good faith exchange between the parties would still meet the 

requirements of the exception if it extended beyond the plan’s deadlines;

• how a “pattern or practice of violations by the plan” will be determined – (what number of 

violations would be required before a plan is determined to have been engaged in a pattern 

or practice of violations? Would the character of each violation be considered in determining 

if a pattern or practice of violations took place? If particular violations had been cured by 

remedial steps taken by the plan, could the plan excuse such violations from a consideration 

that it had engaged in a pattern or practice of violations? Would violations that occur before 

the applicability date of the regulation be considered?); and

• if discovery into other alleged violations will be permitted before the court decides if the case 

is ripe for adjudication.
Page 9 of 19

Ultimately, much of the information required for this inquiry will not be found in the administrative 

record. Rather, it will result in expensive discovery disputes and prolonged motion practice to 

resolve the issue. This is inconsistent with the Department’s litigation reduction goals. Additionally, 

because some of the elements in the exception go beyond the goal of permitting access to the courts 

when the claimant has been deprived of the ability to obtain a full and fair review, the ACLI submits 

that the test used in the exception is far too broad. For example, if a court concludes that a 

procedural violation did not occur in the context of an “ongoing good faith exchange of information,” 

but the violation does not impact the claimant’s ability to obtain a full and fair review, the remedy of 

exhaustion would not fit the violation. 

All of these abovementioned questions are procedural issues that will inappropriately shift the focus 

of litigation from the important substantive issues regarding the claimant’s qualification for disability 

benefits to procedural technicalities. Accordingly, this section should be eliminated. If, after its 

review, the Department continues to believe that such procedural amendments provide an actual, 

measurable benefit to the claimant (whom the rules are intended to help), we suggest the following 

alternative.

As an alternative approach, the ACLI recommends that in lieu of the multi-part test set out in 

subsection (l)(2)(ii) of the proposed regulation, the Department instead adopt a test similar to the 

one in Schorsch v. Reliance Standard Life Insurance, 693 F. 3d 734 (7th Cir. 2012) and numerous 

similar cases.23 In those cases, a claimant is deemed to have exhausted administrative remedies if: 

“there is a lack of meaningful access to review procedures, or where pursuing internal plan remedies 

would be futile.” Schorsch, 693 F. 3d at 739.

In Schorsch, the insured claimed that the claim administrator had a different motive for denying her 

claim than was stated in the denial letter. Because the claimant had been told that she could obtain 

a review, review the pertinent documents, and submit additional information as part of an appeal, 

the Seventh Circuit rejected the argument that she had exhausted her administrative remedies, 

irrespective of the alleged violation of the claimant’s right to be notified of the true reason her claim 

had been denied. Alternatively, if a plan refuses to provide the claimant pertinent plan documents or 

information from the administrative record to allow the claimant to pursue an appeal, the 

“meaningful access” test would allow the claimant to file suit without any further administrative 

review. See, e.g., Wilczynski v. Lumbermen’s Mut. Cas. Co., 93 F. 3d 397 (7th Cir. 1996).

The ACLI suggests that the Department replace proposed subsection (l)(2)(ii) with the following 

language: 

(I)(2)(ii): Notwithstanding paragraph (l)(2)(i) of this section, the administrative remedies 

available under a plan with respect to disability benefits will only be deemed exhausted for 

violations of this section if the claimant has not been provided meaningful access to review 

procedures or where further review would be futile.

 

23 See, e.g., Perrino v. Southern Bell Tel. & Tel., 209 F. 3d 1309, 1316-1318 (11th Cir. 2000); Majka v. The Prudential Ins. 

Co. of America, 171 f. Supp. 2d 410, 414-416 (D. N.J. 2001); Wilson v. Globe Specialty Products, 117 F. Supp 2d. 92, 98-

99 (D. Mass. 2000).
Page 10 of 19

The ACLI also seeks modification of the language in subsection (I)(2)(ii) which allows claimants to 

seek an explanation of any claimed violation from the plan, to which it must respond within ten days. 

The plan’s response must provide a “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.”

We propose that claimants should be required to clearly identify the request described in subsection 

(I)(2)(ii) as a prerequisite to filing suit under ERISA Section 502. This requirement would allow a plan 

to know that there is an attempt to trigger this part of the Rule. We also propose that a plan 

receiving such a letter should have ten business days within which to provide a response. Making 

such a request mandatory would allow the parties to attempt to resolve disputes without resorting to 

litigation. This would also promote the Department’s goal of facilitating greater dialogue between 

claimants and the plan. Finally, requiring claimants to do so would promote judicial economy and 

clarify the administrative record for judicial review on any claimed procedural violation.

Summarizing the foregoing, the Department’s revisions to subsection (I) would undoubtedly lead to 

increased litigation. Allowing access to Federal Court on a claim of a lack of “strict adherence” to all 

of Section 2560.503-1’s numerous requirements will incentivize claimants to file suit. It can be 

anticipated that when such a suit is filed, claimants will immediately seek discovery to try and perfect 

any alleged violations. At the same time, plans and claims administrators will likely file motions to 

dismiss based on the de minimis violations exception. All of these issues will be decided in the 

context of a regulation that does not provide clear direction as stated above.

The net effect of this litigation for many claimants will be many months or more of delay as the 

courts determine whether the dispute is ripe for adjudication and resolve discovery disputes. Many 

courts may refuse to exercise jurisdiction over such early attempts at litigation to avoid opening the 

floodgates for similar litigation, and to ensure that those cases that are litigated have an adequate 

administrative record to review. For all of the reasons stated, the changes to subsection (I) will bring 

about the exact harm that we believe the Department seeks to avoid and decrease, namely: 

increased litigation and delay in claims resolution.

 

B. Right to Review and Respond to New Information before Final Decision 

The revisions to subsection(h), which provides for a right to review and respond, is another example 

of a change in which the costs far exceed the benefits. As noted above, the Department concluded 

that few plans base adverse benefit determinations on appeal on new evidence or rationales. ACLI’s 

survey illustrates the opposite. With respect to short-term disability claims, in 2014, 87.3 percent of 

appealed cased involved new information, in 2015, 87.9 percent of appealed cases involved new 

information, and in 2016, 83.9 percent of appealed cases involved new information. The average 

volume of this new information was 66 pages. With respect to long-term disability claims, ACLI’s 

survey shows that in 2014, 83.5 percent of appealed cased involved new information, in 2015, 83

percent of appealed cases involved new information, and in 2016, 82.8 percent of appealed cases 

involved new information. The average volume of this new information was 261.5 pages.

Under the pre-2017 version of the claims regulation, an insured has ample opportunity to support 

his/her claim and receive a full and fair, independent review on appeal. (Employers also may choose 
Page 11 of 19

to design their disability benefit plans to include additional voluntary levels of appeal.) A claimant 

who receives an initial adverse benefit determination has a right to a free copy of the administrative 

record that contains all relevant information as defined by the regulations. The insured has six full 

months to review the record and develop a response. The claimant can appeal earlier if he/she so 

chooses and thus speed up the ultimate decision-making process. The appeal review is performed 

by an examiner who had no involvement in the initial claim process or decision, and the appeal gives 

no deference to the initial claim decision. If the initial adverse decision is upheld on appeal, the 

insured is provided with a detailed explanation of the administrator’s reasons for the decision as 

required by the regulations as well as a description of his/her right to bring suit under ERISA. 

Taking all of that into account, numerous courts have recognized that a claimant does receive a full 

and fair review under the pre-2017 regulations. See e.g. Midgett v. Washington Group, 561 F.3d 

887 (8th Cir. 2009); Metzger v. Unum, 476 F. 3d 1161 (10th Cir. 2007); Glazer v. Reliance Standard, 

524 F.3d 1241 (11th Cir. 2008); Pettaway v. Teacher’s Insurance and Annuity Ass’n of America, 644 

F.3d 427 (D.C. Cir. 2011).

The proposed new subsections (h)(4)(i) and (ii) of the regulations are problematic for several 

reasons, including their ambiguity and the impracticality of their application to the prompt 

administration of disability claims. First, it remains unclear what is meant by “new and additional 

evidence,” and there are sure to be costly disputes over the meaning of this provision. Second, the 

amendments are certain to cause an endless back and forth of information between the plan and 

the claimant, needlessly delaying the appeal process and ultimately, the appeal decision. Third, this 

is potentially exacerbated by the lack of clarity regarding whether the administrator will have enough 

time to properly review information received late in the appeal period. Claim administrators could be 

forced to make a decision based on an incomplete record or exceed the allowable time periods to do 

a complete review. Under the Final Rule, exceeding the time period is a procedural violation which 

will entitle the claimant to run to court as described above. On the other hand, a hurried decision 

made in order to avoid running afoul of the time limits for making a claim decision is contrary to the 

standard of a “full and fair review.” 

By way of example, plans could have to send claimants new or additional evidence before the plan 

may have determined whether or how that evidence may contribute to an adverse appeal decision; 

claimants could receive or provide new or additional evidence in piecemeal fashion as the appeal 

process proceeds; claimants could be required to provide comments on the new or additional 

information without necessarily knowing how that information may, if at all, affect the claim decision; 

if claimants did not want to provide a response, then the claimant could still be required to contact 

the plan to let it know that; and the plan may have to generate new or additional information as a 

result of the plan’s review of the claimant’s responses. This is neither practical nor desirable from 

the point of view of either the claimant or the plan. And once again, the endless appeal cycle will 

increase the time it takes to decide the appeal and the costs of administration without any 

reasonable connection to decreasing litigation or improving the outcome of the decision.

The Department should rescind the amendments to these sections. If the Department, after its 

review, determines that these provisions require revision, we suggest the following alternatives.
Page 12 of 19

We recommend that the Department revise “new and additional information” to read “new and 

additional medical reviews, including Independent Medical Examination (IME) reports.”

In addition, to avoid unnecessary delays, ensure the appeal process continues to move forward, and 

that appeal determinations are issued as soon as practicable, we also recommend that the 

Department amend the Final Rule to include timeframes by which the claimant must provide his/her

responses to the medical reviews, and by which the plan must review and consider the claimant’s 

responses and issue the determination on appeal.

Thus, we recommend the following amended language for section (h)(4)(i):

(i) “Provide that, before the plan can issue an adverse benefit determination on review of a 

disability benefit claim, the plan administrator shall provide the claimant, free of charge, with 

any new or additional medical reviews considered, relied upon, or generated by the plan (or 

at the direction of the plan) in connection with the claim; the claimant may have up to but no 

more than 15 business days from receipt to respond to the medical review provided by the 

plan (“response period”), and the time remaining for an appeal determination shall be tolled 

during this response period. After receipt by the plan of the claimant’s response, the plan 

shall have no fewer than 15 business days to issue a determination on review, but the plan 

must issue the decision as soon as reasonably practicable. This provision shall not apply to 

plans that provide a second or additional level of voluntary review.”24

Finally, with regard to subsection 4(ii), it is not clear what is meant by “new or additional rationale.” 

This is subject to different interpretations, in that it could mean a completely new and different 

ground upon which an adverse determination is based on appeal that was not a part of the initial 

claim determination, or alternatively, it could mean a new and different fact that, on appeal, provides 

further support for upholding the adverse determination.

We recommend that the Department define “new or additional rationale” to mean a completely new 

and different ground upon which an adverse determination is based. 

We recommend the following amended language for section (h)(4)(ii):

(ii) “Provide that, before the plan can issue an adverse benefit determination on review of a 

disability benefit claim, if the plan administrator relies upon a new ground for the adverse 

determination which was not a basis for the initial claim determination, the plan 

administrator shall provide the claimant, free of charge, with the new ground. The claimant 

may have up to but no more than 15 business days from receipt to provide a response to the 

plan concerning the new ground (“response time”), and the time for an appeal determination 

shall be tolled during the response time. After receipt by the plan of the claimant’s 

 

24 As mentioned above, the application of timeframes and tolling will ensure the appeal process moves along and does not 

become stalled. In addition, situations may arise when the claimant may not provide a response before a determination is 

due on day 45, or provides a response within days of the determination deadline. Imposition of time deadlines and tolling 

will prevent the appeal process from becoming stalled, and ensure the plan has adequate time to consider the claimant’s 

responses and issue a determination within a reasonable time.
Page 13 of 19

response, the plan shall have no less than 15 business days to issue a determination on 

review, but the plan must issue the decision as soon as reasonably practicable. This 

provision shall not apply to plans that provide a second or additional level of voluntary 

review. 

