ERISA Advisory Council to Study QDIAs and Health Insurance Appeals Processes

The ERISA Advisory Council voted during a meeting Wednesday to focus its attention on issues related to welfare plan claims and appeals and qualified default investment alternatives. The council will study these issues and make recommendations to the Employee Benefit Security Administration later this year as per its mandate from the Department of Labor.

The ERISA Advisory Council is a 15-member advisory panel appointed by the Secretary of Labor in staggered three-year terms. Different members are appointed to represent employers, employees, the public at large, and various industries related to employee benefits. The council’s meeting on what topics to cover and the vote were open to the public.

QDIAs

QDIAs received a unanimous vote for further study by the council. As a default investment selected by a plan for their participants, the QDIA is of increasing importance due to the proliferation of automatic enrollment in defined contribution plans.

Several proposals concerning QDIAs were consolidated during the meeting into one category. Specifically, the QDIA study group will explore the use and deployment of QDIAs, use of lifetime income options as QDIAs, and if there should be rules for QDIAs concerning liquidity.

The Lifetime Income for Employees Act was proposed in the House in June and would permit sponsors to use an annuity as a QDIA, provided no more than 50% of the participant’s contributions are invested in it, a nod to liquidity concerns around the insurance-backed product. Annuities are currently allowed to be used as QDIAs and the legislation is intended to relax requirements that funds in a QDIA must be available for withdrawal at least once every three months.

The bill has not yet advanced in the House.

Welfare Plan Appeals

The second and final topic for study is welfare claims and appeals, which nine of 15 members voted to study. This group will look at how to make welfare plans claims and appeals easier to access for participants.

Members noted that many plan participants do not know how to appeal a health insurance claim denial, or even that they can. Many participants are unjustly denied health or other welfare coverage and are unfamiliar with the processes to appeal and receive a fair review of their claim, members in favor of the study topic argued.

Other Topics

The council considered other topics that did not make the final cut. They included: behavioral economics as applied to benefit plans and why more plans aren’t adopting automatic features; retirement plan leakage; addressing conflicts of interest among boards of trustees and auditors; and appraisals of shares in Employee Stock Ownership Plans.

 Members also considered a review of pension death audit service providers in light of the Central States and Special Financial Assistance controversy in which the Central States pension fund received $127 million in SFA funds for 3,479 dead participants. This error occurred because the plan did not have access to the Social Security death master file and the money was repaid. Since death audit providers also lack access to the DMF, there was concern among some members about how an auditor can certify a death audit at all.

The council did not set a deadline for their study groups to reconvene or for their next meeting. The 15-member council will divide into two sub-groups, one to study each topic.