Plan Document Appendix
Introduction
As an Appendix to the plan document and SPD, certain clarifications should be made which may have a direct impact on the plan’s benefits and administration. Such clarifications cover these topics:
For some of these clarifications, Plan Options as set forth in the Schedule of Benefits are contemplated.
Plan
Document – Schedule of Benefits
The number of months applicable to the Recovery of Benefits shall not exceed _____.
The following items will not be deemed to be income for purposes of determining benefits:
Certain problematic or controversial aspects of the definition of disability are to be treated as follows:
1. Pain (will) (will not be) treated as a cause of disability without a definite diagnosis of a disease or impairment. Pain, as a subjective factor (will) (will not) be considered when determining disability.
2. Destructive personal habits (addition to painkillers, e.g. (will) (will not) be deemed to be a disability.
Discretionary Authority is determined by plan governance and funding which are as follows: ____________________
___________________________
___________________________
Claims Fiduciary is ___________________
___________________________________
Conflicted-Interests is [significant] [insignificant] [non-existent].
Medical Disorders in the absence of any specific disease shall include the following [pain] [substance abuse] [non-clinical depression] [behavior disorders].
A physical disorder, followed shortly by a mental disorder, or vice versa, shall be deemed to be [a single] [separate] disability.
Offsets to Benefits will be treated as follows:
Physicians’ Opinions will be treated by the plan by the [traditional] [explicit] method.
The plan (is) (is not) ERISA exempt. The plan fiduciary which has the sole authority to adjudicate claims is _________________________.
The Plan sets forth certain administrative remedies which, if not followed, will result in the denial of a claim. The Plan will follow these rules when applying this provision:
1. Failure to properly and timely file a claim and failure to exhaust plan remedies are the same.
2. Litigation must not be began without first exhausting plan remedies
3. An administrative and procedural failure occurs when Plan does not provide claim forms, does not respond with a timely and up-or-down claims decision; does not abide by its own rules; and does not provide a timely and proper claim denial letter.
4. The Plan should not anticipate or assume that the Participant will fail to properly or timely respond to any administrative requirement; or vise versa.
5. Filing a lawsuit in violations of the Plan’s appeals procedures will result in the Participant’s forfeiture of such right at a later date.
6. Not having all of the facts is a good and sufficient reason for non-compliance with the Plans appeals procedure which is available to both the Plan and the Participant.
7. Participant, not such Participant’s agent, representative, attorney, etc., has the responsibility to follow the Plans appeals procedures.
8. In applying Plan appeals procedures, the Participant and not the Plan has the duty to show proof of disability.
9. The Plan’s time period for filing a lawsuit may be shorter than the state’s time period applicable to commercial contracts. The tolling of such period begins on the date proof of loss was requested (on an initial claim) or the day of last claim payment (on a claim denial).
10. Privacy of medical information infractions is deemed to be a Plan administration failure.
Benefit
Recovery – Coverage Rescission
In the event that benefits have been incorrectly paid, such benefits shall be recomputed and corrected going back in time not to exceed the number of months set forth in the Schedule of Benefits. Such adjustment shall be made whether the Plan or the Participant is favored without regard for the reason for the error.
The Plan reserves the right to rescind coverage and recover past benefits (subject to limitation set forth in the previous paragraph) where material misrepresentation or concealment was involved.
Compensation
– Earnings Definition
When benefits are paid incorrectly because the Plan was provided incorrect compensation amounts, the Participant has a dispute with the Employer and not with the Plan.
The Schedule of Benefits sets forth what items of income will or will not be considered when determining benefits.
Definition
of Disability
Being reasonably fit by training, education or experience means the following (e.g.):
1. A gate attendant is not expected to accept a work assignment as a chemical laboratory assistant.
2. A Chemist is expected to accept a work assignment as a gate attendant.
Disability will measure both the loss of the capacity to work and the loss of income. For example, a dentist going from 10% administration and 90% chair work to the opposite is not disabled.
Certain problematic or controversial aspects of the definition of disability are specifically clarified in the Schedule of Benefits. These include:
· Pain as a cause of disability
· Destructive personal habits (addition to pain/killers).
