ERISA Stirrings?

The ERISA Advisory Council held hearings a couple weeks ago in Washington on “Managing Disability Risks in an Environment of Individual Responsibility.” Another hearing is slated for mid-August. The Council advises the Secretary of Labor on ERISA-related matters and is comprised of 15 appointees representing employee organizations, employers, the general public, and the insurance, corporate trust, accounting, actuarial, and investment fields.

The Council is examining the impact that the shift to Defined Contribution plans has had on access to employer-provided LTD coverage. The review is being conducted in the context of promoting conditions for a financially secure retirement for American workers, including how to protect employees’ retirement savings in periods of disability.

The broad questions that the council is reviewing and attempting to answer are:

1) What are employees offered?

2) What retirement income gaps are created during a period of disability?

3) What role can the DOL adopt to assist participants with respect to managing disability risks?

4) What role can the DOL undertake with respect to assisting employers to develop and offer effective disability benefit designs?

In regard to the last item, the Council is specifically looking at how LTD insurers adjudicate claims for persons going through the Social Security disability claim and appeal process and also “what revisions, if any, can be made to the [ERISA] claims regulations to explicitly address the application of the full and fair review standard as applied to disability plan,” including offset provisions.

This is no surprise, as regulators at the state and federal levels have had Social Security and other LTD policy offsets in their cross-hairs for the last couple years. What is not always well understood, though, is the crucial role that offsets play in keeping LTD premiums down and claimants from being over-insured relative to their normal work earnings.

It will be interesting to see if the August hearings bring more calls from consumer groups (and their allies in the plaintiff bar) for changes in the regulatory framework that governs employee benefit plans, including ERISA.