Claims Procedure for Plans Providing Disability Benefits; 90-Day Delay of Applicability Date, 56560-56566 [2017-25729]

Agencies

• Employee Benefits Security Administration
• DEPARTMENT OF LABOR

[Federal Register Volume 82, Number 228 (Wednesday, November 29, 2017)]
[Rules and Regulations]
[Pages 56560-56566]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-25729]


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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; 90-Day 
Delay of Applicability Date

AGENCY: Employee Benefits Security Administration, Department of Labor.

ACTION: Final rule; delay of applicability date.

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SUMMARY: This document delays for ninety (90) days--through April 1, 
2018--the applicability of a final rule amending the claims procedure 
requirements applicable to ERISA-covered employee benefit plans that 
provide disability benefits (Final Rule). The Final Rule was published 
in the Federal Register on December 19, 2016, became effective on 
January 18, 2017, and was scheduled to become applicable on January 1, 
2018. The delay announced in this document is necessary to enable the 
Department of Labor to carefully consider comments and data as part of 
its effort, pursuant to Executive Order 13777, 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.

DATES: The amendments are effective on January 1, 2018.

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.

SUPPLEMENTARY INFORMATION: 

A. Background

    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'') previously 
established regulations setting forth minimum requirements for employee 
benefit plan procedures pertaining to claims for benefits by 
participants and beneficiaries. 29 CFR 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.
    On February 24, 2017, the President issued Executive Order 13777 
(``E.O. 13777''), entitled Enforcing the Regulatory Reform Agenda.\1\ 
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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    \1\ 82 FR 12285 (March 1, 2017).
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    Not long thereafter, certain stakeholders asserted in writing that 
the Final Rule will drive up disability benefit plan costs, cause an 
increase in litigation, and consequently impair workers' access to 
disability insurance protections.\2\ In support of these assertions, 
the stakeholders said, among

[[Page 56561]]

other things, 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.'' \3\ In addition, the stakeholders said 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.'' \4\ 
The stakeholders argued 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.'' \5\ 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.'' \6\ Some members of Congress also presented these same or 
similar concerns in writing to the Secretary of Labor.\7\
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    \2\ Some of the stakeholders also asserted a comment that was 
previously provided with respect to the 2015 proposed amendments, 
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. However, 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 
procedural protections and consumer safeguards that Congress 
established for group health care claimants under the ACA.
    \3\ 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 and posted on EBSA's Web site).
    \4\ 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 
and posted on EBSA's Web site).
    \5\ Letter from Governor Dirk Kempthorne, supra, note 3.
    \6\ Id.
    \7\ 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 and posted on 
EBSA's Web site).
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    According to the stakeholders, 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.\8\ The stakeholders argued 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. 
As an 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 they asserted resulted in a 20% decrease of 
covered employees.\9\ From this, 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 that fewer people 
will have adequate income protection in the event of disability. The 
stakeholders further asserted 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.\10\
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    \8\ 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 and posted on EBSA's Web site).
    \9\ Id.
    \10\ 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 and 
posted on EBSA's Web site). See also Letter from David P. Roe, M.D., 
Member of Congress (and 27 other Members of Congress), supra, note 
7.
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    The stakeholders stated that, while the Final Rule's Regulatory 
Impact Analysis (RIA) addressed the limited data sources that were 
publicly available at that time, the Department's ability to fully 
quantify and evaluate costs and benefits was accordingly constrained. 
But the stakeholders said 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 asserted 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 business information, an independent 
third party must collect the data in a manner that protects this 
information. This may include, among other things, negotiating specific 
non-disclosure, security, and data retention agreements. They further 
observed 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 asserted 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.
    In light of the foregoing, and pursuant to E.O. 13777, the 
Department published in the Federal Register on October 12, 2017, at 82 
FR 47409, a document seeking comment on a proposed 90-day delay of the 
applicability date of the Final Rule through April 1, 2018 (NPRM). The 
comment period on the proposed delay ended on October 27, 2017. In that 
same document, the Department sought comments and data germane to the 
examination of the merits of rescinding, modifying, or retaining the 
Final Rule. This comment period ends on December 11, 2017.

