[Federal Register Volume 82, Number 196 (Thursday, October 12, 2017)]
[Proposed Rules]
[Pages 47409-47415]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-22082]


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

29 CFR Part 2560

RIN 1210-AB39


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

AGENCY: Employee Benefits Security Administration, Department of Labor.

ACTION: Proposed rule.

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SUMMARY: The Department of Labor proposes to delay for ninety (90) 
days--through April 1, 2018--the applicability of the Final Rule 
amending the claims procedure requirements applicable to ERISA-covered 
employee benefit plans that provide disability benefits. The Final Rule 
was published in the Federal Register on December 19, 2016, and became 
effective on January 18, 2017. The Final Rule currently is scheduled to 
apply to claims for disability benefits under ERISA-covered employee 
benefit plans that are filed on or after January 1, 2018. Following 
publication of the Final Rule, various stakeholders and members of 
Congress asserted that it will drive up disability benefit plan costs, 
cause an increase in litigation, and in so doing impair workers' access 
to disability insurance benefits. Pursuant to Executive Order 13777, 
the Department of Labor has concluded that it is appropriate to give 
the public an additional opportunity to submit comments and data 
concerning potential impacts of the Final Rule. The Department of Labor 
will carefully consider the submitted comments and data as part of its 
effort to examine regulatory alternatives that meet its objectives of 
ensuring the full and fair review of disability benefit claims while 
not imposing unnecessary costs and adverse consequences. The Department 
of Labor accordingly seeks public comment on a proposed 90-day delay of 
the applicability of the Final Rule in order to solicit additional 
public input and examine regulatory alternatives. If this proposal is 
finalized, the amendments made on December 19,

[[Page 47410]]

2016, would become applicable to claims for disability benefits that 
are filed after April 1, 2018, rather than January 1, 2018.

DATES: Comments on the proposal to extend the applicability date for 90 
days must be submitted to the Department on or before October 27, 2017. 
Comments providing data and otherwise germane to the examination of the 
merits of rescinding, modifying, or retaining the rule must be 
submitted to the Department on or before December 11, 2017.

FOR FURTHER INFORMATION CONTACT: Frances P. Steen, Office of 
Regulations and Interpretations, Employee Benefits Security 
Administration, (202) 693-8500. This is not a toll free number.

ADDRESSES: You may submit written comments, identified by RIN 1210-
AB39, by one of the following methods:
    <bullet> Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
    <bullet> Email: <a href="/cdn-cgi/l/email-protection#791c54362b30391d1615571e160f"><span class="__cf_email__" data-cfemail="37521a78657e7753585b19505841">[email protected]</span></a>. Include RIN 1210-AB39 in the subject 
line of the message.
    <bullet> Mail: 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.
    Instructions: All submissions received must include the agency name 
and RIN for this rulemaking. Persons submitting comments electronically 
are encouraged to submit only by one electronic method and not to 
submit paper copies. Comments will be available to the public, without 
charge, online at http://www.regulations.gov and http://www.dol.gov/ebsa and at the Public Disclosure Room, Employee Benefits Security 
Administration, Suite N-1513, 200 Constitution Avenue NW., Washington, 
DC 20210.
    Warning: Do not include any personally identifiable or confidential 
business information that you do not want publicly disclosed. Comments 
are public records and are posted on the Internet as received, and can 
be retrieved by most internet search engines.