C. Culturally and Linguistically Appropriate Notices 

The industry understands that translation services are needed in certain cases (the majority if not all 

disability carriers provide telephone assistance); however, the new requirement appears to be unduly 

costly as compared to the full and fair review benefits assumed to result. These requirements would 

also add more time to already tight time constraints that would need to change. A disability income 

claim file is usually voluminous, communication is frequently conducted via mail rather than 

electronically (unlike medical claims), and there may be some aspects of the communication (e.g., 

the translation of the plan provisions) that might “get lost in translation”. Thus, we recommend that 

the Final Rule be amended to make clear that the English version takes precedence in the event of 

any conflict with the translated documents. Furthermore, given the fact that disability claims are 

unique in their potential longevity (again, years or decades) and therefore in the breadth of 

communication that may occur over that time, we recommend that the Final Rule be clarified that it 

applies only to adverse benefit determinations. Lastly, the Final Rule should be clarified that the 

requirement to provide “assistance with filing claims and appeals in any applicable non-English 

language” is limited to procedural, not substantive, assistance.

In addition, it is not clear what value is added by the phrase “culturally appropriate” in the Final Rule. 

Again, it seems that the Department is deferring to what might have been beneficial (although we 

cannot determine how) for medical claims procedures; however, we cannot determine how it is 

defined for purposes of providing translation services in the context of disability claims. We suggest 

removing the word “culturally” from the Final Rule so as to eliminate this ambiguity. 

D. Contractual Limitation Period

The Department requested public comment on the statute of limitations in ERISA cases, and

specifically notice of an ERISA plan’s contractual limitations period. The ACLI continues to 

recommend that the final determination on appeal quote in full the applicable plan’s contractual 

limitation provision. We believe that adopting the Final Rule in which the determination letter must 

identify a specific date for the expiration of the limitation period will ultimately create confusion for 

claimants. While this recommendation does not get to the Department’s desire that a date certain is 

named, the Department’s decision is not practically possible given the intersection of unique policy 

language referring to proof of loss and state law. In some ERISA plans, the limitations period 

commences on the date proof of loss is required to be provided, or on the date proof of loss is 

actually provided. Some jurisdictions have interpreted plan limitations to commence when a claim 

accrues, and accrual is a judicial term that varies by jurisdiction – as some state insurance 

departments have specific laws that vary by state. The proposed “right to review” provisions may 

result in numerous determination letters, which must be reconsidered if a claimant provides a 

response to new or additional information. As a result, in some ERISA plans, the deadline for filing 

suit will change when a new determination letter is issued, resulting in several notices to the 
Page 14 of 19

claimant with new and revised limitation deadlines. Thus, to avoid that problem, as well as the 

difficulties of interpreting judicial decisions on limitations provisions that vary between jurisdictions, 

we recommend that the claimant be provided with the language of the limitations provision. This 

also will eliminate the risk that an insurer or other administrative entity is seen as providing legal 

advice to a claimant – something prohibited by state law.

IV. The Department Should Revise Its Regulatory Impact Analysis (RIA) Based on the New Data It 

Receives from Stakeholders 

Based on additional data provided by stakeholders, it is imperative that the Department conduct a 

full and thorough new Regulatory Impact Analysis to determine if the benefits of the Final Rule 

outweigh its costs.

In the Final Rule, the Department stated that it had quantified the costs where possible and provided 

a qualitative discussion of the benefits that are associated with the proposed regulations. However, 

the Final Rule is replete with references to the Department’s lack of data, much of it critical, to this 

rulemaking. Further, the Department stated that comment letters did not provide data on the cost 

analysis. Indeed, in the proposed rule to extend the applicability date, the Department stated that it 

had requested data in April 2015 (“2015 NPRM”)25; however, we note that it was not until May 2015 

that the Department even added to its regulatory agenda that it would propose amendments to 

claims procedures regulations. Further, it was not until November 18, 2015 that the Department 

issued the proposed rule, and this proposal did not include a request for data nor did it refer to the 

“2015 NPRM” in its cost-benefit analysis of that proposed rule. Instead the Department basically 

utilized analysis completed specifically for the health claims procedures update several years earlier. 

The Department’s lack of data is reflected in its flawed RIA. As stated in our January 19, 2016

comment letter and below, we believe that the Department (1) failed to qualitatively describe the 

benefits of the proposed regulations, and (2) failed to adequately quantify the primary costs 

associated with the proposed regulations. The delay should provide time for the Department to

appropriately review the data herein and submitted by other interested parties and conduct a

meaningful and appropriate RIA based on the disability income industry and not the utilization of the 

5+ year old analysis done for the group health plan regulation update.

A. The Department Failed to Consider Regulatory Alternatives

Executive Order 12866 requires Federal Agencies, in deciding whether and how to regulate, to 

assess the costs and benefits of available regulatory alternatives, including the alternative of not 

regulating.26 The 2015 proposed rule and the Final Rule did not include any discussion of possible

regulatory alternatives contemplated or considered by the Department. Nor did the Department

provide any evidence or data to conclude that the current disability claims regulatory regime was 

inadequate and warranted the revision. The November 18, 2015 proposed rule and the Final Rule 

were silent to this requirement.

 

25 See 82 Fed. Reg. 47409, 47411 (October 12, 2017).

26 See 58 Fed. Reg. 51735 (October 4, 1993), Section 1(a).
Page 15 of 19

B. The Department’s Cost-Benefit Analysis Was Inadequate 

Congress, courts, and the executive branch of government have issued guidance mandating 

thorough, objective cost-benefit analysis in rulemaking. Collectively, these standards ensure that 

federal agencies “strike the right balance,” and develop “more affordable, less intrusive rules to 

achieve the same ends--giving careful consideration to benefits and costs.”27 Executive branch 

mandates for cost-benefit analysis began in 1981 with Executive Order 12291 which created a new 

procedure for the Office of Management and Budget (OMB) to review proposed agency regulations, 

and ensured the President would have greater control over agencies and improve the quality and 

consistency of agency rulemaking. Since then, cost-benefit analysis has formed the core of the 

review process. The order unambiguously stated, “regulatory action shall not be undertaken unless 

the potential benefits to society for the regulation outweigh the potential costs to society.”28 

Regulatory agencies, therefore, must balance the benefits of proposed regulations against their 

costs. 

In 1993, Executive Order 12866 superseded the 1981 order, but retained cost-benefit analysis as a 

fundamental requirement in rulemaking. Executive Order 12866 instructs that “in deciding whether 

and how to regulate, agencies should assess all costs and benefits of available regulatory 

alternatives, including the alternative of not regulating.”29 In a manner parallel to the 1981 order, 

Executive Order 12866 advises that agencies must perform their analysis and choose the regulatory 

approach that maximizes net benefits.30 

President Obama reaffirmed the importance of a cost-benefit analysis in 2011 through Executive 

Order 13563 and reinforced the core principles in Executive Order 12866 by emphasizing that “each 

agency must . . . propose or adopt a regulation only upon a reasoned determination that its benefits 

justify its costs.”31 Importantly, five Administrations since 1981 have consistently made a costbenefit analysis a threshold for Federal agency rulemaking.

The OMB provided Federal agencies with extensive guidance on performing cost-benefit analysis in 

its Circular A-432, which identifies three fundamental elements to Federal agency rulemaking: (i) a 

statement of the need for the proposed regulation; (ii) discussion of alternative regulatory 

 

27 Op-Ed, President Barack Obama, Toward a 21st Century Regulatory System, Wall Street Journal (Jan. 18, 2011). The 

President’s Op-Ed coincided with his issuance of Executive Order 13563, which set strict standards for cost-benefit analysis 

in federal agency rulemaking.

28 46 Fed. Reg. 13193, 13193 (February 17, 1981).

29 Exec. Order No. 12866, 3 C.F.R. 638 (1993).

30 The 1981 and the 1993 executive orders emphasize different approaches to the same cost–benefit end. The 1981

order required that the benefits “outweigh” the costs, while the 1993 order required only that the benefits “justify” the 

costs. See generally Peter M. Shane, Political Accountability in a System of Checks and Balances: The Case of Presidential 

Review of Rulemaking, 48 ARK. L. REV. 161, 176-78 (1994) (comparison of 1981 and 1993 executive orders with 

additional detail and observing that the 1993 “order focuses on a similar mandate, but describes it with greater nuance”).

31 Exec. Order 13563, § 1(b), 76 Fed. Reg. 3821 (Jan. 18, 2011). The order further notes that “each agency is directed to 

use the best available techniques to quantify anticipated present and future benefits and costs as accurately as possible.” 

Additional analysis of this order can be found in Helen G. Boutrous, Regulatory Review in the Obama Administration: CostBenefit Analysis for Everyone, 62 ADMIN. L. REV. 243, 260 (2010).

32 Office of Mgmt. & Budget, Circular No. A-4, Regulatory Analysis (Sept. 17, 2003), last available at 

https://www.whitehouse.gov/omb/circulars_a004_a-4/. OMB invited full public comment on his 48-page circular in draft 

form, which contains detailed instructions about conducing cost-benefit analysis, and provides a standard template for 

running the analysis.
Page 16 of 19

approaches; and (iii) an analysis of both qualitative and quantitative costs and benefits of the 

proposed action and the leading alternatives. The analysis should attempt to express both benefits 

and costs in a common measure - monetary units - to facilitate the assessment. When benefits or 

costs cannot be quantified in monetary terms or in some other quantitative measure, the Agency 

should describe them qualitatively.33

In the preamble of the Final Rule, the Department states that, in accordance with OMB Circular A-4, 

it has quantified the costs where possible and provided a qualitative discussion of the benefits that 

are associated with the Final Rule. As discussed below, we believe that the Department (1) failed to 

qualitatively describe the benefits of the Final Rule, and (2) failed to adequately quantify the primary 

costs associated with the Final Rule.

C. The Department Overestimated the Benefits of the Final Rule

In the preamble, the Department acknowledges that it “does not have sufficient data to quantify the 

benefits associated with the final regulations due to data limitations and the lack of effective 

measures.”34 However, much of the Department’s qualitative analysis consisted of the 

Department’s “expectations” of the benefits of the Final Rule. Indeed, the Department attempts to 

justify its promulgation of the Final Rule by alleging a large volume of litigation in the disability claims 

area35 and the advancements in claims processing technology. Pursuant to Executive Order 12866, 

Federal agencies should promulgate only such regulations as are required by law, are necessary to 

interpret the law, or are made necessary by compelling public need. The Final Rule is neither 

required by law nor necessary to interpret the law. Therefore, the Department is required to 

establish a “compelling public need” for its regulatory action. The Department’s misplaced reliance 

on the volume of litigation in the disability benefits area, the advancements in claims processing 

technology, and its “thoughts” that disability claimants deserve protections as stringent as those 

applicable to healthcare claimants does not demonstrate a compelling public need for this regulatory 

action.

The Department states that it “expects” that the Final Rule will improve the procedural protections 

for workers who become disabled and make claims for disability benefits. The Department, however,

provided no basis for this “expectation” and, indeed, failed to provide any substantial analysis of 

problems with the current regulatory structure or demonstrate why the proposed additional 

regulatory requirements will strengthen the procedural protections currently in place. 

Additionally, the Department states that the Final Rule will cause some participants to receive 

benefits they might otherwise have been incorrectly denied absent the fuller protections provided by 

the proposed regulations. Although the Final Rule requires additional disclosure and a right to 

 

33 To ensure that agencies properly perform cost-benefit analysis and select the most cost-effective regulatory options, OMB 

and the White House Office of Information and Regulatory Affairs (OIRA) review agency cost-benefit analysis before proposed 

regulations become effective.

34 81 Fed. Reg. at 92333.

35 As indicated in footnote 5, the Department cites in the preamble a 2012 paper in support of its assertion that “disability 

cases dominate the ERISA litigation landscape today.” However, the Department does not explain how the proposed 

regulations will reduce the volume of litigation.
Page 17 of 19

review and respond to new information before a final appeal decision is made, the Department does 

not explain how these additional requirements will cause participants to receive benefits they might 

otherwise have been incorrectly denied. Moreover, although the Department requested comments 

on whether, and to what extent, modifications to the existing timing rules are needed, we are 

concerned the additional “back-and-forth” dialogue contemplated by some of the Final Rule will 

result in an endless loop, thus not being beneficial to claimants, claim adjudicators, or employers. 

The fact that the Department disregarded this potential issue and the potential delay to claimants 

remains a concern. 

As further justification for the Final Rule, the Department stated that 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. Yet, again, the Department provided no 

explanation or basis as to how the Final Rule would do this. Does the Department assume that the 

new regulations will result in less litigation, because participants (or their attorneys) will be less likely 

to pursue litigation due to a “fairer system of disability claims and appeals processing”? And, if so, 

how? Or is this yet another deferral to the health claims processing that been the primary basis for 

the rule amendments?

Finally, the Department stated that 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. The pre-2017 

regulatory scheme provided both certainty and consistency with regard to the adjudication of 

disability benefit claims. Layering on additional requirements based on medical claim adjudication –

a system far different from disability income claim adjudication – will result in disruption to the 

current system’s certainty and consistency, leading to increased costs to and burdens on the court 

system to determine claim decisions. 