B. Public Comments and Decision on Delay

    The Department received approximately 110 comment letters in 
response to the proposed delay. As evidenced below, there is no 
consensus among the commenters regarding whether a delay is appropriate 
or the length of any such delay. Many commenters strongly support a 
delay, though much longer than 90 days, but at least as many commenters 
equally strongly oppose any delay of any length. All of the commenters' 
letters, and other related submissions made part of the public record, 
are available for public inspection on EBSA's Web site. After carefully 
considering the record, the proposal is adopted without change.
    A significant number of commenters representing employers, plans, 
insurance carriers, and plan service providers strongly support a delay 
of the applicability date. Many of these commenters repeated prior 
assertions that the Final Rule, if not revised or repealed, will drive 
up disability benefit plan costs, cause an increase in litigation, and 
in doing so impair workers' access to disability benefit

[[Page 56562]]

insurance.\11\ In support of these assertions, these commenters 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.'' \12\ In addition, they 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.'' \13\ A delay, according to 
these commenters, will enable the Department to conduct a reexamination 
of the Final Rule, make changes, and prevent these adverse consequences 
from ever occurring.
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    \11\ See, e.g., Comment Letter #105 (America's Health Insurance 
Plans) (``Because demand by employees for private disability income 
protection is sensitive to the cost of coverage, the Rule would 
drive down the number of working Americans with private disability 
income protection, exposing more American families to the financial 
risk of disabling illness or injury. As a result, not only would 
more families face financial hardship, the federal government, 
states, and taxpayers would also face higher costs because, lacking 
disability income protection benefits, more disabled workers would 
be forced to rely on public assistance programs.'').
    \12\ Comment Letter #104 (American Benefits Council, American 
Council of Life Insurers, America's Health Plans, Cigna, The ERISA 
Industry Committee, Financial Services Roundtable, The Guardian Life 
Insurance Company of America, The Hartford, MetLife, Mutual of 
Omaha, National Association of Insurance and Financial Advisors, 
National Business Group on Health, NFL Player Disability and 
Neurocognitive Benefit Plan, Sun Life Financial, Unum Group, Inc., 
U.S. Chamber of Commerce).
    \13\ Id. See also Comment Letter #105 (America's Health 
Insurance Plans) (``Of major concern, the Rule's provisions would 
greatly increase disability income claim litigation and litigation 
costs. The Rule provides, at the claimant's option, for a short-cut 
to the federal courts and to de novo court review if a plan does not 
`strictly adhere' to its provisions.'').
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    Nearly all of the supporters of a delay requested a delay of longer 
than 90 days. The majority requested a delay ranging from 6 months to 1 
year, with a few commenters requesting an even longer delay. The 
primary reason offered for a longer delay, according to these 
commenters, is that a 90-day delay will not provide enough time for the 
Department to complete a careful review of the public record (including 
the information and data due on December 11, 2017), to perform a review 
and analysis of the Final Rule in light of the information and data 
provided, to propose revisions to the Final Rule and receive comments, 
to publish a revised final rule, and to provide plans and their service 
providers sufficient time to comply with a revised rule.\14\ One 
commenter, for example, noted that historically the Department has 
taken months, if not years, to review existing regulations, propose 
changes, and issue final rules.\15\
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    \14\ See, e.g., Comment Letter #98 (American Council of Life 
Insurers); Comment Letter #104 (American Benefits Council, American 
Council of Life Insurers, America's Health Plans, Cigna, The ERISA 
Industry Committee, Financial Services Roundtable, The Guardian Life 
Insurance Company of America, The Hartford, MetLife, Mutual of 
Omaha, National Association of Insurance and Financial Advisors, 
National Business Group on Health, NFL Player Disability and 
Neurocognitive Benefit Plan, Sun Life Financial, Unum Group, Inc., 
