Fall 2002

Number 5

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. 

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