That the Participant has or has not been deemed to be disabled for Social Security, Workers’ Compensation, state disability, or similar programs, is only one of numerous factors in the Plan’s determination of disability.
Discretionary
Authority
The Schedule of Benefits sets forth which of the following plan governance and funding methods are used and their impact on claims processing:
A. Fully Insured
The insurer shall be at risk for the entire promised plan benefits, the responsibility for the claims determination shall be as follows:
1. Insurer
is Fiduciary as Regards Total Claims Determination
The insurer has discretionary authority only over total claims determination. In other administrative functions, the insurer is a servicing agent (party in interest).
2. Insurer
is Plan Administrator
The insurer assumes all of the responsibilities of plan governance as ERISA plan administrator including the total discretionary authority over claims determination and also all other administrative functions.
B. Administrative Services Only Arrangement
The employer is the plan sponsor and plan administrator and assumes some, or all of the risk for the plan benefits. As for the sharing of the risk the, following options are available:
1. All of the Risk is assumed by the Employer.
2. Some of the Risk is assumed by the
insurer.
Where some of the risk is assumed by the Insurer, the Schedule of Benefits sets forth the manner by which the risk is split between the insurer and employer.
The insurer shall perform all of the plan’s administrative functions using as the servicing one of the following:
1.
The Insurer itself
Discretionary
authority is for:
a. Claims only
b. All plan functions
2.
Administrative Service Firm
The administrative service firm may or may not be independent of the Insurer.
a. Firm is not Independent of Insurer
Discretionary Authority is for:
i. Claims only
ii All plan functions.
b. Firm is Independent of Insurer
Discretionary
Authority is for:
i. Claims only
ii. All plan functions
iii. No plan functions.
C. Self-Funded
The employer serves as plan sponsor and assumes all of the risk of the promised benefits using the non-trusted, general asset form of funding. While stop-loss may be purchased by the employer, it is not a plan asset because the employer is the applicant, owner, payer and beneficiary thereof. The administration may be as followed.
a.
Fully Self-Administered
The employer attends to all plan function and in particular has discretionary authority over total claims determination.
b.
Third Party Administered
The third party administrator performs the employer- assigned plan functions with the following assigned discretionary authority:
i. None of the Plan Functions
Third party serves only as a perfunctory service agent.
ii. Claims Processing
Third party has discretion authority only over total claims determination becoming the claims fiduciary.
iii. All Plan Functions
Third party has discretionary authority over all plan functions being the plan administrator and plan fiduciary.
D.
Trusteed
The Schedule of Benefits sets forth which of the numerous variations with trusteed plans are to be followed:
1. Plan Sponsorship May Be
a.
Employer
Total
discretionary Authority over Claims Determinations
i. Employer
ii. Trustees
iii. Other
b.
Trust
Total
Discretionary Authority over Claims Determinations
As determined by trust document.
2. Trust Sponsorship May Be
a. Employer Only
b.
Multi-Employer
i. Voluntary Employees Beneficiary Association
ii. Multiple Employer Welfare Arrangement
3.
Tax Status of Trust May Be
a. Qualified (see IRC §501 (c)(a))
b. Non-qualified (fully trouble).
Unless otherwise indicated, any stop-loss agreements will have the trust as the applicant, owner, payer and beneficiary.
The Schedule of Benefits sets forth the name of the claims fiduciary for Firestone v. Bruch purposes.
Conflicted-Interest is deemed to be one of the following:
· Significant
· Insignificant
· Non-existent.
Mental Disorders
Unless otherwise provided, rules used in determining disability for mental disorders are as follows:
1. A mental disorder is one classed as such by the ICD medical codes even if such has a medically-proven physical origin.
2. Both a mental and physical disorder may jointly exist. In such instance, the predominating condition shall be the cause of disability.
3. The Schedule of Benefits sets forth whether the following conditions are causes of disability in the absence of any specific disease:
· Pain
· Substance abuse
· Non-clinical depression
· Behavior disorders (anxiety, e.g.).
4. A physical disorder followed shortly by a mental disorder, or vice versa shall be treated as [a single] [separate] disabilities as shown in the Schedule of Benefits.