D. The Department Underestimated the Costs of the Final Rule 

Lacking an analysis of the actual cost of the Final Rule, the Department chose instead to selectively 

focus on two less expensive and quantifiable costs of the regulation, namely (1) the cost of providing

the claimant any new or additional evidence considered; and (2) the cost of providing notices of 

adverse benefit determinations in a culturally and linguistically appropriate manner. Otherwise, the 

Final Rule is replete with statement after statement that the Department had no data or sufficient 

data36 and that commenters did not provide data.

The Final Rule would require that an adverse benefit determination contain a discussion of the 

decision, including the basis for disagreeing with any disability determination by the Social Security 

Administration, or a treating physician presented by the claimant, to the extent the plan did not 

follow those determinations. Compliance with this new regulatory requirement will require collection 

of additional information, additional claim administrator evaluation, and potentially additional 

medical professional analysis, thereby increasing the administrative costs associated with disability 

 

36 See 21 Fed. Reg. at 92333, 92334, 92335, 92336, 92338, 92339, 92340.
Page 18 of 19

claims determinations. It will also place an undue burden on the Social Security Administration by 

requiring it to respond to voluminous requests for information about its disability determinations. 

Yet, inexplicably, the Department did not evaluate or address at all this likely substantial additional 

cost burden in its quantification of the primary costs associated with the Final Rule. Instead, they 

deflect this omission by stating that the “commenter provided no alternative estimates or data 

supporting their assertions that the Department could use to revise its cost estimate.”37

Additionally, the ACLI is concerned that the Department has underestimated the costs associated 

with the requirement that claimants have a right to review and respond to new evidence or 

rationales developed by the plan during the pendency of the appeal. The Department’s annual 

aggregate cost estimate is based solely on the administrative functions associated with collecting 

and distributing the additional evidence considered, relied upon, or generated by (or at the direction 

of) the plan during the appeals process. The Department failed to provide any cost estimate for the 

time a plan would incur under the proposal to substantively evaluate claimant responses received 

during this proposed “back and forth” process.38 A plan’s evaluation of claimant responses to any 

new evidence or rationales developed by the plan during the pendency of the appeal would likely 

require medical professional evaluation. Yet, the Department does not include the expected cost of 

any such medical professional evaluation in its cost estimate, rather the Department states that 

commenters did not provide estimates.

Summary 

 

In a voluntary system of employee benefits, each employer has a finite amount of resources to spend 

on compensation and benefits, including disability income plans. The disability income insurance 

industry believes that all claimants are entitled to a full and fair review. The pre-2017 rules provide 

for such full and fair review. However, if the uniformity, predictability, and efficiency which are 

hallmarks of ERISA are eroded due to new regulations that seem destined to increase confusion and 

litigation, versus providing true benefits to American workers, an employer might reduce or shift to 

employees the cost of disability benefits or, in a worst-case scenario, eliminate disability income 

benefits altogether. That was not Congress’ intent in enacting ERISA.

ACLI’s data illustrates that many of the Department’s conclusions in promulgating the Final Rule 

were incorrect, and after a full evaluation, the Department will conclude that the Final Rule’s costs 

outweigh its benefits. The Final Rule will add to the costs and administrative burden for a claims

administrator to reasonably and timely decide benefit claims and the Final Rule will increase - not

decrease – the number of litigated disability cases, in contravention of the Department’s goals 

stated in the preamble. Moreover, the Final Rule will prolong the time it takes for the courts to 

resolve disputes. 

 

37 81 Fed. Reg. 92335.

38 Indeed, the example Department provided in the preamble of how this new provision would work contemplates the 

plan’s generation of an additional medical report as a result of the claimant’s response to new evidence generated by the 

plan. Yet, the Department’s cost estimate does not include any costs associated with the potential of a plan being required 

to generate such a report. 
Page 19 of 19

The Final Rule should be repealed. The Department should consider regulatory alternatives to 

reasonably address the Department’s concerns through a more focused approach, as provided in 

this letter, that would not disrupt the careful balancing between ensuring fair and prompt 

enforcement of claimant rights under disability income plans and encouraging the creation and 

maintenance of such plans.

Sincerely,

Steven Clayburn, FSA, MAAA
Claims Procedure for Plans Providing Disability Ben

RIN 1210‐AB39 – ACLI Comment Letter

Exhibit A – ACLI Disability Income Insurance Carrier S

December 11, 2017
Instructions

# of claims# of claims

2014 2015 

77,218 163,796 79,466 163,812 83,954 158,698 

2014 2015 

6,606 7,017 

294 310 248 221 

2014 2015 

6,895,378 7,303,796 

21,797,359 22,620,819 30,375,822 31,469,327 

2014 2015 

9,595,102 10,198,394 

468,070 474,115 

4,831,288 4,654,588 

0

NA

0A. What is your best estimate of the number of claims that, in the absence of the rule your company would now approve solely because of the rule?1A. How many ERISA-qualified Group Disability Income policies were in force on Dec 31 of? I.e. The compapolicy and bears the actuarial risk. Do not include Administrative Services Only (ASO) plans.

# of Short-Term ONLY policies

# of Short-Term ONLY plans

# of Long-Term ONLY plans

# of plans covering both

0B. What is your best estimate of the annual benefits of the claims in question 0A?

# in plans covering BOTH

1B. How many ERISA-qualified Group Disability plans did you act as administrator ONLY on Dec 31 of? I.e. where the insurance company has not issued a policy and therefore has no actuarial risk.

# in Short-Term ONLY

# in Long-Term ONLY

Note: If you sold a policy and act as administrator, the policy is recorded in 1A and nothing is recorded in 1B.2A. How many covered lives were in the policies reported in 1A?

# of policies covering both

# of Long-Term ONLY policies

# in policies covering BOTH

# in Short-Term ONLY

# in Long-Term ONLY

2B. How many covered lives were in the plans reported in 1B?
STDI Questions

2014 2015 

1,917,745 2,009,803 

2014 2015 

87.1% 86.2% 12.9% 13.8% 

0.0% 0.0% 

2014 2015 

2.7% 2.9% 

19.6% 19.6% 

0.4% 0.3% 

13.4% 14.4% 

3.3% 3.0% 0.3% 0.2% 

18.1% 17.4% 

7.4% 7.6% 0.0% 0.0% 

19.9% 17.9% 

3.3% 4.1% 0.0% 0.1% 5.8% 6.4% 5.8% 6.0% 

For this section, data should be based on year claim was received. For example, a claim received in 2015 rethe disability was incurred, would be part of the 2015 data.

Claim counts should include both insured and ASO plans.

1. How many short-term disability income (STDI) claims were submitted initially?

# of claims submitted

2. Of the STDI initial claims, what number were:Short Term Disability Insurance Claims and Appeals

Denied due to pre-existing condition

Claimant not covered by policy/Not Eligible

Death

Information request not received

Set up in error

Approved during the initial review

Denied during the initial review

Remain unresolved

3. Of the STDI claims denied during the initial review, how many were due to the following

(If possible, please have column totals match denied claims from Q2)

Claimant withdrew claim

Fraud

Waiting period not satisfied

All other reasons

Not disabled any occupation

Not disabled own occupation

Policy exclusion

RTW gainful occupation

RTW own occupation
STDI Questions

2014 2015 2016

SSDI Approved 82 103 118

2014 2015 2016

# Denied 7 12 7

2014 2015 

2000002000000002000002000038

2014 2015 

All STD 13 days 13.3 days 

4. Among your STDI claims, what number of claimants were already approved for SSDI before your claims 

Death

Information request not received

Set up in error

Not disabled any occupation

Not disabled own occupation

5. Of the claims in 4, what number of claims were initially denied?6. Of the claims in 5, how many were denied due to the following

(If possible, please have column totals match denied claims from Q5B)

Denied due to pre-existing condition

Claimant not covered by policy/Not Eligible

Waiting period not satisfied

All other reasons

7. Please provide the average number of days involved in processing an initial STDI claim. Please count frois initially received to when initial decision is made. 

Policy exclusion

RTW gainful occupation

RTW own occupation

Claimant withdrew claim

Fraud
STDI Questions

Yes 0%No 100%Yes 100%No 0%

1%

100%

37%

2014 2015 

11,925 13,574 

2014 2015 

5.8% 3.2% 2.7% 2.8% 

78.8% 81.8% 12.7% 12.1% 

8. What is your best estimate as to the number of days the rule will (decrease)/increase the number of days claims decision?

3.3 days

Appeals staff do not make any initial claim decisions

Appeals staff do not make initial claim decisions for that plan

12. How many initially denied STDI claims were appealed? (Count multiple appeals of one claim as a single 

Number appealed

13. How many appealed cases involved new information?9. Are individuals that review appeals compensated based on whether appeals are upheld or overturned?10. Are your appeal staff members segregated from the claim staff making the initial claim denial?

<-- GO TO Q

11. How are the appeal staff segregated from claim staff? (Mark all that apply)

Appeals are handled by a third-party

New info submitted by claimant

New info developed by company

New info submitted by BOTH

No new info
STDI Questions

Any comments on regarding the volume of new information?

2014 2015 

57.2% 58.6% 

4.9% 4.7% 

37.9% 36.7% 

0.0% 0.1% 0.0% 0.0% 

2014 2015 

42.8 days. 45.1 days. 

Yes 42.4%No 57.6%

14. What is your best estimated of the average number of pages per appeal that this new information const

acknowledge that "pages" is undefined. We are trying to determine the "volume" of new material.

Average pages per appeal 66.1 pages

Pending

16. What was the average number of days involved in processing an STDI claim going through the entire apPlease count from when the appeal was filed to final appeal decision. Exclude any claims in which the appedecided. 

All appeals

17. What is your best estimate as to the number of days the rule will (decrease)/increase the number of dayappeals decision?15. How many of the appealed STDI claims were

Upheld with no new findings

Upheld with new reason given for denial

Overturned

Settled

35.5 days

18. Do you allow a second or additional appeal?
STDI Questions

19. Other than the first appeal, how many additional appeals do you allow?

47.2%52.8%

0.0%0.0%

Third level

More than three levels

20. What is the number of claimaints that ultimately will receive STDI benefits exclusively because of the ruwould not have been paid except for the changes specified under the rule; please keep in mind that the rule benefit qualification requirements?)

0

(Select only 1)

We only allow first level of appeal

Second level
LTDI Questions

2014 2015 

280,179 277,826 

2014 2015 

68.3% 68.1% 30.5% 30.8% 

1.2% 1.1% 

2014 2015 

6.5% 6.5% 7.6% 7.6% 1.8% 1.7% 

14.9% 17.1% 

2.7% 2.7% 0.4% 0.3% 

19.8% 19.6% 

1.9% 1.9% 0.1% 0.1% 

19.1% 16.8% 

4.8% 5.6% 0.0% 0.0% 

15.2% 15.0% 

5.2% 5.1% 

For this section, data should be based on year claim was received. For example, a claim received in 2015 rethe disability was incurred, would be part of the 2015 data.

Claim counts should include both insured and ASO plans.

1. How many long-term disability income (LTDI) claims were submitted initially?

# of claims submitted

2. Of the LTDI initial claims, what number were:Long Term Disability Insurance Claims and Appeals

Denied due to pre‐existing condition

Claimant not covered by policy/Not Eligible

Death

Information request not received

Set up in error

Approved during the initial review

Denied during the initial review

Remain unresolved

3. Of the LTDI claims denied during the initial review, how many were due to the following

(If possible, please have column totals match denied claims from Q2)

Claimant withdrew claim

Fraud

Waiting period not satisfied

All other reasons

Not disabled any occupation

Not disabled own occupation

Policy exclusion

RTW gainful occupation

RTW own occupation
LTDI Questions

2014 2015 2016

SSDI Approved 6,788 6,264 6,257

2014 2015 2016

# Denied 672 692 729

2014 2015 

74.2% 19.9% 18.8% 

8.9% 9.9% 3.6% 1.7% 

33.8% 35.2% 

0.6% 0.0% 1.8% 4.5% 

15.0% 17.4% 

0.3% 0.0% 0.0% 0.0% 0.6% 0.0% 3.6% 4.5% 0.0% 0.0% 5.0% 5.7% 

6.8% 2.3% 

2014 2015 

All LTD 39 39 

4. Among your LTDI claims, what number of claimants were already approved for SSDI before your claims d

Death

Information request not received

Set up in error

Not disabled any occupation

Not disabled own occupation

5. Of the claims in 4, what number of claims were initially denied?6. Of the claims in 5, how many were denied due to the following

(If possible, please have column totals match denied claims from Q5B)

Denied due to pre‐existing condition

Claimant not covered by policy/Not Eligible

Waiting period not satisfied

All other reasons

7. Please provide the average number of days involved in processing an initial LTDI claim. Please count frois initially received to when initial decision is made. 