U.S. Chamber of Commerce); Comment Letter #105 (America's Health 
Insurance Plans); Comment Letter #97 (National Business Group on 
Health); Comment Letter #94 (UNUM Group); Comment Letter #93 (United 
Healthcare); Comment Letter #96 (Cigna Corporation); Comment Letter 
#92 (US Chamber of Commerce); Comment Letter #95 (Sun Life 
Financial).
    \15\ Comment Letter #104 (American Benefits Council, American 
Council of Life Insurers, America's Health Plans, Cigna, The ERISA 
Industry Committee, Financial Services Roundtable, The Guardian Life 
Insurance Company of America, The Hartford, MetLife, Mutual of 
Omaha, National Association of Insurance and Financial Advisors, 
National Business Group on Health, NFL Player Disability and 
Neurocognitive Benefit Plan, Sun Life Financial, Unum Group, Inc., 
U.S. Chamber of Commerce).
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    By contrast, a significant number of commenters representing 
disability claimants strongly oppose any delay of the applicability 
date. These commenters firmly believe that disability claimants are in 
need of the increased procedural protections provided by the Final 
Rule, and that such protections are promised by section 503 of ERISA. 
These commenters argue that the Final Rule is the product of a valid 
and extensive multi-year rulemaking process, completed in December 
2016, and that nothing in the public record has changed since then to 
warrant a delay. These commenters discount industry assertions that the 
Final Rule will lead to unwarranted price increases and reduced 
coverage as mere unsubstantiated and undocumented allegations. These 
commenters maintain that if such assertions were true, industry 
stakeholders would have proven their case during the rulemaking process 
that ended in 2016.
    Importantly, many of these same commenters raised serious issues 
under the Administrative Procedures Act (APA) with respect to process 
surrounding the proposed delay. They argue that the Department has not 
clearly articulated its reasons for proposing a delay. They argue that 
the Department is relying on non-public information, provided 
exclusively by or on behalf of the industry, as the sole basis for the 
delay, and that the public has not been given a reasonable opportunity 
to review and respond to this non-public information. They also argue 
that the public will not have a reasonable opportunity to review and 
respond to the data and information, if any, submitted under the 
December 11, 2017, deadline. Some of these commenters even expressed 
concern that the delay could result in litigation for violations of the 
APA.
    After carefully considering these comments, the proposal is adopted 
without change. Pursuant to E.O. 13777, the Department previously 
determined it was appropriate to seek additional input regarding the 
regulatory impact analysis in the Final Rule, and to that end publicly 
solicited comments on October 12, 2017. See 82 FR 47409, 47411-12 (Oct. 
12, 2017) (explaining reasoning and recognizing that access to 
disability benefits depends in part on affordability, which is affected 
by regulatory burdens). The Department expects that data and 
information will be submitted by December 11, 2017, and that the 
Department will be able to consider whether such data and information 
support the assertions made by the stakeholders and commenters arguing 
for consideration of regulatory alternatives other than those adopted 
in the Final Rule and possible revision or rescission of the Final 
Rule. The Department, however, would not reasonably be able to complete 
this notice and comment process and a reexamination before January 1, 
2018. Rather, extending the applicability date past January 1, 2018, 
allows the Department to complete this public solicitation process and 
examine regulatory alternatives prior to the Final Rule becoming 
applicable. At this point, the Department is not prepared to follow the 
alternative approach of allowing the Final Rule to become applicable 
and thereafter completing a reexamination and potential proposal of 
regulatory alternatives for public comment. While that approach is 
relatively common with respect to reexaminations of existing 
regulations, in light of the fact that the Final Rule is not yet 
applicable, the approach taken by the Department allows stakeholders 
interested in changes to the Final Rule a final opportunity to make 
their case. It also avoids potential unnecessary disruption of the 
disability insurance market and frictional costs that, if the 
stakeholders provide data supporting their allegations regarding 
adverse consequences of the Final Rule on

