Consumer Appeal Rights Enforcement Act
- Sponsor
- Rep. Lee, Summer L. [D-PA-12]
- Committees
- Education and Workforce Committee (primary)
- Last action
- Jul 16, 2026
Bottom line
The Consumer Appeal Rights Enforcement Act aims to strengthen consumer protections for participants in ERISA-covered plans by imposing substantial financial penalties on entities that fail to adhere to established claims and appeals procedures, and by expanding the Secretary of Labor's enforcement powers.
What it actually does
This bill amends the Employee Retirement Income Security Act of 1974 (ERISA) to significantly increase enforcement mechanisms and penalties for violations of claims and appeals procedures by employee benefit plans. It introduces substantial civil penalties for both "global" failures in claims procedures or external review processes and "individual" failures to provide notifications, respond to claims, or provide requested information in a timely manner. It also repeals a section of ERISA related to the Secretary of Labor's direct enforcement authority for certain provisions, thereby expanding that authority.
Proponents argue
Supporters argue that the bill will enhance consumer protections by ensuring that employee benefit plans, particularly health plans, adhere strictly to claims and appeals procedures. They contend that current enforcement mechanisms are insufficient, leading to delays, denials, and lack of transparency for participants and beneficiaries. The new penalties would incentivize compliance, making it easier for individuals to receive timely decisions and access external review when needed, thereby upholding the original intent of ERISA to protect plan participants.
Opponents contend
Critics might argue that the proposed penalties are excessive and could lead to an overly litigious environment, increasing administrative burdens and costs for plan administrators and fiduciaries. They may contend that the existing regulatory framework provides adequate consumer protections and that these new penalties could inadvertently lead to higher costs for employers offering plans, potentially reducing benefits or discouraging plan sponsorship. Concerns could also be raised about the potential for frivolous complaints leading to disproportionate penalties.
The bill is short and relatively straightforward for those familiar with ERISA, allowing for a quick assessment of its core changes.
Section 2(a), amending ERISA Section 502(a)(5) and (6)
Expanding Equitable Relief and Secretary's Penalty Collection Authority
This provision amends ERISA to allow for equitable relief not only for violations of ERISA itself but also for violations of the terms of the plan. It also clarifies and expands the Secretary of Labor's authority to collect civil penalties under the title. This means participants can seek remedies if a plan violates its own rules, and the Secretary has clearer power to enforce penalties.
Supporters argue
Supporters argue this clarification strengthens participant rights by allowing legal action when plans fail to follow their own stated terms, closing a potential loophole. It also streamlines the Secretary's ability to enforce penalties, improving overall compliance.
Critics contend
No specific opposition is typically raised against clarifying equitable relief or the Secretary's collection authority, as these are generally seen as administrative improvements, though some might view it as a step towards increased regulatory burden.
Tradeoffs
Balances the need for clear enforcement authority with potential concerns about increased litigation or regulatory reach.
Section 2(b), adding new ERISA Section 502(c)(14)
Establishment of Global and Individual Civil Penalties for Claims and Appeals Violations
This section introduces significant civil penalties for two types of violations: "global violations" (a plan failing to have compliant claims or external review procedures in writing or operation) and "individual violations" (failing to provide required notifications, respond to claims/appeals/requests in a timely manner, or provide requested information). Global violations can incur penalties of up to $1,000 per participant/beneficiary per year, trebled if not corrected within 90 days. Individual violations can incur penalties of up to $1,000 per day per violation, trebled for uncorrected violations within specific timeframes (e.g., 3 days for urgent care claims). A "pattern or practice" of individual violations also triggers specific penalties.
Section 2(c), adding new ERISA Section 502(g)(3)
Judicial Imposition of Penalties and Coordination with Secretary's Assessments
This provision grants courts the authority to impose the same civil penalties described in Section 502(c)(14) against defendants (other than plans) in actions brought by participants for violations of claims or external review procedures. It also prevents double jeopardy by stating that neither the Secretary nor a court can assess penalties for the same violation if the other has already done so.
Section 3(a), repealing ERISA Section 502(b)(3)
Repeal of Secretary's Direct Enforcement Authority for Certain Provisions
This section repeals ERISA Section 502(b)(3), which currently states that the Secretary of Labor may not initiate an action under subsection (a)(2) or (a)(5) with respect to a violation of part 2 (participation and vesting) or part 3 (funding) of ERISA. The repeal means the Secretary would be able to initiate such actions, thereby expanding the Department of Labor's direct enforcement authority.
The bill explicitly references specific sections of the Code of Federal Regulations (29 CFR 2560.503-1 for claims procedures and 29 CFR 2590.715-2719 for external review processes) as the standards for compliance.
Section 2(b), ERISA Section 502(c)(14)(A)(ii)(I)(bb), (A)(ii)(II)(bb), (A)(iii), (B)(iv)(III)
Why it matters:This is standard legislative practice to incorporate existing regulatory frameworks without reprinting them in full.
Case for: Supporters would argue that referencing existing, well-understood regulations provides clarity and consistency, ensuring that plans are held to established standards without creating new, potentially conflicting rules.
Case against: Critics might argue that relying on external regulations makes the bill less transparent for a casual reader, requiring additional research to grasp the full implications of the compliance requirements.
Estimated impact: Ensures that the new penalties are tied to specific, detailed regulatory requirements that plans are already expected to follow, reinforcing existing standards.
The bill specifies that civil penalties for global violations can be trebled if not corrected within 90 days of notice, and individual violation penalties can be trebled if not corrected within 3 to 90 days, depending on the type of plan and urgency of the claim.
Section 2(b), ERISA Section 502(c)(14)(B)(ii) and (iv)
Why it matters:This is a standard legislative technique to add a strong deterrent for continued non-compliance, often placed within the penalty structure.
Case for: Proponents would argue that trebled penalties are a necessary and powerful incentive for plans to promptly correct violations, especially for urgent care claims where delays can have severe consequences for participants.
Case against: Opponents might argue that trebled penalties are disproportionately harsh, particularly for complex issues that may take longer than the specified correction periods to resolve, potentially leading to excessive financial burdens.
Estimated impact: Significantly increases the financial risk for plans that are slow to address identified compliance issues, potentially leading to much higher penalty assessments.
This section repeals a provision that previously limited the Secretary of Labor's ability to initiate actions concerning ERISA's participation, vesting, and funding requirements. Its repeal effectively grants the Secretary direct enforcement authority over these critical areas.
Section 3(a), repealing ERISA Section 502(b)(3)
Why it matters:This could be seen as a technical cleanup or a strategic placement to avoid drawing immediate attention to a significant expansion of federal enforcement power.
Case for: Supporters would argue that this repeal is essential for comprehensive oversight, allowing the Secretary to directly protect fundamental participant rights related to benefit eligibility and plan solvency, which are core to ERISA's mission.
Case against: Critics might contend that this quietly expands federal power into areas previously managed differently, potentially leading to increased regulatory intervention and compliance costs for plans without sufficient public debate.
Estimated impact: Broadens the Department of Labor's enforcement scope significantly, allowing direct intervention in areas crucial for long-term plan stability and participant benefit security.