SUPPLEMENTARY INFORMATION: Section 503 of the Employee Retirement 
Income Security Act of 1974, as amended (``ERISA''), requires that 
every employee benefit plan shall establish and maintain reasonable 
procedures governing the filing of benefit claims, notification of 
benefit determinations, and appeal of adverse benefit determinations. 
In accordance with its authority under ERISA section 503, and its 
general regulatory authority under ERISA section 505, the Department of 
Labor (``Department'') long ago established regulations setting forth 
minimum requirements for employee benefit plan procedures pertaining to 
claims for benefits by participants and beneficiaries. 29 CFR Sec.  
2560.503-1.
    On December 19, 2016, the Department published a final regulation 
(``Final Rule'') amending the existing claims procedure regulation; the 
Final Rule revised the claims procedure rules for ERISA-covered 
employee benefit plans that provide disability benefits. The Final Rule 
was made effective January 18, 2017, but the Department delayed its 
applicability until January 1, 2018, in order to provide adequate time 
for disability benefit plans and their affected service providers to 
adjust to it, as well as for consumers and others to understand the 
changes made.
    The Final Rule requires that plans, plan fiduciaries, and insurance 
providers comply with certain requirements when dealing with disability 
benefit claimants. In summary, the Final Rule includes the following 
requirements for the processing of claims and appeals for disability 
benefits:
    <bullet> Disclosure Requirements. Benefit denial notices must 
contain a more complete discussion of why the plan denied a claim and 
the standards it used in making the decision. For example, notices must 
include a discussion of the basis for disagreeing with a disability 
determination made by the Social Security Administration (``SSA'') if 
presented by the claimant in support of his or her claim.
    <bullet> Claim File and Internal Protocols. Benefit denial notices 
must include a statement that the claimant is entitled to receive, upon 
request, the entire claim file and other relevant documents. Currently, 
this statement is required only in notices denying benefits on appeal. 
Benefit denial notices also must include the internal rules, 
guidelines, protocols, standards, or other similar criteria of the plan 
that were used in denying a claim, or a statement that none were used. 
Currently, denial notices are not required to include these internal 
rules, guidelines, protocols, or standards; instead denial notices may 
include a statement that such rules, guidelines, protocols, or 
standards were used in denying the claim and that a copy will be 
provided to the claimant upon request.
    <bullet> Review and Respond to New Information. Plans may not deny 
benefits on appeal based on new or additional evidence or rationales 
that were not included when the benefit was denied at the claims stage, 
unless the claimant is given notice and a fair opportunity to respond.
    <bullet> Conflicts of Interest. Plans must ensure that disability 
benefit claims and appeals are adjudicated in a manner designed to 
ensure the independence and impartiality of the persons involved in 
making the decision. For example, a claims adjudicator or medical or 
vocational expert could not be hired, promoted, terminated, or 
compensated based on the likelihood of the person denying benefit 
claims.
    <bullet> Deemed Exhaustion. If a plan does not adhere to all claims 
processing rules, the claimant is deemed to have exhausted the 
administrative remedies available under the plan, unless the violation 
was the result of a minor error and other conditions are met. If the 
claimant is deemed to have exhausted the administrative remedies 
available under the plan, the claim or appeal is deemed denied on 
review without the exercise of discretion by a fiduciary and the 
claimant may immediately pursue his or her claim in court. A plan also 
must treat a claim as re-filed on appeal upon the plan's receipt of a 
court's decision rejecting the claimant's request for review.
    <bullet> Coverage Rescissions. Rescissions of coverage, including 
retroactive terminations due to alleged misrepresentation of fact 
(e.g., errors in the application for coverage) must be treated as 
adverse benefit determinations, thereby triggering the plan's appeals 
procedures. Rescissions for non-payment of premiums are not covered by 
this provision.
    <bullet> Communication Requirements in Non-English Languages. 
Benefit denial notices have to be provided in a non-English language in 
certain situations, using essentially the standard applicable to group 
health benefit notices under the Affordable Care Act (``ACA''). 
Specifically, if a disability claimant's address is in a county where 
10 percent or more of the population is literate only in the same non-
English language, benefit denial notices must include a prominent 
statement in the relevant non-English language about the availability 
of language services. In such cases, plans also would be required to 
provide oral language services in the relevant non-English language and 
provide written notices in the non-English language upon request.
    When it adopted the Final Rule, the Department published a 
regulatory impact analysis (``RIA'') to support its conclusion that 
changes to the existing rules were necessary to ensure that disability 
claimants receive a full and

[[Page 47411]]

