Whither Discretionary Authority?

The New York State Insurance Department (NYSID) recently released a draft of Regulation 184 - Prohibition of Discretionary Clauses.

Here is the link http://www.ins.state.ny.us/r_outreach/r_out_discret_clause.pdf

NY took some initial halting steps on discretionary authority in 2006, with the release of Circular Letter 14 proposing to ban discretionary authority provisions in insurance policies, but it has been very surprising that NY had not jumped back into the discretionary authority mosh pit since then. Perhaps emboldened by similar recent stirrings in other jumbo states (TX and CA), it appears NY is now moving ahead with promulgating such a regulation. NY has asked that comments on the draft it is now proposing be submitted by May 5th. As the list of states acting on the topic of discretionary authority grows, it seems only a matter of time before this issue bubbles up to the Supreme Court for a decision that will have a profound impact on employee benefit plans and ERISA.