[[Page 56563]]

access to disability insurance, may not be offset by commensurate 
benefits (as explained further below in the regulatory impact analysis 
section of this document).
    At this juncture, the Department continues to think that a 90-day 
delay will be sufficient for it to complete the comment solicitation 
process, perform a reexamination of the information and data submitted, 
and take appropriate next steps. It is premature, in the Department's 
view, to consider a delay of longer than 90 days pending receipt of 
reliable data and information that reasonably supports the commenters' 
assertions that the Final Rule will lead to unwarranted cost increases 
and related diminution in disability coverage benefits. As discussed in 
the preamble to the NPRM, various stakeholders made a commitment to 
provide such data and information to the Department. There is little in 
the public record to date to support a further delay of the Final Rule 
or subsequent substantive changes. Thus, without data and information 
that provides sufficient empirical support for the assertions of the 
commenters and stakeholders seeking a rescission or revision of the 
Final Rule, it is not possible for the Department to conduct a 
meaningful reexamination or articulate a reasoned basis for further 
delaying the procedural protections for disability benefit claimants 
provided by the Final Rule. If the Department receives such supporting 
data and information, the Department will provide interested 
stakeholders with a reasonable opportunity for notice and comment on 
that data and information. Only at that point would the Department be 
in a position to seriously consider any further delay of some or all of 
the requirements of the Final Rule beyond April 1, 2018. Delaying the 
applicability date of the Final Rule beyond the proposed 90-day delay 
period is, in the Department's view, unwarranted at this point in time.
    Likewise, the Department declines to extend the 60-day comment 
period for submitting data and information. As already noted, the 
proposal established this 60-day deadline (December 11, 2017) for 
submitting data and information germane to the examination of the 
merits of rescinding, modifying, or retaining the Final Rule. Many 
commenters who support a delay asserted that 60 days is an insufficient 
period of time for them to provide the data needed to support their 
claims of increased costs and litigation and reduced access to 
coverage. One reason offered in support of extending this deadline is 
that it is an unprecedented undertaking for disability carriers to work 
together to compile data to analyze the impact of rule on anticipated 
but unknowable consumer behavior.\16\ Another reason offered is that 
data on the disability market, competitive landscape, and employer 
responses to pricing and new administrative requirements are difficult 
if not impossible to collect, especially because some plan rates are 
guaranteed for multiple years.\17\ An additional reason offered is that 
for many plans and service providers fall open enrollment season will 
interfere with many commenters' ability to gather and analyze the 
information requested.\18\ Those seeking an extension of time to submit 
data generally requested an additional 60 days (totaling 120 days).
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    \16\ Comment Letter #96 (Cigna Corporation).
    \17\ Id.
    \18\ Comment Letter #97 (National Business Group on Health).
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    The Department is not persuaded by these comments. The commenters 
and stakeholders who are arguing for a rescission or revision of the 
Final Rule made representations, both before the NPRM and again during 
the NPRM comment period, of unwarranted cost increases and related 
diminution in disability benefit coverage. Presumably, the commenters 
and stakeholders had a factual basis for making these representations 
and assertions to the government at the time they made them. 
Accordingly, the Department believes it is reasonable to expect those 
stakeholders to provide reasonably convincing factual support for their 
representations within a 60-day period. Also, on balance, the 
Department believes more harm than good would be caused by granting an 
extension of the 60-day comment period. Primarily this is because 
extending the 60-day comment period necessarily would require a 
corresponding delay of the 90-day applicability date, an outcome 
already rejected by the Department, above, as unwarranted at least at 
this point. While the Department takes note of the potential complexity 
involved in collecting relevant data and information, and recognizes 
that time and care is needed in such matters, the Department notes that 
not all insurance industry commenters requested an extension of the 60-
day comment period. A major insurance trade association representing 
approximately 290 member insurance companies, for example, commented 
that it will respond with pertinent data and comments by December 11, 
2017.\19\ In light of the impact on claimants of further delaying the 
applicability of the Final Rule, and the fact that the overall 
rulemaking project has been ongoing for many years, and the fact that 
parties have previously indicated the process for collecting this data 
and information is well underway, the Department believes that a 60-day 
period to provide reliable data and information is sufficient.
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    \19\ See Comment Letter #98 (American Council of Life Insurers).
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    Nor does the Department agree with the commenters that assert 
violations of the APA with respect to the rulemaking process for the 
delay. The NPRM was published in the Federal Register and the public 
was given 15 days to comment on the proposed delay and 60 days to 
comment and provide data on matters germane to the examination of the 
merits of rescinding, modifying or retaining the Final Rule. Although 
the Department limited the comment period on the proposed delay to 15 
days, the delay issue is straightforward and the Department, in fact, 
received 110 comment letters on the issue. For complete transparency, 
all comments were, and continue to be, posted on the Department's Web 
site promptly after receipt. In addition, other written information 
(e.g., letters, emails, etc.) relied upon by the Department to issue 
the NPRM were identified (by name of sender and date) and as explained 
in the preamble to the NPRM, placed on file with EBSA, and subsequently 
posted on the Department's Web site for public access. The primary 
rationale for the 90-day delay--to solicit data and information and 
reexamine the decisions and impact of the Final Rule in light of newly 
received data and information, with the objective of ensuring full and 
fair reviews of disability claims while not imposing unnecessary costs 
and adverse consequences--was clearly articulated in the NPRM for 
public consideration and response and is repeated here as the primary 
basis for this final rule. Further, many commenters were concerned that 
they would not have an opportunity to review or respond to information 
submitted under the 60-day deadline in advance of the Department taking 
further action. The Department does not intend to take further 
regulatory action, including rescinding, modifying, or further delaying 
the Final Rule, without first affording the public another opportunity 
to review and comment on the data and information received under the 
60-day comment period ending on December 11, 2017.