fair review of their claims. The Department found at that time that the 
Final Rule would change the claims review process for ERISA-covered 
disability plans by expanding due process rights. The analysis 
concluded that: (1) The Final Rule would help alleviate the hardship to 
many individuals when they are unable to work after becoming disabled 
and their claims are unfairly denied; and (2) greater 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, would 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 among individual plans.
    On the cost side, the RIA concluded that the amendments would have 
modest costs, since many of the amendments clarified provisions of the 
claims procedure regulation or required the provision of information to 
claimants that adjudicators should already possess. Although the 
Department requested data when it first proposed amendments to the 
claims procedure regulation in April 2015 (``2015 NPRM''), the comment 
letters received generally did not contain alternative cost and 
benefits estimates or data that the Department could use to estimate 
costs and benefits for the Final Rule. However, the Department 
quantified the costs associated with two specific provisions in the 
Final Rule for which it had sufficient data: The requirements to 
provide (1) additional information to claimants in the appeals process; 
and (2) information in a non-English language. The RIA acknowledged 
that the Department did not have sufficient data to quantify the 
benefits associated with the Final Rule.
    After the Department published the Final Rule, certain stakeholders 
asserted in writing that the Final Rule will drive up disability 
benefit plan costs, cause an increase in litigation, and thus impair 
workers' access to disability insurance protections.\1\ In support of 
these assertions, the stakeholders say that the right to review and 
respond to new information or rationales unnecessarily ``complicates 
the processing of disability benefits by imposing new steps and 
evidentiary burdens in the adjudication of claims,'' and that some of 
the new disclosure requirements ``forc[e] plans to consider disability 
standards and definitions different from those in the plan.'' \2\ In 
addition, the stakeholders say that the new deemed exhaustion provision 
``explicitly tilts the balance in court cases against plans and 
insurers'' and ``creates perverse incentives for plaintiff's attorneys 
to side-step established procedures and clog the courts for resolution 
of benefit claims.'' \3\ The stakeholders argue that these provisions 
(and others) collectively ``will delay any final decision for the 
claimant and will significantly increase the administrative burdens on 
employers and disability insurance carriers, hurting the very employee 
the rule was purporting to help.'' \4\ Moreover, according to the 
stakeholders, these new provisions (and others) are unnecessary in any 
event because ``there are already existing robust consumer protections 
applicable and available to disability claimants that have worked for 
well over a decade.'' \5\ Members of Congress also presented these same 
or similar concerns in writing to the Secretary of Labor.\6\
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    \1\ Some of the stakeholders also asserted a comment that was 
previously provided with respect to the 2015 NPRM, specifically that 
the Department exceeded its authority and acted contrary to 
Congressional intent by applying certain ACA protections to 
disability benefit claims, arguing that if Congress had wanted these 
protections to apply to disability benefit claims, it would have 
expressly extended the claims and appeals rules in section 2719 of 
the Public Health Service Act to plans that provide disability 
benefits. The Department did not take the position that the ACA 
compelled the changes in the Final Rule. Rather, because disability 
claims commonly involve medical considerations, the Department was 
of the view that disability benefit claimants should receive 
procedural protections similar to those that apply to group health 
plans, and thus it made sense to model the Final Rule on the 
procedural protections and consumer safeguards that Congress 
established for group health care claimants under the ACA.
    \2\ Letter from Governor Dirk Kempthorne, President & Chief 
Executive Officer, American Council of Life Insurers, to The 
Honorable Alexander Acosta, Secretary, U.S. Department of Labor, 
``Department of Labor Disability Claims Regulation,'' (July 17, 
2017) (on file with the Employee Benefits Security Administration, 
U.S. Department of Labor).
    \3\ Letter from American Benefits Council, American Council of 
Life Insurers, America's Health Insurance Plans, Cigna, The ERISA 
Industry Committee, Financial Services Roundtable, Sun Life 
Financial, Unum Group, Inc., to Gary Cohn, Director, National 
Economic Council, The White House, Andrew P. Bremberg, Director, 
Domestic Policy Council, The White House, Edward C. Hugler, Acting 
Secretary, U.S. Department of Labor, ``Department of Labor 
Disability Claims Regulation,'' (Mar. 14, 2017) (on file with the 
Employee Benefits Security Administration, U.S. Department of 
Labor).
    \4\ Letter from Governor Dirk Kempthorne, supra, note 2.
    \5\ Id.
    \6\ Letter from David P. Roe, M.D., Member of Congress (and 27 
other Members of Congress), to R. Alexander Acosta, Secretary, U.S. 
Department of Labor, ``Immediate Action Needed on Disability Claims 
Regulation,'' (July 28, 2017) (on file with the Employee Benefits 
Security Administration, U.S. Department of Labor).
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    A confidential survey of carriers covering approximately 18 million 
participants in group long term disability plans (which reflects 
approximately 45% of the group long-term disability insurance market), 
conducted by the stakeholders estimated that the Final Rule would cause 
average premium increases of 5-8% in 2018 (when the Final Rule is 
scheduled to take effect) for several survey participants.\7\ The 
stakeholders argue that the demand for disability insurance is highly 
sensitive to price changes, such that even minor price increases can 
result in take-up rate reductions. For example, they reported that when 
the State of Vermont mandated mental health parity several years ago, 
there was an approximately 20% increase in premiums, which resulted in 
a 20% decrease of covered employees.\8\ Thus, they conclude that the 
cost increases caused by the Final Rule will result in employers 
reducing and/or eliminating disability income benefits, and that some 
individuals may elect to drop or forego coverage, with the result being 
that fewer people will have adequate income protection in the event of 
disability. The stakeholders further assert that loss of access not 
only may be adverse to individual workers and their families, but also 
potentially adverse to federal and state public assistance programs 
more generally.\9\
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    \7\ Email from Michael Kreps, Principal, Groom Law Group, to 
John J. Canary and Jeffrey J. Turner, Office of Regulations and 
Interpretations, Employee Benefits Security Administration (July 13, 
2017) (on file with the Employee Benefits Security Administration, 
U.S. Department of Labor).
    \8\ Id.
    \9\ See, e.g., Letter from Matthew Eyles, Executive Vice 
President, Policy and Regulatory Affairs, America's Health Insurance 
Plans, to The Honorable R. Alexander Acosta, Secretary of Labor, 
U.S. Department of Labor (May 10, 2017) (on file with the Employee 
Benefits Security Administration, U.S. Department of Labor). See 
also Letter from David P. Roe, M.D., Member of Congress (and 27 
other Members of Congress), to R. Alexander Acosta, Secretary, U.S. 
Department of Labor, ``Immediate Action Needed on Disability Claims 
Regulation,'' (July 28, 2017) (on file with the Employee Benefits 
Security Administration, U.S. Department of Labor).
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    The stakeholders acknowledge that the Final Rule's RIA addressed 
the limited data sources that were publicly available at that time, and 
that the Department's ability to fully quantify and evaluate costs and 
benefits was accordingly constrained. But the stakeholders say that 
such data could be developed by the industry and provided to the 
Department, and have promised to work with the Department to obtain 
this data. They explain that collecting the relevant data is a complex 
process that will take time and involve an expenditure of resources. 
For example, because each carrier's data is proprietary and contains 
sensitive

