New Rules for Disability Insurance Claims
and Retirement Plan Distributions
There are two new and important benefits-related matters that we want to call
to your attention. The first concerns the processing of disability insurance
and retirement disability claims, and the second concerns a new notice that must
be provided when a retirement plan participant is eligible for benefits. Both
requirements are effective January 1, 2002.
Disability Insurance Claims:
What Are The New Disability Insurance Claims Rules?
The new rules require the initial claim be processed within forty-five (45) days.
A claims denial must disclose the use of any internal rule, guideline or protocol
used in reaching the decision to deny the claim. If this material is not included
in the denial letter, the participant must be advised that a copy is available
free of charge. Plan limitations and exclusions that serve as the basis of the
denial must also be disclosed. The names of any medical professionals involved
in reviewing the claim must be disclosed.
The participant has sixty (60) days to appeal an adverse ruling, and the appeal
must generally be processed within sixty (60) days. If the plan fiduciaries meet
at least quarterly, appeals can generally be held and processed at the next quarterly
meeting.
To What Plans Do These New Rules Apply?
This new rule applies to claims under disability insurance plans and, most significantly,
to disability benefits payable under retirement plans when the disability claim
is processed by a retirement plan. This means that disability retirement claims
must be processed on a faster schedule than claims for other benefits are processed.
Excluded from the new rule are retirement plans that look to a third party, or
to an outside standard such as Social Security disability, to determine whether
a participant is disabled. Thus, a 401(k) plan that determines disability based
on a finding of disability by the Social Security Administration does not have
to follow the new claims rules.
New Retirement Plan Distribution Rules
As a result of tax law changes made by the Economic Growth and Tax Relief Reconciliation
Act of 2001 ("EGTRRA"), which expand the ability of plan participants
to roll over their distributions, the Model Tax Notice that you are currently
using is now obsolete. The IRS has issued a new model notice that your plan service
providers should now be using. We have placed a downloadable copy of the Notice
on our website. It is available at www.constangy.com. The Notice should
be edited to conform to the specific design of your plan.
If we can assist you in customizing the notice, please contact Ira Friedrich
or Carl Cannon in our Atlanta office at (404) 525-8622 or Dana Thrasher in our
Birmingham office at (205) 205-9321.
The information in this publication is for the purpose of informing
and educating our clients about various aspects of the law and is not intended
to be used as legal advice.