Policy exclusion

RTW gainful occupation

RTW own occupation

Claimant withdrew claim

Fraud
LTDI Questions

Yes 0%No 100%Yes 100%No 0%

1%

100%

42%

2014 2015 

15,440 14,779 

2014 2015 

1.1% 1.5% 1.1% 1.2% 

81.3% 80.3% 16.5% 17.0% 

100.0% 100.0% 

8. What is your best estimate as to the number of days the rule will (decrease)/increase the number of days claims decision?

6.9 days

Appeals staff do not make any initial claim decisions

Appeals staff do not make initial claim decisions for that plan

12. How many initially denied LTDI claims were appealed? (Count multiple appeals of one claim as a single 

Number appealed

13. How many appealed cases involved new information?9. Are individuals that review appeals compensated based on whether appeals are upheld or overturned?10. Are your appeal staff members segregated from the claim staff making the initial claim denial?

<-- GO TO Q

11. How are the appeal staff segregated from claim staff? (Mark all that apply)

Appeals are handled by a third-party

New info submitted by claimant

New info developed by company

New info submitted by BOTH

No new info

Total Appeals
LTDI Questions

Any comments on regarding the volume of new information?

2014 2015 

60.2% 59.2% 

2.6% 2.7% 

36.9% 37.8% 

0.3% 0.3% 

0.0% 0.1% 0.0%

2014 2015 

68.9 days 68.7 days 

Yes 51.8%No 48.2%

14. What is your best estimated of the average number of pages per appeal that this new information const

acknowledge that "pages" is undefined. We are trying to determine the "volume" of new material.

Average pages per appeal 261.5

Pending

16. What was the average number of days involved in processing an LTDI claim going through the entire apPlease count from when the appeal was filed to final appeal decision. Exclude any claims in which the appedecided. 

All appeals

17. What is your best estimate as to the number of days the rule will (decrease)/increase the number of dayappeals decision?15. How many of the appealed LTDI claims were

Upheld with no new findings

Upheld with new reason given for denial

Overturned

Settled

47.3 days

18. Do you allow a second or additional appeal?
LTDI Questions

19. Other than the first appeal, how many additional appeals do you allow?

41.5%58.5%

0.0%0.0%

Third level

More than three levels

20. What is the number of claimaints that ultimately will receive LTDI benefits exclusively because of the ruwould not have been paid except for the changes specified under the rule; please keep in mind that the rule benefit qualification requirements?)

0

(Select only 1)

We only allow first level of appeal

Second level
Terminations

Denial: The determination, before any benefits are paid on a claim, that the claim is not valid.

Approval: The determination, before any benefits are paid on a claim, that the claim is valid.

Initial Review of the Claim: The process/procedure undertaken, prior to the denial or approval of a claim, as to whether the claim is valid

Initial Appeal: Any new review of the initial claims review that is made at the request of the claimant.

Claim Terminations, Combine STDI and LTDI

2014 2015 

698,196 711,444 

2014 2015 

1,816,926 1,888,461 

2014 2015 

15.5% 15.5% 

0.0% 0.0% 

53.9% 53.2% 

1.7% 1.7% 

28.8% 29.6% 

2014 2015 

41,121 40,504 

2014 2015 

62.5% 61.5% 34.6% 35.8% 

0.0% 0.0% 

2.9% 2.7% 

Definition of Terms Used in the Survey

Termination of Benefit: Any claim which, having been deemed a valid claim and for which benefits have been paid, where benefits are term

1. How many DI beneficiaries were receiving benefits at year end?

# of beneficiaries

2. How many claims were terminated?

# of terminations

3. What was the reason the claim was terminated

End of benefit period

Fraud

Beneficiary no longer disabled

Death

All other reasons

4. How many of these terminations were disputed/appealed by the beneficiary?

# disputed/appealed?

5. What was the ultimate outcome of this dispute/appeal?

Termination upheld

Termination overturned

Final decision pending

All other outcomes
Litigation

Litigation Frequency and Cost

2012 2013 2014

19 14 21

824

86 53 72

499

2012 2013 2014

73 79 6738 25 19

949 1025 843

90 118 141

Decrease 0 % Decrease 0No Change 0 No Change NAIncrease 100% % Increase 38%

$15,700,000

98%31%15%

1. Based on the year that the claim was filed. please indicate the number of claims that resulted in a lawsuit 

STDI Lawsuits

Note: Change in years requested

Resulted in no change to company decision

Overturn any part of company decision

Were settled

Still pending

LTDI Lawsuits

Note: Change in years requested

Resulted in no change to company decision

Overturn any part of company decision

Were settled

Still pending

2. Among claims that result in litigation, what is the average litigation cost for your company?

$35,584

Select all that apply

Internal Estimates

Outside Consultants

Other Sources

3. As a result of this rule, do you expect the number of lawsuits related to claims denials to:

Select only one Select only one

Total Litigation Cost Increase

4. What is the basis for the prediction in question 3?
Litigation

2014 2015 

83 63 18 16 

1,380 1,110 

107 154 

Decrease 0% % DecreaseNo Change 0% No Change NAIncrease 100% % Increase 40%

$15,946,000

97%34%

0%

$41,200

7. As a result of this rule, do you expect the number of lawsuits related to termination of benefits to:5. Based on the year a termination-related lawsuit was filed, please indicate the number of lawsuits that end

No change to company decision

Overturn any part of company decision

Were settled

Internal Estimates

Outside Consultants

Other Sources

Select only one Select only one

Total Litigation Cost Increase

8. What is the basis for the prediction in question 7?

Select all that apply Other? Please descr

Still pending

6. What is the average per termination litigation cost for your company?
Market Impacts

Internal Claim Procedures/CostsBriefly describe the systems and procedures that will need updatingAdministration Cost Increase $32,900,000Litigation Cost Increase $31,646,000Total Increase

<--From litigation questions

Please provide your best estimate as to the following costs/expenses your company will incur due to the ruballpark estimates are acceptable. This isn't rocket science but more akin to fishing with hand grenades -- c1. What is the estimated cost to update claim (and/or other) systems to comply with the rule? These are the up/implementation costs associated with ensuring that your systems and procedures will conform with the the rule. This would include legal advice, new computer hardware, leasing additional back office space, updcomputer software, employer training and so forth. It would not include the labor cost of additional staff, buthe cost of training that staff.

$64,546,000

$19,200,000

2. The rule changes when customers may request the entire claims file. Briefly describe the types additionaanticipate incurring to conform to the rule?3. Please provide your best estimate of the total additional annual labor costs (LTDI examiners, STDI exam

Nurses, adminstrative staff, etc) that your company will incur to conform with the proposed rule.
Market Impacts

Impact of 2000 Rule

No 100% <-- Thank youYes

Demand Elasticity of the Proposed Rule (2016 Rule)

Note: % change in lives covered = (Number of lives covered after rule – number of lives before rule)/(Lives before rule)% change in premium price = (Price after rule – price before rule)/(Price before rule)

<--Thank you. ACLI will not be collecting nor aggregating You may submit this information directly to the DOL.

I.e. For each 1% increase in price, 1will drop their coverage

5. Using your best estimate, please calculate the following ratio as to the impact of the 2016 proposed rule:% Change in lives covered/% Change in Premium Price

-1.9

The Department of Labor is seeking the following data as to the impact of the “2000 Final Rule”: (1) cost incresulted from compliance with the 2000 Final Rule (or lack thereof) and whether such costs were passed on (2) whether employers stopped offering disability insurance benefits and or employee take-up rates decreathat demonstrates how the 2000 Final Rule impacted the cost of disability claims litigation.4. Does your company have reliable data that illuminates these three data requests?
In October 2017 this survey, undertaken as a response to a Request for Information by the United States Department of Labo

disability income insurers by the American Council of Insurers (ACLI). Survey questions were limited to only those disability in

policies and plans that were under the jurisdiction of the Employee Retirement Income and Security Act of 1974 (ERISA). Resp

from companies representing over 80% of the lives insured under all group disability income insurance and included both AC

member companies.To ensure accuracy and consistency in responses, the survey instrument was developed by the ACLI Senior Economist Jeffry J

disability income insurance experts within the industry. Survey results were collated and analyzed by Dr. Janoska.

In 1996, Dr. Janoska received his PhD from University of Maryland ‐ College Park (UMCP). During his time at UMCP, Dr. Janosk

Almon's Interindustry Forecasting at the University of Maryland (INFORUM), a research institute specializing in forecasting th

impact of demographics and policy changes. Dr. Janoska's dissertation advisor was Clopper Almon. Dr. Janoska has worked at 

RFA, Inc.) prior to joining ACLI. Dr. Janoska has served nearly twenty years at the ACLI and has developed an extensive knowle

insurer data, terminology and the most efficient methods to obtain consistent and accurate data when conducting industry s
Claims Procedure for Plans 

Providing Disability Benefits:

RIN 1210‐AB39 

ACLI Comment Letter

Exhibit B
American Council of Life Insurers 

101 Constitution Avenue, NW, Washington, DC 20001-2133 

www.acli.com 

Steven Clayburn, FSA, MAAA 

Senior Director & Actuary 

January 19, 2016 

Submitted Electronically 

Office of Regulations and Interpretations 

Employee Benefits Security Administration 

Room N-5666 

U.S. Department of Labor 

200 Constitution Avenue NW 

Washington DC 20210 

Attention: Claims Procedure Regulation Amendment for Plans Providing Disability Benefits 

Subject: Claims Procedure for Plans Providing Disability Benefits (RIN 1210-AB39) 

 

Dear Sir/Madam: 

On behalf of the American Council of Life Insurers1 (ACLI), we respectfully offer these comments on 

the Department of Labor’s (“Department”) proposed amendments to the ERISA claims procedures 

for disability income insurance. The ACLI is in complete agreement that the full and fair equitable 

administration of disability income claims is an important objective. But as proposed, we have 

concerns with many of the amendments. The Department has stated that it has incorporated the 

new procedural protections and safeguards made applicable to group health plans under the 

Affordable Care Act. 20 fed. Reg. 72014. However, the Department has failed to recognize the 

material differences inherent in the adjudication of disability income claims and medical claims and 

has overlooked the increased complexity and costs these proposals will impose on disability income 

claims adjudication. The proposals are also fundamentally at odds with the public policy underlying 

ERISA because they are likely to work as a disincentive to employers, particularly small employers, 

who seek to offer or continue to offer disability income coverage as a part of their employee benefit 

plans. Contrary to what the Department believes, the proposals are likely to increase the volume 

and complexity (and therefore the cost) of benefits litigation. In sum, the proposals will increase the 

administrative burden on insurers and other claims administrators without any tangible benefit to 

claimants as to the fair and equitable settlement of claims. Further, contrary to the expressed 

justification for the proposals, it is our view that some of the proposed changes will disrupt claims 

adjudication practices that have been working well for administrators and claimants for over a 

decade. Finally, as described below, the Department failed both to qualitatively describe the 

benefits of the proposed regulations, and to adequately quantify the proposed regulations’ costs, a 

prerequisite of Federal agency rulemaking.

 

1 The American Council of Life Insurers (ACLI) is a Washington, D.C.-based trade association with approximately 300 

member companies operating in the United States and abroad. ACLI advocates in federal, state, and international forums 

for public policy that supports the industry marketplace and the 75 million American families that rely on life insurers’ 

products for financial and retirement security. ACLI members offer life insurance, annuities, retirement plans, long-term 

care and disability income insurance, and reinsurance, representing more than 90 percent of industry assets and 

premiums. 
Page 2 of 15

Disability Income Insurance versus Medical Expense Insurance 

 

The fundamental differences between health and disability claims are material to the proposed 

regulations. Medical claims are generally auto-adjudicated. The administrator’s benefit decision is 

based on simple procedural questions (e.g., whether the benefit is a covered benefit, whether the 

procedure required a prior authorization, whether the health care provider was in or outside the 

network, etc.). 

Disability income claims adjudication, on the other hand, requires multiple sources of information 

and the skilled input of many types of professionals. Since a “disability” is a contractual definition, 

there is a distinction between a disability and a functional impairment which may not rise to the level 

of a “disability” under the terms of the applicable contract. Disability claims require a much more 

extensive and time consuming analysis (as a claim can last years or decades), including a 

determination of the nature of the underlying medical condition, the extent of the individual’s 

resulting functional deficits, and the impact on the individual’s ability to work. This is why regulations 

that serve medical claimants will not work for disability income claimants. 