[[Page 47412]]

business information, an independent third party must collect it in a 
manner that protects this information. This may include, among other 
things, negotiating specific non-disclosure, security, and data 
retention agreements. They further observe that such a process must 
also be carefully designed to ensure that there are no violations of 
relevant federal or state laws, such as antitrust laws. The 
stakeholders also assert that each carrier's existing information 
technology systems may collect and report data in different ways, so, 
to be usable, the data must be aggregated into standardized data sets, 
anonymized to ensure that no data point can be attributed to a single 
carrier, and reviewed and analyzed to ensure accuracy and reliability 
(as required for a regulatory impact analysis). The stakeholders made a 
commitment to provide this data and asked the Department to delay the 
Final Rule's applicability date.
    On February 24, 2017, after the Final Rule amending the disability 
claims procedure was published and became effective, the President 
issued Executive Order 13777 (``E.O. 13777''), entitled Enforcing the 
Regulatory Reform Agenda.\10\ E.O. 13777 is intended to reduce the 
regulatory burdens agencies place on the American people, and directs 
federal agencies to undertake specified activities to accomplish that 
objective. As a first step, E.O. 13777 requires the designation of a 
Regulatory Reform Officer and the establishment of a Regulatory Reform 
Task Force within each federal agency covered by the Order. The Task 
Forces were directed to evaluate existing regulations and make 
recommendations regarding those that can be repealed, replaced, or 
modified to make them less burdensome. E.O. 13777 also requires that 
Task Forces seek input from entities significantly affected by 
regulations, including state, local and tribal governments, small 
businesses, consumers, non-governmental organizations, and trade 
associations.
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    \10\ 82 FR 12285 (March 1, 2017).
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    In light of the foregoing, the Department has concluded that it is 
appropriate to seek additional public input regarding the regulatory 
impact analysis in the Final Rule. If additional reliable data and 
information is submitted, the Department will be able to consider 
whether it supports regulatory alternatives other than those adopted in 
the Final Rule. The Department is unable to complete a notice and 
comment and reexamination process by January 1, 2018, particularly 
given the complex data collection and sanitation process required here, 
as described by the stakeholders. Extending the applicability date past 
January 1, 2018, would allow the Department to complete this public 
solicitation process and examine regulatory alternatives. The 
Department consequently seeks public input on a proposed 90-day 
delay.\11\ For reasons discussed below, the Department believes 90 days 
is a reasonable period during which to review public input and take an 
appropriate course of action.
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    \11\ The Department notes that several provisions in the Final 
Rule essentially conform the express text of certain parts of the 
Final Rule to various federal court decisions on full and fair 
review requirements in the 2000 Final Rule. E.g., Saffon v. Wells 
Fargo & Co. Long Term Disability Plan, 522 F.3d 863, 871-872 (9th 
Cir. 2008) (finding that a full and fair review requires a plan 
administrator to disclose the reasons for denial in the 
administrative process); 75 FR at 43333 n.7. The proposed delay of 
the applicability date in this document does not modify or otherwise 
delay the application of any such controlling judicial precedents.
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    As indicated above, a primary concern of the stakeholders is that 
the Final Rule will unnecessarily increase the cost of coverage and 
discourage the uptake and utilization of disability coverage. While a 
number of the commenters on the 2015 NPRM forecasted increased 
regulatory and compliance costs as a whole, few, if any, of them 
offered itemized cost estimates on a provision-by-provision basis.\12\ 
The Department recognizes that access to disability benefits depends in 
part on affordability, which is affected by regulatory burdens. 
Accordingly (as opposed to generalized predictions of cost increases or 
aggregate cost estimates of the Final Rule in its entirety), the 
Department solicits costs estimates on each of the provisions contained 
in that rule. Itemized cost estimates of this type would enhance the 
Department's ability to assess costs and benefits of regulatory 
alternatives and to select approaches that maximize net benefits.
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    \12\ See, e.g., Comment Letter #115 (American Benefits Council) 
(asserting generally that the 2015 NPRM ``is likely to impose a host 
of additional costs on plans--none of which appear to have been 
considered by the Department as part of its economic analysis.''); 
see also Comment Letter #114 (American Council of Life Insurers) 
(asserting that it ``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.'').
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    The Department also seeks data on the price elasticity of demand 
for disability insurance coverage. Many stakeholders, for example, 
discuss price sensitivity in this market and predict possibly 
significant reductions in access to coverage unless the Final Rule is 
revised or repealed (i.e., that the price elasticity of demand in this 
market is relatively elastic). Evidence of this elasticity would be 
very helpful to the Department. For example, a number of states (some 
very recently) have banned discretionary clauses in insurance policies, 
which may have resulted in increased administrative costs. In those 
cases, is there data showing reduced demand (in terms of dropped 
coverage or reduced uptake) following the implementation of the bans? 
Another example is the Final Rule's requirement to discuss the basis 
for disagreeing with a disability determination made by the SSA. Is 
there data showing a detrimental impact on coverage in jurisdictions 
where courts \13\ have endorsed such an explanation? Another possible 
example is the changes to the claims procedure requirements made in 
2000.\14\ Is there data showing a detrimental impact on coverage after 
those revisions were made? This is not an exhaustive list of 
potentially relevant situations or questions; instead, it is intended 
to provide insight into issues the Department intends to consider and 
as to which comments will be helpful.
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    \13\ See, e.g., Montour v. Hartford Life and Accident Ins. Co., 
588 F.3d 623, 637 (9th Cir. 2009) (``[F]ailure to explain why it 
reached a different conclusion than the SSA is yet another factor to 
consider in reviewing the administrator's decision for abuse of 
discretion, particularly where, as here, a plan administrator 
operating with a conflict of interest requires a claimant to apply 
and then benefits financially from the SSA's disability finding.''); 
Brown v. Hartford Life Ins. Co., 301 F. App'x 772, 776 (10th Cir. 
2008) (insurer's discussion was ``conclusory'' and ``provided no 
specific discussion of how the rationale for the SSA's decision, or 
the evidence the SSA considered, differed from its own policy 
criteria or the medical documentation it considered'').
    \14\ In November of 2000, the Department published a final rule 
substantially reforming the standards governing the timeframes and 
disclosure requirements for ERISA benefit claims and appeals, 
including disability benefits. 65 FR 70246 (Nov. 21, 2000).
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    The Department also seeks comments on any matter germane to this 
examination, including the merits of rescinding, modifying, or 
retaining the Final Rule. Upon completion of this public solicitation 
process and review, the Department may decide to allow all or part of 
the Final Rule to take effect as written, propose a further extension, 
withdraw the Final Rule, or propose amendments to the Final Rule. The 
Department requests comments on each of these possible outcomes.
    Comments on whether to extend the applicability date for 90 days 
must be submitted to the Department within 15 days. If the 90-day 
period is insufficient, please specify a sufficient period of time and 
explain why longer than 90 days is needed. Comments providing data or 
otherwise germane to the examination

