What is a discretionary clause?
A single sentence in your plan document that decides whether a court reviews your denial fresh or only for reasonableness.
A discretionary clause is language in a plan document giving the plan administrator or claims fiduciary the authority to interpret plan terms and decide eligibility for benefits. Under Firestone Tire & Rubber Co. v. Bruch, that single clause is what shifts a court's review of your denial from deciding the claim fresh (de novo) to only checking whether the administrator's decision was reasonable, a much more deferential and claimant-unfriendly standard. See standard of review: de novo vs. arbitrary and capricious for what that difference means in practice.
The Department of Labor's own 2016 disability-claims rulemaking record notes that commenters specifically raised "the validity of discretionary clauses in plans that are used as a basis for seeking a deferential 'arbitrary or capricious' standard for court review of benefit denials" as a contested issue, which tells you this is a real, actively disputed feature of ERISA practice, not a settled technicality.
Where to look for it
Look in your plan document or Summary Plan Description for language naming who has "authority to interpret," "discretionary authority," "final and conclusive" decision-making power, or similar phrasing, usually in a section describing the plan administrator's or claims fiduciary's powers. If you cannot find or understand this language, an attorney who handles ERISA LTD appeals can identify it quickly from your plan document.
Does your state restrict discretionary clauses?
Separately from the ERISA case-law standard above, some states have moved to restrict discretionary clauses through their own insurance codes. The National Association of Insurance Commissioners (NAIC) keeps its own state-by-state chart for its Prohibition on the Use of Discretionary Clauses Model Act, current as of that chart's Fall 2024 edition. Several jurisdictions, among them Arkansas, Illinois, Maryland, Puerto Rico, and Vermont, have adopted the model act itself; several more, among them California, New York, Texas, and Washington, have a related statute, regulation, or bulletin addressing discretionary clauses without adopting the current model act; NAIC's chart also lists further states across those columns, and marks a third group as having no current activity, so find your own state's row before assuming either way. NAIC's own chart carries its own caution, that it "does not constitute a formal legal opinion," and tells readers to consult state law directly, so treat it as a starting point for your own state, not a verdict on your plan.
Whether any of that reaches your plan turns on how your LTD benefit is funded, not simply on where you live. ERISA limits how far state insurance law can reach into an employee benefit plan: a plan is not "deemed to be an insurance company ... for purposes of any law of any State purporting to regulate insurance companies," the provision commonly called the deemer clause. In practice, a state discretionary-clause law can reach a plan whose LTD benefit is funded through an insurance policy, but it generally does not reach a self-funded plan. Your plan document or Summary Plan Description, not this list, is what actually tells you which kind of plan you have.
Sources
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989) for the standard-of-review holding. DOL's 2016 disability-claims rulemaking record, where commenters raised discretionary clauses as a live, contested issue. NAIC's state page for the Prohibition on the Use of Discretionary Clauses Model Act, current edition Fall 2024, checked 2026-09-17. 29 U.S.C. ยง 1144(b)(2), the ERISA deemer clause, checked 2026-09-17.