Analyzing impairment against the contractual terms of disability, as noted in the preamble to the 

proposed amendments, is inherently factual in nature. One individual can be impaired significantly 

but not satisfy the contractual definition of disability, while another individual can meet the contract 

definition of disability with only limited impairment. For example, under an “own occupation” 

definition in a contract where a person is disabled if they are unable to perform their own 

occupation, a paraplegic who works full-time successfully as an actuary will not be contractually 

disabled despite a significant impairment, because of the ability to work as an actuary. At the other 

extreme, a concert pianist with an injury to a digital nerve will be contractually disabled despite a 

minor impairment because that impairment will prevent her from working as a concert pianist. 

Many disability contracts contain definitions of disability that change over the pendency of a claim, 

typically from “own occupation” as described above to “any occupation” where a person must be 

disabled from performing any occupation as defined in the contract in order to continue to receive 

disability benefits. This adds further to the complexity of disability claim adjudication requiring the 

skilled judgment of a variety of professionals, including medical, vocational, and rehabilitation 

specialists. Many disability income policies also contain a loss-of-earnings component so that the 

interpretation of the definition of disability necessitates a comprehensive analysis of an insured’s 

pre- and post-impairment earning potential. 

It is precisely these distinctions that led to the claims procedure regulations being separated into two 

discrete components fifteen years ago. 

 

 Application of the Employee Retirement Income Security Act of 1974 (ERISA) to Disability 

Plans 

As a threshold matter, it is important to underscore that employers are not required to offer 

employee benefit plans or to include disability income protection in any employee benefit plan. 

ERISA does not mandate that employers provide disability income insurance benefits or any other 

kind of welfare benefits. Congressional intent in this regard has been recognized by the courts. See 

e.g., Varity Corp. v. Howe, 516 U.S. 489, 497, 116 S. Ct. 1065, 134 L. Ed. 2d 130 (1996) (Congress 

sought “to create a system that is [not] so complex that administrative costs, or litigation expenses, 

unduly discourage employers from offering [ERISA] plans in the first place.”) Instead, ERISA 

represents a “careful balancing” between ensuring fair and prompt enforcement of rights under a 
Page 3 of 15

plan and the encouragement of the creation of such plans. The law induces employers to offer 

benefits by assuring a predictable set of liabilities, under uniform standards of primary conduct and 

a uniform regime of ultimate remedial orders and awards when a violation has occurred. Conkright v. 

Frommert, 559 U.S. 506, 516-17 (2010) (citations and quotations omitted). 

Within this voluntary system, an employer or other plan sponsor is free to make a number of plan 

design choices that will impact the overall cost of its disability income program. The current 

regulations, written to benefit the insured, have worked well for more than a decade. As insurers, 

the industry has adapted to the tighter time frames implemented in the 2000 updates and 

continued to comply successfully with all other requirements. For disability income claims incurred 

by insurers, the vast majority of these claims are paid. From the beginning of 2006 through 2014, 

insurers have incurred over $101 billion in short-term and long-term disability claims.2 Of the claims 

that are denied, only a very small percentage are ultimately litigated. Therefore, we strongly disagree 

with the unfounded statement in the preamble that “insurers and plans looking to contain disability 

benefit costs are often motivated to aggressively dispute disability claims”. 

Specific Concerns with the Proposed Amendments

In the preamble of the proposed amendments to the established claims procedure regulations, the 

Department cites to a single article purporting to document the volume and constancy of litigation in 

disability income claims3 and advancements in claims processing technology as rationales for the 

proposed rule changes. The ACLI does not agree that these rationales translate into a valid basis to 

amend the disability income insurance claims regulations as proposed. As we have noted above, the 

complexity of the disability review process does not lend itself to the “auto-adjudication” typical of 

the healthcare claim determination process. As such, technology advances that have expedited 

processing of healthcare claims do not apply to disability income claim adjudication. Further, we 

disagree that the proposed regulations will decrease the number of potential litigated cases. To the 

contrary, many of the proposed changes virtually guarantee an increase in litigated claims. The 

additional cost imposed thereby, as well as the costs imposed by the additional administrative 

burden attendant on these proposed amendments, will increase the costs for plans. Increased costs 

will either be passed on to participants, or employers will choose to reduce or discontinue disability 

income insurance altogether.4 

A report by Charles River Associates examined the positive impact that private long-term disability 

plans has on public programs.5 Reversing or halting the growth of disability benefit plans offered by 

private employees will have far reaching adverse effects on the nation’s workforce.

 

 

 

2 National Association of Insurance Commissioners Annual Statement Data, 2006 – 2014 

3 See footnote 8 to the preamble citing Sean M. Anderson, ERISA Benefits Litigation: An Empirical Picture, 28 ABA J. Lab. & 

Emp. L. 1 (2012). Significantly, this article does not even attempt to explain the reasons for disability claims litigation rates 

from 2006-2010. The period encompasses the worst of the economic recession. Yet, although it is well established that 

disability claims spike during periods of plant closures, layoffs and the like, there was no attempt to investigate whether the

recesision influenced the increase in litigation. 

4 “Employers or other plan sponsors are generally free under ERISA, for any reason at any time, to adopt, modify, or 

terminate welfare plans.” Curtiss-Wright Corp. v. Shoonejongen, 514 U.S. 73, 78 (1995). 

5 “Private Disability Insurance and Return-to-Work Cost Savings to SSDI and Other Federal Programs,” Charles River 

Associates, Sept. 2013 (funded by America’s Health Insurance Plans), http://www.ahip.org/PrivateDIReturntoWork82013/
Page 4 of 15

Right to Review and Respond to New Information before Final Decision 

At the outset, we note that Amendment No. 3 is specifically intended to apply to the pendency of an 

appeal. 80 Fed. Reg. 72017. However, section (h)(4)(i) of the proposal refers to “... disability benefit 

claims and appeals process.” This appears to be in error, and we recommend that this language 

therefore be amended to “... disability benefit appeals process.” To the extent that it is the intention 

that these amendments apply to the claims process, this change is not needed. A claimant already 

has the right to obtain a complete copy of the claims file and to respond to the evidence and grounds 

upon which the initial adverse determination was based by submitting his response and evidence on 

appeal. For the reasons set forth below, we do not believe that the claimant needs to have access to 

the entirety of the evolving claim file during the appeal process and before that process has been 

completed. We therefore recommend that (h)(4)(i) be deleted. 

Regarding the appeal process, an insured has ample opportunity to support his/her claim and 

receive a full and fair, independent review on appeal. (Employers also may choose to design their 

disability benefit plans to include additional voluntary levels of appeal.) A claimant who receives an 

initial adverse benefit determination has a right to a free copy of the administrative record that 

contains all relevant information as defined by the regulations. The insured has six full months to 

review the record and develop a response. The appeal review is performed by an examiner who had 

no involvement in the initial claim process or decision, and the appeal gives no deference to the 

initial claim decision. If the initial adverse decision is upheld on appeal, the insured is provided with 

a detailed explanation of the administrator’s reasons for the decision as required by the regulations 

as well as a description of his/her additional rights. 

Taking all of that into account, numerous courts have recognized that a claimant does receive a full 

and fair review under the existing regulations. See e.g., Midgett v. Washington Group, 561 F. 3d 887 

(8th Cir. 2009); Metzger v. Unum, 476 F. 3d 1161 (10th Cir. 2007); Glazer v. Reliance Standard, 

2008 WL 1775437 (11th Cir. 2008); Pettaway v. Teacher’s Insurance and Annuity Ass’n of America, 

644 F. 3d 427 (D.C. Cir. 2011). 

The proposed new subsections (h)(4)(i) and (ii) and (iii) of the regulations are also problematic, 

including because of their ambiguity and the impracticality of their application to the prompt 

administration of disability claims. It is unclear what is meant by “new and additional evidence,” and 

the amendments are certain to cause an endless back and forth of information between the plan 

and the claimant, needlessly delaying the appeal process and ultimately, the appeal decision. 

By way of example, plans would have to send claimants new or additional evidence before the plan 

may have determined whether and how that evidence may contribute to an adverse appeal decision; 

claimants would receive new or additional evidence in piecemeal fashion as the appeal process 

proceeds; claimants could be required to provide comments on the new or additional information 

without necessarily knowing how that information may, if at all, affect the claim decision; if claimants 

did not want to provide a response, then the claimant could still be required to contact the plan to let 

them know that; and the plan may have to generate new or additional information as a result of the 

plan’s review of the claimant’s responses. This is neither practical nor desirable from the point of 

view of either the claimant or the plan. And once again, the endless appeal cycle will increase the 

costs of disability insurance without any reasonable connection to decreasing litigation. 

Nevertheless, it appears that the Department wishes to provide the claimant with an opportunity to 

have a dialogue with the plan concerning new or additional medical evidence or information 

generated on appeal. 80 Fed. Reg. Footnote 13 72017. Therefore, we recommend that the 

Department revise “new and additional information” to read “new and additional medical reviews, 

including Independent Medical Examination (IME) reports.” 
Page 5 of 15

To avoid unnecessary delays, ensure the appeal process continues to move forward, and that appeal 

determinations are issued as soon as practicable, we also recommend that the Department include 

timeframes by which the claimant must provide his/her responses to the medical reviews, and by 

which the plan must review and consider the claimant’s responses and issue the determination on 

appeal. 

We recommend the following language for section (h)(4)(ii): 

(ii) “Provide that, before the plan can issue an adverse benefit determination on review of a disability 

benefit claim, the plan administrator shall provide the claimant, free of charge, with any new or 

additional medical reviews considered, relied upon, or generated by the plan (or at the direction of 

the plan) in connection with the claim; the claimant may have up to but no more than 15 business 

days from receipt to respond to the medical review provided by the plan (“response period”), and the 

time remaining for an appeal determination shall be tolled during this response period. After receipt 

by the plan of the claimant’s response, the plan shall have no fewer than 15 business days to issue 

a determination on review, but the plan must issue the decision as soon as reasonably practicable. 

This provision shall not apply to plans that provide a second or additional level of voluntary review.”6

With regard to subsection 4(iii), it is not clear what is meant by “new or additional rationale.” This is 

subject to different interpretations, in that it could mean a completely new and different ground upon 

which an adverse determination is based on appeal that was not a part of the initial claim 

determination, or alternatively, it could mean a new and different fact that, on appeal, provides 

further support for upholding the adverse determination. 

We recommend that the Department define “new or additional rationale” to mean a completely new 

and different ground upon which an adverse determination is based. 

We recommend the following language for section (h)(4)(iii): 

(iii) “Provide that, before the plan can issue an adverse benefit determination on review of a 

disability benefit claim, if the plan administrator relies upon a new ground for the adverse 

determination which was not a basis for the initial claim determination, the plan administrator shall 

provide the claimant, free of charge, with the new ground. The claimant may have up to but no more 

than 15 business days from receipt to provide a response to the plan concerning the new ground 

(“response time”), and the time for an appeal determination shall be tolled during the response time. 

After receipt by the plan of the claimant’s response, the plan shall have no less than 15 business 

days to issue a determination on review, but the plan must issue the decision as soon as reasonably 

practicable. This provision shall not apply to plans that provide a second or additional level of 

voluntary review. 

Exhaustion of Administrative Remedies 

With respect to the revisions to subsection (l) pertaining to the exhaustion of administrative 

remedies, the ACLI is supportive of the Department’s effort to revise the regulations so that minor 

violations of the regulations do not result in the exhaustion of administrative remedies. Maintaining 

 

6 As mentioned above, the application of timeframes and tolling will ensure the appeal process moves along and does not 

become stalled. In addition to the example the Department has offered in the preamble, situations will arise when the 

claimant may not provide a response before a determination is due on day 45, or provides a response within days of the 

determination deadline. Imposition of time deadlines and tolling will prevent the appeal process from becoming stalled, 

and ensure the plan has adequate time to consider the claimant’s responses and issue a determination within a 

reasonable time.
Page 6 of 15

the integrity of the administrative review process -- as opposed to immediately litigating benefit 

disputes-- serves the Congressional purposes of reducing the number of frivolous lawsuits under 

ERISA; promoting the consistent treatment of claims for benefits; providing for a non-adversarial 

method of claims settlement; and minimizing the cost of claims settlement for all involved. See, e.g., 

Kross v. W. Elec. Co., 701 F.2d 1238, 1244-45 (7th Cir. 1983). The doctrine of exhaustion of 

administrative remedies also enables the Plan to obtain full information about a claim and make a 

reasoned decision based on the information, as well as providing “reviewing courts a factual 

predicate upon which to proceed.” Chorosevic v. MetLife Choices, 600 F.3d 934, 941 (8th Cir. 

2010), further citations omitted. 

Despite these important considerations, the Department’s proposed changes allow claimants to file 

suit, and claim exhaustion, if the plan “fails to strictly adhere to all the requirements” of Section 

2560.503-1. The ability to file suit for such a violation is subject, however, to the de minimis

violation exception found in subsection (I)(2)(ii). 