[[Page 47413]]

of the merits of rescinding, modifying, or retaining the rule must be 
submitted to the Department within 60 days. If 60 days is not enough 
time to provide input on the broader examination, including responding 
to the various data requests throughout this document, commenters are 
encouraged to notify the Department within the 15-day period, and to 
explain why 60 days is not enough time and specify how much time is 
needed. This will give the Department an opportunity to consider 
whether to extend the 60-day comment period in conjunction with a 
decision on whether and how long to delay the applicability date.

Regulatory Impact Analysis

    The Department proposes to delay the applicability date of the 
Final Rule for 90 days--through April 1, 2018. During the delay, the 
Department will review the Final Rule to determine whether it is 
unnecessary, ineffective, or imposes costs that exceed benefits in 
conformance with E.O. 13777. As part of this process, the Department 
also will review data submitted on the issues raised on the RIA in the 
Final Rule to determine whether such new information and data support 
changes to the Final Rule.
    The delay is necessary to avoid the applicability date of the Final 
Rule occurring before the Department completes its review, which would 
necessarily require those regulated by the Final Rule to prepare for 
and begin complying on January 1, 2018 while the Department is still 
reviewing the rule. That would unnecessarily and unwisely disrupt the 
disability insurance market and produce frictional costs that are not 
offset by commensurate benefits. The tradeoff is that the changes in 
the Final Rule will be delayed.