Offsets to Benefits
Offsets to LTD benefits include the following benefits:
· Social security
· Workers’ compensation
· State disability
· Railroad retirement
· Other benefits of a similar nature
Offsets do not include earned income such as rental, investments, etc.
Offsets paid to the participant retroactively, after this Plan’s disability payments have been made [will] [will not] be recoverable by the Plan as set forth in the Schedule of Benefits.
Where the cause of disability for this Plan is for one condition and the cause of disability for an offset in another condition, the offset [will] [will not] be applied.
Where the offset benefits are replaced by a single sum settlement, the settlement shall be [annuitized] [not annuitized].
Physician’s Opinions
In General
The Schedule of Benefits sets forth whether the role of physician’s opinion in the determination of a claim shall be either by the (a) traditional or the (b) explicit method where:
a. The traditional method is essentially one of facts and circumstances using the prevailing industry practices and the Plan document wording as the sole guides.
b. The explicit method is for the Plan to set forth in detail what weights will be given by the claims fiduciary in the claims determination process to the potential array of physician’s opinions. Included on the explicit rule will be an assessment of the quality of such opinion.
The opinion of a physician is one of many factors which are used to determine the payability of a claim.
Explicit Method Described
There are four classes of physicians which should be considered:
Class Description
A Treating physician
B Consultant to Participant
1. Independent
2. Not Independent
C Consultant to Plan or vendor
1. Independent
2. Not Independent
D Government Sponsored Plans
Where opinion is available from Medicare,
Social Security, Workers’ Compensation, State Disability Plans.
These are the examples of the factors in determining the quality of the opinion of each Physician (Class D excluded):
·
Professional Expertise
Specialty board certified psychiatrist or psychologist, e.g.
·
Professional Reputation
Malpractice claims, checkered career, e.g.
The quality of opinion will be measured from 0 (low) to 10 (high).
The significance or relevance of the physician’s opinion as to the payability of the claim will be measured as follows:
1 – Least favorable to participant
2-9 – Sliding scale
10 – Most favorable to participant.
Factors which are used to measure such significance or relevance include (a) hands-on examination or review of medical records only and (b) confirming or contradictory opinions or evidence.
In assessing the appropriateness of the opinions of physicians, the claims fiduciary will follow these steps:
Step
a. A worksheet to be made part of the claims denial letter will appear as follows:
Name of Weight Assigned
Consulting Significance to Opinion by
Physician Class Quality Factor Claims
Fiduciary
b. From the analysis made in Step 2, the claims fiduciary concludes that such opinions do one of the following:
· Support claim denial
· Do not support claim denial
· Are neutral to claim denial.
c. The conclusion in Step 2, is one of many factors used to determine the payability of a claim for benefits.
Plan Eligibility Issues
Terminating Plan benefits and the Participant’s employment are two separable and distinguishable events each to be treated independently. Acceptance of a severance benefit may extinguish a Participant’s right to benefits and vice versa. Total disability may occur during a Participant’s leave of absence and be a payable benefit.
If a pay increase makes the LTD benefits contributory by the Participant, failure to make such requisite contribution will cause such Participant not to lose all such benefits for non-payment of such contribution.
Preemption by ERISA
The Schedule of Benefits sets forth whether the plan is ERISA-exempt and whether a plan fiduciary has the sole authority to adjudicate claims.
Where the Plan is ERISA-exempt, state law relief is not available to the Plan, its parties and vendors thereto.
Certain state laws are specifically preempted, e.g.:
· Bad faith claim denial
· Tortious breach of an insurance contract
· Tortious invasion of privacy (relative surveillance, e.g.)
· Effects of multiple LTD coverages be prorated
· Promissory estoppel, unjust enrichment, negligence
· Whistleblower laws.
Summary Plan Description
Where the SPD is silent as to what the plan document sets forth specifically and in writing, there will be no issue of conflict so long as the Participant did not rely detrimentally on such difference and there is not any demonstratable conflict between the two instruments.
Surveillance
The Plan may use surveillance as a means of adjudicating disability claims. Since the surveillance firm offers only facts and evidence, it does not become a plan fiduciary.