The ACLI believes that the proposed test for determining whether a violation should result in 

administrative remedies being deemed exhausted fails to meet the goals stated above, and will 

guarantee increased litigation to determine whether the claim administrator’s conduct fits within the 

de minimis violation exception. The proposed amendments would give rise to disputes between the 

claimant and the plan regarding whether the alleged procedural violation: 

 was de minimis and that it did not, or was not likely to cause, prejudice or harm to the 

claimant; 

 was for good cause or matters beyond the control of the plan; 

 occurred in the context of an ongoing good faith exchange of information between the plan 

and the claimant; and, 

 was “part of a pattern or practice of violations by the plan.” 

The proposed regulation does not require the claimant to have any communication with the plan, 

once the claimant has concluded that there was a procedural violation. Thus, claimants can (and 

likely will) proceed to file lawsuits immediately upon discerning any alleged procedural violation in 

the hopes that a court will apply a de novo standard of review. If the exception stated in subsection 

(l)(2) is promulgated as currently drafted, courts will then have to determine: 

 whether the alleged procedural violation was de minimis?

 what degree of prejudice or harm is required? 

 whether the harm or prejudice should only be considered in terms of the claimant’s ability to 

obtain a full and fair review? 

 whether the violations are excusable for “good cause”? 

 whether an ongoing good faith exchange between the parties would still meet the 

requirements of the exception if it extended beyond the plan’s deadlines? 

 How a “pattern or practice of violations by the plan” would be determined? What number of 

violations would be required before a plan is determined to have been engaged in a pattern 

or practice of violations? Would the character of each violation be considered in determining 

if a pattern or practice of violations took place? If particular violations had been cured by 

remedial steps taken by the plan, could the plan excuse such violations from a consideration 

that it had engaged in a pattern or practice of violations? Would violations that occur before 

the applicability date of the regulation be considered? 

 would discovery into other alleged violations be permitted, before the court decides if the 

case is ripe for adjudication? 
Page 7 of 15

Additionally, because some of the elements in the proposed exception go beyond the goal of 

permitting access to the courts when the claimant has been deprived of the ability to obtain a full 

and fair review, the ACLI submits that the test used in the exception is broader than it needs to be. 

For example, if a court concludes that a procedural violation did not occur in the context of an 

“ongoing good faith exchange of information,” but the violation does not impact the claimant’s ability 

to obtain a full and fair review, the remedy of exhaustion would not fit the violation. 

Instead, the ACLI requests that in lieu of the multi-part test set out in subsection (l)(2)(ii) of the 

proposed regulation, the Department instead adopt a test similar to the one in Schorsch v. Reliance 

Standard Life Insurance, 693 F. 3d 734 (7th Cir. 2012) and numerous similar cases.7 In those 

cases, a claimant is deemed to have exhausted administrative remedies if: “there is a lack of 

meaningful access to review procedures or where pursuing internal plan remedies would be futile.” 

Schorsch, 693 F. 3d at 739. 

In Schorsch, the insured claimed that the claim administrator had a different motive for denying her 

claim than was stated in the denial letter. Because the claimant had been told that she could obtain 

a review, review the pertinent documents, and submit additional information as part of an appeal, 

the Seventh Circuit rejected the argument that she had exhausted her administrative remedies, 

irrespective of the alleged violation of the claimant’s right to be notified of the true reason her claim 

had been denied. Alternatively, if a plan refuses to provide the claimant pertinent plan documents or 

information from the administrative record to allow the claimant to pursue an appeal, the 

“meaningful access” test would allow the claimant to file suit without any further administrative 

review. See, e.g., Wilcynski v. Lumberman’s Mut. Cas. Co., 93 F. 3d 397 (7th Cir. 1996). 

Rather than developing a new set of criteria, and a new line of cases, to determine if a procedural 

violation excuses the exhaustion requirement, the ACLI requests that the Department replace 

proposed subsection (l)(2)(ii) with the following language: 

(I)(2)(ii): Notwithstanding paragraph (l)(2)(i) of this section, the administrative remedies 

available under a plan with respect to disability benefits will only be deemed exhausted for 

violations of this section if the claimant has not been provided meaningful access to review 

procedures or where further review would be futile. 

The ACLI also seeks modification of the language in proposed subsection (I)(2)(ii) which allows the 

claimants to seek an explanation of any claimed violation from the plan, to which it must respond 

within ten days. The plan’s response must provide a “description of the bases, if any, for asserting 

that the violation should not cause the administrative remedies under the plan to be deemed 

exhausted.” 

We propose that claimants should be required to make the request described in subsection (I)(2)(ii) 

as a prerequisite to filing suit under ERISA Section 502. We also propose that a plan receiving such 

a letter should have ten business days within which to provide a response. Making such a request 

mandatory would allow the parties to attempt to resolve disputes without resorting to litigation. 

Furthermore, requiring claimants to do so would promote judicial economy and clarify the 

administrative record for judicial review on any claimed procedural violation. 

 

Summarizing the foregoing, the Department’s proposed revisions to subsection (I) would 

undoubtedly lead to increased litigation. Allowing access to Federal Court on a claim of a lack of 

 

7 See, e.g., Perrino v. Southern Bell Tel. & Tel., 209 F. 3d 1309, 1316-1318 (11th Cir. 2000); Majka v. The Prudential Ins. 

Co. of America, 171 f. Supp. 2d 410, 414,-416 (D. N.J. 2001); Wilson v. Globe Specialty Products, 117 F. Supp 2d. 92, 98-

99 (D. Mass. 2000). 
Page 8 of 15

“strict adherence” to all of Section 2560.503-1’s numerous requirements will incentivize claimants 

to file suit. It can be anticipated that when such a suit is filed, claimants will immediately seek 

discovery to try and perfect any alleged violations. At the same time, plans and claims 

administrators will likely file motions to dismiss based on the de minimis violations exception. All of 

these issues will be decided in the context of a regulation that does not provide clear direction as 

stated above. 

The net effect of this litigation for many claimants will be many months or more of delay as the 

courts determine whether the dispute is ripe for adjudication and resolve discovery disputes. Many 

courts may refuse to exercise jurisdiction over such early attempts at litigation to avoid opening the 

floodgates for similar litigation, and to ensure that those cases that are litigated have an adequate 

administrative record to review. For all of the reasons stated, the proposed changes to subsection (I) 

will be to bring about the exact harm that the Department seeks to avoid, namely: increased 

litigation and delay in claims resolution. 

Improvements to Basic Disclosure Requirements 

Both sections (g)(1)(vii)(A) and (j)(6)(i) of the new regulations state that an adverse benefit 

determination shall set forth “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...” 

We believe it is important for a claimant to have a full understanding of how the Plan reached its 

decision; however, we have concerns with this new addition. First and foremost, a particular thirdparty decision will be irrelevant to the ERISA plan terms that are being reviewed for the benefit 

determination. As stated above, a determination of whether a claimant is entitled to disability 

benefits under a particular plan is a contractual determination. Other payers may be bound by 

different contractual (or sometimes statutory) definitions of disability. In order to reconcile the plan 

decision with the decision of other payers, the plan will need to receive and interpret the contractual 

or statutory language as well as determine and evaluate the medical and vocational information 

relied upon by the other payer. At a minimum the regulations should distinguish what is meant by 

another basis of determination and clarify that the claimant would need to present all of the 

information utilized by the third party, thus eliminating the potential of adverse selection (“cherrypicking”) of information provided. 

Under ERISA, a fiduciary is required to discharge its obligations in accordance with the documents 

and instruments governing the plan. 29 U.S.C § 1104(a)(1)(D). As a practical and legal matter, a 

fiduciary could never use a third party’s denial as a basis to deny an ERISA-governed disability 

benefit, and the same can be said that a fiduciary should not rely on a third party’s granting of a 

benefit as a basis to grant a benefit that is subject to specific ERISA plan terms. Therefore, a 

requirement to reconcile the different decisions is contrary to ERISA’s legislative scheme. 

We suggest that a better alternative is to limit the category of ”other payers of benefits” regarding 

which the proposed rules require a discussion to SSDI decisions and treating physicians’ opinions 

with which the claim fiduciary did not agree or did not follow. Insurers already review the 

administrative record from a holistic point of view and consider treating physicians’ opinions and 

SSDI decisions. See Metropolitan Life Insurance Company v. Glenn, 554 U.S. 105 (2008). A more 

focused amendment would provide the benefit of adding the Department’s weight to this judicial 

interpretation. 
Page 9 of 15

Application to Qualified Pension Plans 

Footnote 4 in the preamble states that a benefit is a disability benefit, subject to the special rules for 

disability claims under the ERISA Section 503 Regulation, if the plan conditions its availability to the 

claimant upon a showing of disability. Footnote 4 further states that its does not matter how the 

benefit is characterized by the plan or whether the plan as a whole is a pension plan or welfare plan. 

In this regard, we note that the Department has previously addressed the application of the special 

rules for disability claims to a pension plan that provides that pension benefits shall be paid to 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. Specifically, in the Department’s 

FAQ’s About the Benefit Claims Procedure Regulation, A-9, the Department opined that under such 

circumstances, the claim would be subject to the regulation’s procedural rules for pension claims, 

not disability claims. 

We therefore recommend that the Department exclude pension plans from the proposed regulations. 

If the Department determines not to fully exclude pension plans from the proposed regulations, we 

recommend, consistent with the Department’s position as describe above, that the disability claims 

regulations exclude claims with respect to a pension plan that provides that pension benefits shall 

be paid to 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. Such claims should be 

adjudicated pursuant to the existing claims regulation’s procedural requirements for pension plans. 

 

The Department’s Cost Benefit Analysis is Inadequate 

Congress, courts, and the executive branch of government have issued guidance mandating 

thorough, objective cost-benefit analysis in rulemaking. Collectively, these standards ensure that 

federal agencies “strike the right balance,” and develop “more affordable, less intrusive rules to 

achieve the same ends--giving careful consideration to benefits and costs.”8 Executive branch 

mandates for cost-benefit analysis began in 1981 with Executive Order 12291 which created a new 

procedure for the Office of Management and Budget (OMB) to review proposed agency regulations, 

and ensured the President would have greater control over agencies and improve the quality and 

consistency of agency rulemaking. Since then, cost-benefit analysis has formed the core of the 

review process. The order unambiguously stated, “regulatory action shall not be undertaken unless 

the potential benefits to society for the regulation outweigh the potential costs to society.”9 

Regulatory agencies, therefore, must balance the benefits of proposed regulations against their 

costs. 

In 1993, Executive Order 12866 superseded the 1981 order, but retained cost-benefit analysis as a 

fundamental requirement in rulemaking. Executive Order 12866 instructs that “in deciding whether 

and how to regulate, agencies should assess all costs and benefits of available regulatory 

alternatives, including the alternative of not regulating.”10 In a manner parallel to the 1981 order, 

Executive Order 12866 advises that agencies must perform their analysis and choose the regulatory 

approach that maximizes net benefits.11 

 

8 Op-Ed, President Barak Obama, Toward a 21st Century Regulatory System, Wall Street Journal (Jan. 18, 2011). The 

President’s Op-Ed coincided with his issuance of Executive Order 13,563, which set strict standards for cost-benefit 

analysis in federal agency rulemaking. 

9 46 Fed. Reg. 13193, 13193 (Feb. 17, 1981). 

10 Exec. Order No. 12866, 3 C.F.R. 638 (1993). 

11 The 1981 and the 1993 executive orders emphasize different approaches to the same cost–benefit end. The 1981 

order required that the benefits “outweigh” the costs, while the 1993 order required only that the benefits “justify” the 

costs. See generally Peter M. Shane, Political Accountability in a System of Checks and Balances: The Case of Presidential 
Page 10 of 15

President Obama reaffirmed the importance of a cost-benefit analysis in 2011 through Executive 

Order 13563 and reinforced the core principles in Executive Order 12866 by emphasizing that “each 

agency must . . . propose or adopt a regulation only upon a reasoned determination that its benefits 

justify its costs.”12 Importantly, five Administrations since 1981 have consistently made a costbenefit analysis a threshold for Federal agency rulemaking. 

The OMB provided Federal agencies with extensive guidance to perform cost-benefit analysis in its 

Circular A-413, which identifies three fundamental elements to Federal agency rulemaking: (i) a 

statement of the need for the proposed regulation; (ii) discussion of alternative regulatory 

approaches; and, (iii) an analysis of both qualitative and quantitative costs and benefits of the 

proposed action and the leading alternatives. The analysis should attempt to express both benefits 

and costs in a common measure—monetary units—to facilitate the assessment. When benefits or 

costs cannot be quantified in monetary terms or in some other quantitative measure, the Agency 

should describe them qualitatively.14

In the preamble, the Department states that, in accordance with OMB Circular A-4, it has quantified 

the costs where possible and provided a qualitative discussion of the benefits that are associated 

with the proposed regulations. As discussed below, we believe that the Department (1) failed to 

qualitatively describe the benefits of the proposed regulations, and (2) failed to adequately quantify 

the primary costs associated with the proposed regulations. 

