Administrators of ERISA plans, especially those attempting to distinguish SSA findings irreconcilable with their own conclusions, should watch this issue carefully.
Senator Tom Coburn (R-Neb.), the ranking Republican on the Senate Committee on Homeland Security and Governmental Affairs, recently issued a report outlining what he calls “an enormous and urgent problem that should demand our immediate attention.” The allegations caught the attention of CBS’s 60 Minutes, which ran a piece on Cobrun’s report the day before it was made public.
According to the report, Social Security Disability claims have risen 20% over the past six years, with a budget of $135 billion. This increase means that the federal government spends more on disability claims than it does on the Department of Homeland Security, the Justice Department, and the Labor Department combined. Indeed, in 2012, the Social Security Administration paid billions of dollars in attorneys’ fees to lawyers representing successful claimants.
Coburn’s investigation focused on the Conn Law Firm based in Eastern Kentucky and the firm’s relationship with David B. Daugherty, an administrative law judge in the Social Security Administration’s regional Huntington, West Virginia Office. According to the report, Daugherty awarded more than $2.5 billion in benefits between 2005 and 2011. Coburn concluded in his investigation that Daugherty would inform the firm as to the type of medical evidence he would need to see to find a claimant disabled. The report also stated that the doctors solicited by the firm would, from time to time, sign residual functional capacity forms that had been completed by the firm, and the firm would use identical evidence for different claimants. This alleged scheme is reported to have resulted in millions for the firm and doctors, and about $100,000 in alleged payments to Daugherty.
What does all this mean for ERISA plan administrators? ERISA plan participants seeking long-term disability benefits often cite a favorable Social Security award as support for their claims. These new allegations suggest possible additional bases to distinguish these awards — particularly if they involve a claim handled by the Conn Law Firm or decided by Judge Daugherty.
While the Coburn report and 60 Minutes story are at this point just allegations, they coincide with a documented rise in Social Security disability claims and an increase in the volume of LTD claims under employer plans. The Coburn report suggests that claimants are using Social Security disability benefits to bridge the gap to retirement. ERISA plan claims likely are no different. The Coburn report is another reason why ERISA plan administrators should take a close look at any Social Security award presented in support of a claim for LTD or other benefits.