C. Regulatory Impact Analysis

    The Department expects that the extension of the applicability date 
of the

[[Page 56564]]

Final Rule will produce benefits that justify associated costs. The 
Department requested data from stakeholders that provides evidence to 
support their assertions that the Final Rule will increase disability 
benefit plan costs and cause a rise in litigation, thereby impairing 
workers' access to disability insurance protections, and that the 
Department's regulatory impact analysis for the Final Rule was 
insufficient. The deadline for the Department to receive such data and 
information is December 11, 2017. Delaying the applicability date will 
provide the Department with time to carefully consider the data and 
information as part of its reexamination of the rule to determine 
whether there are reasonable and feasible alternatives that will allow 
the Department to meet its objective of ensuring the disability plan 
claimants receive a full and fair review of their disability benefit 
plans without imposing unnecessary costs and adverse consequences on 
plans.
    Delaying the applicability date also will avert the possibility of 
a costly and disorderly transition if the Department subsequently 
changes the regulatory requirements as a result of its reexamination of 
the rule. Similarly, it could avert the possibility of unnecessary 
costs to consumers as a result of an unnecessarily confusing or 
disruptive transition if the Final Rule, for example, were to become 
applicable and then subsequently changed. The Department's objective is 
to complete its review of the Final Rule in conformance with E.O. 
13777, analyze data and comments received in response to the proposed 
delay, determine whether future changes to the Final Rule are 
necessary, and propose and finalize any changes to the rule. If the 
Department revises or repeals some aspects of the rule in the future, 
the delay will allow affected firms to avoid incurring significant 
implementation costs now which later might turn out to be unnecessary, 
as well as to avoid unnecessary confusion to claimants from changing 
standards (should they change).