Benefits of the Proposed Regulations 

In the preamble, the Department acknowledges that it “does not have sufficient data to quantify the 

benefits associated with these proposed regulations due to data limitations and the lack of effective 

measures.”15 However, much of the Department’s qualitative analysis consists of the Department’s 

“expectations” of the benefits of the proposed regulations. Indeed, the Department attempts to 

justify its promulgation of the proposed regulations by relying on the volume of litigation in the 

disability claims area16 and the advancements in claims processing technology, stating that it “thinks 

that disability 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.”17 Pursuant 

 Review of Rulemaking, 48 ARK. L. REV. 161, 176-78 (1994) (comparison of 1981 and 1993 executive orders with 

additional detail and observing that the 1993 “order focuses on a similar mandate, but describes it with greater nuance”). 

12 Exec. Order 13563, § 1(b), 76 Fed. Reg. 3821 (Jan. 18, 2011). The order further notes that “each agency is directed to 

use the best available techniques to quantify anticipated present and future benefits and costs as accurately as possible.” 

Additional analysis of this order can be found in Helen G. Boutrous, Regulatory Review in the Obama Administration: CostBenefit Analysis for Everyone, 62 ADMIN. L. REV. 243, 260 (2010). 

13 Office of Mgmt. & Budget, Circular No. A-4, Regulatory Analysis (Sept. 17, 2003), last available at 

https://www.whitehouse.gov/omb/circulars_a004_a-4/. OMB invited full public comment on his 48-page circular in draft 

form, which contains detailed instructions about conducing cost-benefit analysis, and provides a standard template for 

running the analysis. 

14 To ensure that agencies properly perform cost-benefit analysis and select the most cost-effective regulatory options, 

OMB and the White House Office of Information and Regulatory Affairs (OIRA) review agency cost-benefit analysis before 

proposed regulations become effective. 

15 80 Fed. Reg. 72014, 72021 (Nov. 18, 2015). 

16 As indicated in footnote 3, the Department cites in the preamble a 2012 paper in support of its assertion that “disability 

cases dominate the ERISA litigation landscape today.” However, the Department does not explain how the proposed 

regulations will reduce the volume of litigation. 

17 Id. At 72015. 
Page 11 of 15

to Executive Order 12866, Federal agencies should promulgate only such regulations as are required 

by law, are necessary to interpret the law, or are made necessary by compelling public need. The 

proposed regulations are neither required by law nor necessary to interpret the law. Therefore, the 

Department is required to establish a “compelling public need” for its regulatory action. The 

Department’s misplaced reliance on the volume of litigation in the disability benefits area, the 

advancements in claims processing technology, and its “thoughts” that disability claimants deserve 

protections as stringent as those applicable to healthcare claimants does not demonstrate a 

compelling public need for regulatory action. 

The Department states that it “expects” that the proposed regulations would improve the procedural 

protections for workers who become disabled and make claims for disability benefits. The 

Department, however, provides no basis for this “expectation” and, indeed, fails to provide any 

substantial analysis of problems with the current regulatory structure or demonstrate why the 

proposed additional regulatory requirements will strengthen the procedural protections currently in 

place. 

Additionally, the Department states that the proposed regulations will cause some participants to 

receive benefits they might otherwise have been incorrectly denied absent the fuller protections 

provided by the proposed regulations. Although the proposed regulations requires additional 

disclosure and a right to review and respond to new information before a final appeal decision is 

made, the Department does not explain how these additional requirements will cause participants to 

receive benefits they might otherwise have been incorrectly denied. Moreover, although the 

Department requests comments on whether, and to what extent, modifications to the existing timing 

rules are needed, we are concerned the additional “back-and-forth” dialogue contemplated by some 

of the proposed regulations will result in an endless loop, thus not being beneficial to claimants, 

claim adjudicators, or employers. 

As further justification for the rule, the Department states that 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. Yet, again, the Department provides no 

explanation or basis as to how the new regulations would do this. Does the Department assume that 

the new regulations will result in less litigation, because participants (or their attorneys) will be less 

likely to pursue litigation due to a “fairer system of disability claims and appeals processing”? And, if 

so, how? 

Finally, the Department states that 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. The current 

regulatory scheme provides both certainty and consistency with regard to the adjudication of 

disability benefit claims. Layering on additional requirements based on medical claim adjudication – 

a system far different from disability income claim adjudication – will result in disruption to the 

current system’s certainty and consistency, leading to increased costs to and burdens on the court 

system to determine claim decisions. 

Costs of the Proposed Regulations 

The Department’s analysis of the direct costs of the proposed regulations is insufficient and flawed. 

The Department states that it has quantified the primary costs associated with the proposed 

regulations requirements to (1) provide the claimant free of charge with any new or additional 

evidence considered, and (2) provide notices of adverse benefit determinations in a culturally and 

linguistically appropriate manner. 
Page 12 of 15

The proposed regulations would require that an adverse benefit determination contain a discussion 

of the decision, including the basis for disagreeing with any disability determination by the Social 

Security Administration, a treating physician, or other third party disability payer presented by the 

claimant, to the extent the plan did not follow those determinations. Compliance with this new 

regulatory requirement will require collection of additional information, additional claim 

administrator evaluation, and potentially additional medical professional analysis, thereby increasing 

the administrative and medical costs associated with disability claims determinations. Yet, 

inexplicably, the Department did not evaluate or address at all this likely substantial additional cost 

burden in its quantification of the primary costs associated with the proposed regulations. 

Additionally, the ACLI is concerned that the Department has underestimated the costs associated 

with the proposal’s requirement that claimants have a right to review and respond to new evidence 

or rationales developed by the plan during the pendency of the appeal. The Department’s $1.9 

million dollar annual aggregate cost estimate is based solely on the administrative functions 

associated with collecting and distributing the additional evidence considered, relied upon, or 

generated by (or at the direction of) the plan during the appeals process. The Department fails to 

provide any cost estimate for the time a plan would incur under the proposal to substantively 

evaluate claimant responses received during this proposed “back and forth” process.18 A plan’s 

evaluation of claimant responses to any new evidence or rationales developed by the plan during the 

pendency of the appeal would likely require medical professional evaluation. Yet, the Department 

does not include the expected cost of any such medical professional evaluation in its cost estimate. 

Further, we believe the Department has underestimated the costs associated with delivering such 

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

The Department assumes in its cost estimate that 75 percent of all mailings will be distributed 

electronically with no associated material, printing or postage costs. This percentage appears 

exceedingly high, given that the Department’s current electronic delivery safe harbor applies to 

participants who have the ability to effectively access documents furnished in electronic form at any 

location where the participant is reasonably expected to perform his or her duties as an employee 

and with respect to whom access to the employer's or plan sponsor's electronic information system 

is an integral part of those duties.19 Thus, the Department’s current policy regarding electronic 

delivery focuses on employees actively at work. Both long and short-term disability claimants will 

necessarily not be actively at work and will therefore fall outside of the Department’s electronic 

delivery safe harbor. Finally, we do not understand why in estimating the delivery costs associated 

with the group health plan claims regulatory requirement to provide the claimant, free of charge, with 

any new or additional evidence relied upon or generated by the plan or insurer and the rationale 

used for a determination during the appeals process, the Department assumed that 38 percent of all 

such mailings will be distributed electronically, with no associated material, printing or postage 

costs.20 It is illogical to assume 38 percent electronic delivery for health claims and 75 percent for 

disability income claims, given, as stated above, the fact that disability claimants will not be actively 

at work. The Department provides no rationale for its projected 37 percent increase in electronic 

 

18 Indeed, the example Department provided in the preamble of how this new provision would work contemplates the 

plan’s generation of an additional medical report as a result of the claimant’s response to new evidence generated by the 

plan. Yet, the Department’s cost estimate does not include any costs associated with the potential of a plan being required 

to generate such a report. 

19 See 29 CFR 2520.104b-1(c)(2)(i). 

20 75 Fed. Reg. 43330, 43344 (July 23, 2010). 
Page 13 of 15

delivery of disability claims information to claimants versus its prior electronic delivery estimate with 

regard to health claims information. 

We also have several concerns with the Department’s analysis of the costs associated with the 

proposed regulations’ requirement to provide notices in a culturally and linguistically appropriate 

manner. In order to estimate the cost, and based on “discussions with the regulated community”21

the Department first compares the proposed regulatory requirement with the California state law 

requirement providing translation services and finds that the California experience indicates that 

requests for written documents average 0.098 requests per 1,000 members for health claims. 

Although the Department acknowledges that (1) the California law is not identical to the proposed 

regulations, and (2) the demographics for California do not match that of the other states, the 

Department nonetheless uses the California translation requirement percentage to estimate the 

number of translation service requests that plans could expect to receive. The Department further 

states that industry experts told them that while the cost of translation services varies, $500 per 

document is a reasonable translation cost. 

We note that the proposed regulations’ preamble language regarding the cost of translation services 

is nearly identical to the preamble language utilized to estimate the cost of translation services for 

the Department’s June 24, 2011 amendments to the Interim Final Rule implementing rules relating 

to internal claims and appeals for group health plans and health insurance issuers.22 Given, as 

discussed above, that we are not aware of any recent discussion with the regulated community 

regarding the California state law translation requirement as it relates to disability income plans, it 

appears possible that the Department based its conclusions in this regulatory proposal on 

information and analysis it conducted during its promulgation of the health claims Interim Final Rule. 

As Executive Order 12866 requires federal agencies to “... assess both the costs and benefits of the 

intended regulation”23 (emphasis added), we question the propriety of the Department’s apparent 

utilization of discussions and analysis it conducted 4 years ago -- in the context of a different 

regulation -- to support the current regulatory proposal. As discussed above, there are significant 

differences between health claims adjudication and disability claims adjudication. It is inappropriate 

for the Department to utilize an analysis it undertook to promulgate a health claims regulations as 

support for the cost estimates in the proposed disability claims regulations. 

Further, we question the Department’s utilization of a $500 cost estimate for translation services. 

Given that the Department included the same dollar amount estimate in its interim final health 

claims regulations, promulgated 4 years ago, and the differences in the volume of documents 

associated with a health claim versus a disability income claim, we believe the Department’s cost 

estimate is flawed. 

Regulatory Alternatives 

Executive Order 12866 requires Federal Agencies, in deciding whether and how to regulate, to 

assess the costs and benefits of available regulatory alternatives, including the alternative of not 

regulating.24 The proposed regulations do not include a discussion of any regulatory alternatives 

 

21 The Department does not identify the members of the “regulated community” it had discussions with and we are not 

aware that the Department had discussions with any ACLI members. 

22 See “Group Health Plans and Health Insurance Issuers: Rules Relating to Internal Claims and Appeals and External 

Review Processes,” 76 Fed. Reg. 37208, 37225 (June 24, 2011). 

23 See 58 Fed. Reg. 51735 (Oct. 4, 1993), Section 1(b)(6). 

24 Id. at Section 1(a). 
Page 14 of 15

contemplated or considered by the Department. Nor does the Department provide any evidence or 

data to conclude that the current disability claims regulatory regime is inadequate and warrants 

revision. 

In summary, the ACLI does not believe that the Department has properly quantified or qualified the 

benefits associated with the proposed regulations or provided a sufficient cost analysis associated 

with the proposed regulatory requirements. As such, we believe that the proposed regulations as 

drafted could subject the proposed regulations to judicial challenge. 

For the reasons stated above, the ACLI recommends that the Department withdraw the proposed 

regulations and re-issue them only upon a finding that there is a compelling public need for 

regulatory action and that the benefits of the proposed regulations justify their costs. 

 

Areas in Need of Clarification 

 

Culturally and Linguistically Appropriate Notices 

The industry understands that translation services are needed in certain cases (the majority if not all 

disability carriers provide telephone assistance); however, the new requirement appears to be unduly 

costly as compared to the full and fair review benefits assumed to result. These requirements would 

also add more time to already tight time constraints that would need to change (at least as to 

tolling). A disability income claim file is usually voluminous, communication is frequently conducted 

via mail rather than electronically (unlike medical claims), and there may be some aspects of the 

communication (e.g., the translation of the plan provisions) that might “get lost in translation”. Thus, 

we first recommend that any new regulations make clear that the English version takes precedence 

in the event of any conflict with the translated documents. Furthermore, given the fact that disability 

claims are unique in their potential longevity (again, years or decades) and therefore in the breadth 

of communication that may occur over that time, we recommend that the proposed regulations 

clarify that it applies only to adverse benefit determinations. Lastly, the proposal should clarify that 

the requirement to provide “assistance with filing claims and appeals in any applicable non-English 

language” is limited to procedural, not substantive, assistance. 