1. Executive Order 12866 Statement

    This proposed extension of the applicability date of the Final Rule 
is a significant regulatory action within the meaning of section 
3(f)(4) of Executive Order 12866, because it raises novel legal or 
policy issues arising out of legal mandates, the President's 
priorities, or the principles set forth in the Executive Order. 
Therefore, the Department has considered the costs and benefits of the 
proposed extension, and the Office of Management and Budget (``OMB'') 
has reviewed and approved the proposed applicability date extension.
    The Department's regulatory impact analysis of the Final Rule 
estimated that benefits derived by workers seeking disability benefits 
justify compliance costs.\15\ The 90-day delay of the applicability 
date would delay these estimated costs and benefits by 90 days.
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    \15\ 81 FR 92316, 92339 (Dec. 19, 2016).
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    Data limitations prevented the Department from quantifying benefits 
the Final Rule would provide to workers and their family members 
participating in ERISA-covered disability insurance plans. The RIA for 
the Final Rule includes a qualitative analysis of the benefits. The 
Department estimated at that time that as a result of the rule:
    <bullet> Some participants would receive payment for benefits they 
were entitled to that were improperly denied by the plan;
    <bullet> There would be 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;
    <bullet> Fairness and accuracy would increase in the claims 
adjudication process.
    The Department estimated that the requirements of the Final Rule 
would have modest costs. The Department quantified the costs associated 
with two provisions of the Final Rule for which it had sufficient data: 
The requirements to provide: (1) Providing additional information to 
claimants in the appeals process ($14.5 million annually); and (2) 
providing information in a non-English language ($1.3 million 
annually).
    Stakeholders have raised concerns that the Department 
underestimated the costs of the Final Rule and maintain that if the 
Department had properly estimated costs, it would have found that the 
costs exceed the Final Rule's benefits. Specifically, stakeholders 
assert that: (1) Requiring benefit denial notices include a discussion 
of the basis for disagreeing with a disability determination made by 
the SSA will increase costs because SSA's definitions, policies, and 
procedures may be different from those of private disability plans; (2) 
providing that the claimant is deemed to have exhausted the 
administrative remedies available under the plan if plans do not adhere 
to all claims processing rules, unless the violation was the result of 
a minor error and other specified conditions are met, will result in 
increased litigation and administrative costs; and (3) prohibiting 
plans from denying benefits on appeal based on new or additional 
evidence or rationales that were not included when the benefit was 
denied at the claims stage, unless the claimant is provided notice and 
an opportunity to respond to the new or additional information or 
rationales, will lead to protracted exchanges between plans and 
claimants that will cause delays and lead to higher costs. Stakeholders 
also argue that participants in disability plans are very sensitive to 
price increases and predict that the cost increases associated with the 
Final Rule will cause some individuals to elect to drop or forego 
coverage, meaning that fewer people will have adequate income 
protection in the event of disability.
    During the proposed 90-day applicability date delay, the Department 
intends to assess the impacts of the Final Rule. In order for the 
assessment to be as robust as possible, the Department is hereby 
requesting data that would help it quantify the payments for plan 
benefits that plan participants would receive and any cost increases or 
reductions in access to coverage that could result if the delayed 
provisions of the Final Rule take effect. Specifically, the Department 
requests data that it could use to assess: (1) The number of disability 
claims that are filed and denial rates for such claims, including rates 
separately for claimants who were previously approved under the Social 
Security Disability Insurance Program (SSDI) and statistics on reasons 
for denial; (2) how often plans rely on new or additional evidence or 
rationales during the claims review process and the volume of the 
material that comprise such additional evidence or rationales; (3) the 
price elasticity of demand for disability insurance coverage; (4) 
pricing or premiums for group and individual level policies and factors 
that affect pricing; (5) loss ratios and the breakdown of expenses 
(claims, sales, claims processing, etc.); (6) aggregate, average, and 
median benefits paid and ages of claimants; (7) the projected 
litigation costs associated with the new procedural requirements for 
disability claims provided in the Final Rule; (8) the number of new 
claims that will be granted that, but for the provisions in the Final 
Rule, would have been denied, and the value of those benefits; (9) the 
systems and technology that plans and insurers use to process 
disability claims and cost estimates updating such systems to comply 
with the Final Rule; (10) statistics on steps, timing of steps, and 
disposition of claims from initial filing to final disposition, 
including claims filed but never perfected or decided, up to and 
including claims denied though appeal and litigated; and (11) 
information regarding the costs for non-English services and the 
estimated population of claimants that might be expected to use such 
services. The Department understands that such data is not publicly 
available and is willing