1. Executive Order 12866 Statement

    This 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 extension, and the Office 
of Management and Budget (``OMB'') has reviewed and approved the 
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. The 90-day delay of the applicability date 
would delay these estimated benefits and costs by 90 days.
    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 Final Rule:
     Some participants would receive payment for benefits they 
were entitled to that were improperly denied by the plan;
     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;
     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) Additional information to claimants in 
the appeals process ($14.5 million annually); and (2) information in a 
non-English language ($1.3 million annually).
    Commenters representing employers, plans, insurance carriers, and 
plan service providers 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, these commenters 
assert that among other things: (1) Requiring benefit denial notices to 
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 claimants are deemed to 
have exhausted the administrative remedies available 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 to the 
detriment of plan participants; 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, lead to higher costs, and have an adverse impact on plan 
participants. They 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.
    Other commenters on the 90-day proposed delay asserted that claims 
that the Final Rule would increase premiums 5 percent to 9 percent were 
excessive, and another commenter said that disability benefit plans 
with which it is associated had not experienced any cost increase due 
to the Final Rule. Commenters also asserted that an increase in 
litigation would be the result, not of excessive litigation, but of 
valid challenges to wrongly denied claims as the result of fairer 
claims processes that are implemented in response to the requirements 
of the Final Rule.
    During the 90-day delay, the Department will reassess the impacts 
of the Final Rule. To ensure a robust assessment, the Department will 
closely analyze and utilize the information and data received in 
response to the Department's NPRM to help appropriately 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 existing provisions of the Final Rule take effect. As the 
Department stated in the proposed rule, if any data submitted by 
stakeholders is not publicly available, the Department will 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. This will help ensure 
that the Department reaches an optimal outcome and that full 
transparency is provided to the public.

2. Alternatives Considered

    While the Department considered several alternatives, the 
Department's chosen alternative in this final rule is likely to yield 
the most desirable

[[Page 56565]]

outcome including avoidance of market disruptions. In weighing 
different alternatives, the Department's objective was to avoid 
unnecessary confusion and uncertainty in the disability claims market 
and avoid unnecessary costs and adverse consequences, such as reduced 
access to disability insurance for America's workers and retirees.
    The Department considered having certain provisions of the Final 
Rule go into effect on January 1, 2018, while delaying others. The 
Department, however, ultimately decided not to adopt this approach 
because it has not yet received sufficient provision-specific data from 
commenters with respect to any aspect of the Final Rule, which would 
enable the Department to single out particular provisions for special 
treatment. The Department considered extending the delay by more than 
90 days, but as discussed in the response to public comments above, it 
is premature, in the Department's view, even to consider a delay of 
longer than 90 days pending receipt of reliable data and information 
supporting the commenters' assertions that the Final Rule will lead to 
unwarranted cost increases and related diminution in disability 
coverage benefits. The Department also considered not extending the 
applicability date, which would have meant that the rule would become 
applicable on January 1, 2018. The Department rejected this 
alternative, because it would not provide sufficient time for the 
Department to receive and review data submitted in response to the 
request in the proposal, complete its ongoing review of the rule, and 
propose and finalize any changes to the rule. Moreover, absent the 
extended applicability date, disability plans would feel compelled to 
come into full compliance with the rule despite the possibility that 
the Department might identify and adopt more efficient alternatives. 
This could lead to unnecessary compliance costs to industry that are 
also passed on to consumers and market disruptions that could reduce 
consumer access to these products.

3. 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 rule delays 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 a 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 rule 
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.

4. 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 
final regulatory flexibility analysis (FRFA) of the 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 this final 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.

5. Congressional Review Act

    The final 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, upon publication, will be transmitted 
to Congress and the Comptroller General for review.

6. 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 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 final

[[Page 56566]]

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

7. 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 final rule does not have federalism implications because it 
merely delays the applicability date of the rule. Therefore, the final 
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.

8. 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 E.O. 
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 E.O. 
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 final rule is considered an E.O. 13771 deregulatory 
action. Details on the estimated cost savings can be found in the 
rule's economic analysis. The action is deregulatory as it merely 
delays the effective date, hence stakeholders do not have to comply 
with the regulation until April 1, 2018.

List of Subjects in 29 CFR Part 2560

    Claims, Employee benefit plans.

    For the reasons stated above, the Department amends 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 22nd day of November 2017.
Jeanne Klinefelter Wilson,
Acting Assistant Secretary, Employee Benefits Security Administration, 
Department of Labor.
[FR Doc. 2017-25729 Filed 11-24-17; 11:15 am]
 BILLING CODE 4510-29-P