In addition, it is not clear what value is added by the phrase “culturally appropriate” in the new 

regulations. Again, it seems that this is just adding wording that might have been beneficial 

(although we cannot determine how) for medical claims procedures; however, we cannot determine 

how it is defined for purposes of providing translation services in the disability claims realm. We 

suggest removing the word “culturally” from any final disability income insurance regulations so as to 

eliminate ambiguity. 

Effective/Applicability Date 

As currently proposed, any changes to the disability claims procedures are to take effect 60 days 

after publication of the final rule. This time period will not be sufficient for insurers to implement the 

significant practice, operational, and regulatory changes necessitated by the proposed amendments 

(e.g., educating and increasing staff, updating internal systems, potential 50-state policy re-filings). 

Therefore we urge the Department to incorporate an applicability date of at least 24 months after 

the effective date of the new regulations which would then apply to claims first filed on or after the 

applicability date. In the alternative, if the Department moves forward with the regulations without 

accepting this recommendation, we would urge staggered applicability dates, with the later dates for 

the three main areas of change: 1) right to review and respond to new information before final 

decision; 2) exhaustion of administrative remedies; and 3) improvements to basic disclosure 

requirements. This would allow appropriate measures to be incorporated by a plan. And again, in 

the event of staggered applicability, as was the case with the amendments which resulted in the 
Page 15 of 15

current regulations, we would expect the new rules to be prospective in nature and apply to claims 

first filed on or after a later applicability date.

 

Contractual Limitation Period 

The Department requests public comment on the statute of limitations in ERISA cases, and 

specifically notice of an ERISA plan’s contractual limitations period. The ACLI recommends that the 

final determination on appeal quote in full the applicable plan’s contractual limitation provision. The 

ACLI believes that adopting a rule in which the determination letter must identify a specific date for 

the expiration of the limitation period will ultimately create confusion for claimants. In some ERISA 

plans, the limitations period commences on the date proof of loss is required to be provided, or on 

the date proof of loss is actually provided. Some jurisdictions have interpreted plan limitations to 

commence when a claim accrues, and accrual is a judicial term that varies by jurisdiction – as some 

state insurance departments have specific laws that vary by state. The proposed “right to review” 

provisions may result in numerous determination letters, which must be reconsidered if a claimant 

provides a response to new or additional information. As a result, in some ERISA plans, the deadline 

for filing suit will change when a new determination letter is issued, resulting in several notices to the 

claimant with new and revised limitation deadlines. To avoid that problem, as well as the difficulties 

of interpreting judicial decisions on limitations provisions that vary between jurisdictions, we 

recommend that the claimant be provided with the language of the limitations provision. This also 

will eliminate the risk that an insurer or other administrative entity is seen as providing legal advice 

to a claimant – something prohibited by state law. 

Summary 

 

In a voluntary system of employee benefits, each employer has a finite amount of resources to spend 

on compensation and benefits, including disability income plans. The disability income insurance 

industry believes that all claimants are entitled to a full and fair review. However, if the uniformity, 

predictability, and efficiency which are hallmarks of ERISA are eroded due to new regulations that 

seem destined to increase confusion and litigation, versus providing true benefits to American 

workers, an employer might reduce or shift to employees the cost of disability benefits or, in a worst 

case scenario, eliminate disability income benefits altogether. That was not Congress’ intent in 

enacting ERISA. These proposed amendments will significantly add to the costs and administrative 

burden for a plan administrator to reasonably and timely decide benefit claims and will not decrease 

litigation as envisioned in the Department’s preamble. We believe that the current rules may be 

amended to reasonably address the Department’s concerns through a more focused approach that 

would not disrupt the careful balancing between ensuring fair and prompt enforcement of rights 

under a plan and the encouragement of the creation of such plans that is working for employers and 

workers. 

 
American Council of Life Insurers 

101 Constitution Avenue, NW, Washington, DC 20001-2133 

www.acli.com 

Steven Clayburn, FSA, MAAA 

Senior Actuary, Health Insurance & Reinsurance 

October 27, 2017 

Submitted Electronically via e-ORI@dol.gov 

Office of Regulations and Interpretations 

Employee Benefits Security Administration 

Room N-5655 

U.S. Department of Labor 

200 Constitution Avenue NW. 

Washington, DC 20210 

Attention: Claims Procedure for Plans Providing Disability Benefits Examination 

Subject: Claims Procedure for Plans Providing Disability Benefits; Extension of Applicability 

Date (RIN 1210-AB39) 

 

Dear Sir/Madam: 

On behalf of the American Council of Life Insurers1 (ACLI), I appreciate the opportunity to provide 

comments in response to the proposal by the Department of Labor (“Department”) to extend the 

January 1, 2018 applicability date of the final rule amending Section 2560.503-1 of the Employee 

Retirement Income Security Act (“ERISA”), the claims procedure regulations applicable to ERISAcovered employee benefit plans that provide disability income benefits (the “Final Rule”) published 

on December 19, 2016. 

ACLI strongly supports a delay of the applicability date. However, we are concerned that a 90-day 

delay will provide insufficient time for the Department to carefully review submitted data and 

comments, complete its examination, determine next steps, and communicate its conclusions to 

stakeholders in time for stakeholders to implement modifications to the Final Rule, if any. ACLI and 

its members have committed to work with the Department to gather data responsive to the data 

requests in the NPRM, and we have already begun this process. Given the volume and complexity of 

the data requested, the fact that our members utilize different systems, and the time required to 

review, analyze, and format the data in a responsive manner, we do not expect that we will be 

responding to the data request prior to the Department’s December 11, 2017 deadline. Accordingly, 

we question whether a 90-day delay, through April 1, 2018, will provide sufficient time for the 

Department to review the data it has received, complete a new, updated Regulatory Impact Analysis 

(“RIA”), determine next steps, and obtain other required executive branch regulatory approval. Since 

disability claims administration is heavily dependent on technology, the industry estimates that it will 

need at least 180 days after final action by the Department to implement modifications. 

 

1 The American Council of Life Insurers (ACLI) is a Washington, D.C.-based trade association with approximately 290 

member companies operating in the United States and abroad. ACLI advocates in federal, state, and international forums 

for public policy that supports the industry marketplace and the 75 million American families that rely on life insurers’ 

products for financial and retirement security. ACLI members offer life insurance, annuities, retirement plans, long-term 

care and disability income insurance, and reinsurance, representing 95 percent of industry assets, 93 percent of life 

insurance premiums, and 98 percent of annuity considerations in the United States. 
Page 2 of 3

A Delay Will Provide Adequate Time for the Department to Evaluate the Impact of the Amendments 

The ACLI agrees that the full and fair equitable administration of disability income claims is an 

important objective. However, as detailed in our January 19, 2016 comment letter, we have 

significant concerns with many provisions of the Final Rule. These provisions will increase the 

administrative burden on insurers and other claims administrators without any tangible benefit to 

claimants as to the fair and equitable adjudication of claims. Contrary to the expressed justification 

for the Final Rule, some of the final changes will unnecessarily complicate claims adjudication 

practices that have been working well for administrators and that have provided fair and equitable 

claims adjudication for claimants for over a decade. 

In promulgating the Final Rule, the Department failed both to qualitatively describe the benefits of 

the proposed regulations, and to adequately quantify the proposed regulations’ costs, a longstanding prerequisite of Federal agency rulemaking. Moreover, the Department also failed to 

adequately address the negative impact to consumers of the Final Rule. By way of illustration, the 

Final Rule’s “new rationale” provisions will in most circumstances shorten the amount of time 

consumers will have to appeal a new rationale for denying their claim, which consequently may 

deprive them of the right to obtain a full and fair review. Additionally, the Final Rule’s exhaustion of 

administrative remedies requirements will prolong the litigation between parties and will also likely 

increase the total number of benefit suits that are filed – in contravention to the Final Rule’s stated 

goals. It is clear that the Department did not fully evaluate the negative impact of the Final Rule on 

consumers, and it is necessary and appropriate for the Department to therefore delay the 

applicability date to provide time for it to do so, as well as time for the Department to review and 

consider the critical information the Department is now seeking. 

A Delay Will Provide Adequate Time for the Department to Evaluate the Significant Differences in 

Disability Income Insurance Adjudication versus Medical Expense Insurance Adjudication 

As further detailed in our January 19th comment letter, the Department, in promulgating the Final 

Rule, stated that it intended to amend ERISA disability claims regulations to mirror health insurance 

claims procedures under the Affordable Care Act. However, in doing so, the Department failed to 

recognize the material differences inherent in how disability income claims are adjudicated versus 

adjudication of medical claims. The fundamental differences between medical and disability claims 

adjudication are material to the impact of the Final Rule. Medical claims are generally autoadjudicated. The administrator’s benefit decision is based on simple procedural questions (e.g., 

whether the benefit is a covered benefit, whether the procedure required a prior authorization, 

whether the health care provider was in or outside the network, etc.). 

Disability income claims adjudication, on the other hand, requires review of data from multiple 

sources of information and the skilled input of many types of professionals, including medical, 

vocational, and rehabilitation specialists. Disability claims involve a higher degree of analysis and 

require more extensive, time-consuming, and ongoing reviews (as a claim can last years or decades). 

Disability claims administrators are required to take into consideration the determination of the 

nature of the underlying medical condition, the extent of the individual’s resulting functional deficits, 

and the impact on the individual’s ability to work, among other items. Moreover, the adjudicating of 

a disability claim is not a binary decision. The medical, occupational, and other information that 

comes into a claim file is constantly evolving and must be examined holistically and repeatedly by 

the claim examiner as the medical condition of a claimant evolves over time. In addition, many 

disability plans contain definitions of disability that change over the pendency of a claim, typically 

from “own occupation” to “any occupation” as defined in the plan to continue to receive disability 
Page 3 of 3

benefits, adding further to the complexity of the claim administration. These are just some of the 

ways that disability claims adjudication differs from medical claims adjudication, which is a far 

simpler process. The current disability claims regulations take these differences into account. The 

Final Rule does not do so in every instance. Regulations that may well serve medical claimants will 

not work for disability income claimants. 

It is precisely these distinctions that led to the claims procedure regulations being promulgated with 

separate requirements for health care and disability income plans seventeen years ago, a distinction 

that serves the interests of all stakeholders and thus should continue, with appropriate 

amendments. A delay will provide time for all parties to gain a clearer understanding of the 

differences in claims adjudication. 

 

A Delay Will Provide Adequate Time for the Department to Revise the Regulatory Impact Analysis 

In the Final Rule, the Department stated that it had quantified the costs where possible and provided 

a qualitative discussion of the benefits that are associated with the proposed regulations. However, 

the Final Rule is replete with references to the Department’s lack of data, much of it critical, to this 

rulemaking. Further, the Department stated that comment letters did not provide data on the cost 

analysis. Indeed, in the proposed rule to extend the applicability date, the Department stated that it 

had requested data in April 2015 (“2015 NPRM”)2; however, we note that it was not until May 2015 

that the Department even added to its regulatory agenda that it would propose amendments to 

claims procedures regulations. Further, it was not until November 18, 2015 that the Department 

issued the proposed rule, and this proposal did not include a request for data nor did it refer to the 

“2015 NPRM” in its cost/benefit analysis of that proposed rule. Instead the Department basically 

utilized analysis completed specifically for the health claims procedures update several years earlier. 

The Department’s lack of data is reflected in its flawed RIA. As stated in our January 19th comment 

letter, we believe that the Department (1) failed to qualitatively describe the benefits of the proposed 

regulations, and (2) failed to adequately quantify the primary costs associated with the proposed 

regulations. A delay at this point will provide time for the Department to review the data it requested 

on October 12, 2017, and conduct a meaningful and appropriate RIA. 

Summary 

All claimants are entitled to a full and fair review. The pre-January 1, 2017 rules provide for such full 

and fair review. The Final Rule will add to the costs and administrative burden for a claims 

administrator to reasonably and timely decide benefit claims and the Final Rule will increase - not 

decrease – the number of litigated disability cases, in contravention of the Department’s goals 

stated in the preamble. Moreover, it will prolong the time it takes for the courts to resolve disputes. 

ACLI strongly supports the proposal to delay the applicability date of the disability claims procedures 

rule for further review. In addition, ACLI will respond with data and comments pertinent for a 

meaningful and an appropriate examination of the merit of review of potential regulatory alternatives 

by the December 11, 2017 deadline. 

 

Sincerely, 

Steven Clayburn, FSA, MAAA 

 

2 See 82 Fed. Reg. 47409, 47411 (October 12, 2017)