[[Page 47414]]

to work with stakeholders to ensure that any trade secrets and 
proprietary business information are protected from public disclosure 
and that the data collection process is designed to ensure that no 
violations of antitrust or other federal or state laws occur.\16\
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    \16\ The Department is aware of a number of relevant annual and 
semiannual industry surveys, such as the U.S. Group Disability 
Market Survey. Where applicable, commenters are encouraged to submit 
to the Department the data underlying these surveys. See, e.g., the 
American Council of Life Insurers' Written Statement for the Record 
entitled Do Private Long-Term Disability Policies Provide the 
Protection They Promise? Before the S. Comm. on Finance, 111th Cong. 
113 & n.3 (2010), in which the ACLI discusses aggregate data on 
approvals and elimination periods.
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    It also would be helpful for the Department to receive data 
regarding the impact of the 2000 final claims and appeals regulation 
(2000 Final Rule). Commenters at the time stated that it would lead to 
cost increases and decreases in consumer access. The Department is 
interested in receiving data that shows: (1) Cost increases that 
resulted from compliance with the 2000 Final Rule (or lack thereof) and 
whether such costs were passed on to consumers; and (2) whether 
employers stopped offering disability insurance benefits and/or 
employee take-up rates decreased. The Department also requests data 
that demonstrates how the Department's 2000 Final Rule impacted the 
cost of disability claims litigation.
    While the Department welcomes the submission of all relevant data, 
to ensure its usability, the providers of such data are encouraged to 
discuss its source(s), manner of collection, and any methodology used 
to analyze it and derive conclusions from it. The Department requests 
that commenters fully disclose any bias(es) associated with the data 
and provide honest evaluations of its strengths and weaknesses. This 
will help ensure that the Department reaches an optimal outcome and 
that full transparency is provided to the public.

2. Paperwork Reduction Act

    The Paperwork Reduction Act (``PRA'') prohibits federal agencies 
from conducting or sponsoring a collection of information from the 
public without first obtaining approval from OMB. See 44 U.S.C. 3507. 
Additionally, members of the public are not required to respond to a 
collection of information, nor be subject to a penalty for failing to 
respond, unless such collection displays a valid OMB control number. 
See 44 U.S.C. 3512.
    OMB approved information collections contained in the Final Rule 
under OMB Control Number 1210-0053. The Department is not modifying the 
substance of the Information Collection Requests at this time; 
therefore, no action under the PRA is required. The information 
collections will become applicable at the same time the rule becomes 
applicable. The information collection requirements contained in the 
Final Rule are discussed below.
    This proposal would delay the applicability date of the 
Department's amendments to the disability claims procedure rule for 90 
days, through April 1, 2018. The Final Rule revised the rules 
applicable to ERISA-covered plans providing disability benefits. Some 
of these amendments revise disclosure requirements under the claims 
procedure rule that are information collections covered by the PRA. For 
example, benefit denial notices must contain a full discussion of why 
the plan denied the claim, and to the extent the plan did not follow or 
agree with the views presented by the claimant to the plan or health 
care professional treating the claimant or vocational professionals who 
evaluated the claimant, or a disability determination regarding the 
claimant presented by the claimant to the plan made by the SSA, the 
discussion must include an explanation of the basis for disagreeing 
with the views or disability determination. The notices also must 
include either: (1) The specific internal rules, guidelines, protocols, 
standards or other similar criteria of the plan relied upon in making 
the adverse determination or, alternatively, (2) a statement that such 
rules, guidelines, protocols, standards or other similar criteria of 
the plan do not exist. Plan administrators also must provide (1) 
claimants with any new or additional evidence considered free of 
charge, and (2) notices of adverse benefit determination potentially in 
an non-English language.
    The burdens associated with the disability claims procedure 
revisions are summarized below and discussed in detail in the 
regulatory impact analysis contained in the preamble to the Final Rule 
(81 FR 92317, 92340 (Dec. 19, 2016)). It should be noted that this 
proposal only affects the requirements applicable to disability benefit 
claims, which are a small subset of the total burden associated with 
the ERISA claims procedure information collection.
    Type of Review: Revised collection.
    Agencies: Employee Benefits Security Administration, Department of 
Labor.
    Title: ERISA Claims Procedures.
    OMB Number: 1210-0053.
    Affected Public: Business or other for-profit; not-for-profit 
institutions.
    Total Respondents: 5,808,000. Total Responses: 311,790,000.
    Frequency of Response: Occasionally.
    Estimated Total Annual Burden Hours: 516,000.
    Estimated Total Annual Burden Cost: $814,450,000.

3. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) imposes 
certain requirements with respect to federal rules that are subject to 
the notice and comment requirements of section 553(b) of the 
Administrative Procedure Act (5 U.S.C. 551 et seq.) and which are 
likely to have a significant economic impact on a substantial number of 
small entities. Unless an agency determines that a rule is not likely 
to have a significant economic impact on a substantial number of small 
entities, section 604 of the RFA requires the agency to present an 
initial regulatory flexibility analysis (IRFA) of the proposed rule 
describing the rule's impact on small entities and explaining how the 
agency made its decisions with respect to the application of the rule 
to small entities. Pursuant to section 605(b) of the RFA, the 
Department certified that the Final Rule did not have a significant 
economic impact on a substantial number of small entities and provided 
an analysis of the rationale for that certification. Similarly, the 
Department hereby certifies that the proposed rule will not have a 
significant economic impact on a substantial number of small entities 
because it merely delays the applicability date of the Final Rule.

4. Congressional Review Act

    The proposed rule is subject to the Congressional Review Act (CRA) 
provisions of the Small Business Regulatory Enforcement Fairness Act of 
1996 (5 U.S.C. 801 et seq.) and, if finalized, will be transmitted to 
Congress and the Comptroller General for review.

5. Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4) requires each federal agency to prepare a written statement 
assessing the effects of any federal mandate in a proposed or final 
agency rule that may result in an expenditure of $100 million or more 
(adjusted annually for inflation with the base year 1995) in any one 
year by State, local, and tribal governments, in the aggregate, or by 
the private sector. For purposes of the Unfunded Mandates Reform Act, 
as well as Executive Order 12875, this proposal does not include any 
federal mandate that we expect

[[Page 47415]]

would result in such expenditures by state, local, or tribal 
governments, or the private sector. The Department also does not expect 
that the proposed rule will have any material economic impacts on 
State, local or tribal governments, or on health, safety, or the 
natural environment.

6. Federalism Statement

    Executive Order 13132 outlines fundamental principles of 
federalism, and requires the adherence to specific criteria by federal 
agencies in the process of their formulation and implementation of 
policies that have ``substantial direct effects'' on the States, the 
relationship between the national government and States, or on the 
distribution of power and responsibilities among the various levels of 
government. Federal agencies promulgating regulations that have 
federalism implications must consult with State and local officials and 
describe the extent of their consultation and the nature of the 
concerns of State and local officials in the preamble to the Final 
Rule.
    This proposed rule does not have federalism implications because it 
merely delays the applicability date of the rule. Therefore, the 
proposed rule has no substantial direct effect on the States, the 
relationship between the national government and the States, or the 
distribution of power and responsibilities among the various levels of 
government. In compliance with the requirement of Executive Order 13132 
that agencies examine closely any policies that may have federalism 
implications or limit the policy making discretion of the States, the 
Department welcomes input from States regarding this assessment.

7. Executive Order 13771: Reducing Regulation and Controlling 
Regulatory Costs

    Executive Order 13771, titled Reducing Regulation and Controlling 
Regulatory Costs, was issued on January 30, 2017. Section 2(a) of EO 
13771 requires an agency, unless prohibited by law, to identify at 
least two existing regulations to be repealed when the agency publicly 
proposes for notice and comment, or otherwise promulgates, a new 
regulation. In furtherance of this requirement, section 2(c) of EO 
13771 requires that the new incremental costs associated with new 
regulations shall, to the extent permitted by law, be offset by the 
elimination of existing costs associated with at least two prior 
regulations. This proposed rule is expected to be an EO 13771 
deregulatory action.

List of Subjects in 29 CFR Part 2560

    Claims, Employee benefit plans.

    For the reasons stated above, the Department proposes to amend 29 
CFR part 2560 as follows:

PART 2560--RULES AND REGULATIONS FOR ADMINISTRATION AND ENFORCEMENT

0
1. The authority citation for part 2560 continues to read as follows:

    Authority: 29 U.S.C. 1132, 1135, and Secretary of Labor's Order 
1-2011, 77 FR 1088 (Jan. 9, 2012). Section 2560.503-1 also issued 
under 29 U.S.C. 1133. Section 2560.502c-7 also issued under 29 
U.S.C. 1132(c)(7). Section 2560.502c-4 also issued under 29 U.S.C. 
1132(c)(4). Section 2560.502c-8 also issued under 29 U.S.C. 
1132(c)(8).


Sec.  2560.503-1   [Amended]

0
2. Section 2560.503-1 is amended by removing ``on or after January 1, 
2018'' and adding in its place ``after April 1, 2018'' in paragraph 
(p)(3) and by removing the date ``December 31, 2017'' and adding in its 
place ``April 1, 2018'' in paragraph (p)(4).

    Signed at Washington, DC, this 6th day of October, 2017.
Timothy D. Hauser,
Deputy Assistant Secretary for Program Operations, Employee Benefits 
Security Administration, Department of Labor.
[FR Doc. 2017-22082 Filed 10-10-17; 8:45 am]
BILLING CODE 4510-29-P


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