The ERISA statute provides an exemption for certain categories of employers, including church plans and government plans. Employers that are exempt from ERISA generally provide disability plans through insurers in the same way that nonexempt employers do. As a result, the plans offered by exempt employers are typically identical to ERISA governed plans and are administered in the same way. The application process and the appeal process are therefore similar to the one described for the ERISA application process. However, since exempt plans are not subject to ERISA, they are treated under the law like any other contract. Although claimants should follow the procedures provided in the plan, their recourse when they are denied benefits and have complied with the appeal procedures in the plan is to file a lawsuit for breach of contract and other available remedies (such as consumer protections laws) in the appropriate state court. They can then proceed to request documents, send interrogatories for the administrator to answer, take depositions and ultimately have a trial. In other words, they get to prove their case in a court of law in the same way that virtually every other legal conflict between private parties is resolved in our legal system.
Administrators handling exempt claims are so used to having the law in their favor when they are administering ERISA governed plans that they often treat exempt claims in the same way. But lawyers for exempt claimants have the whole panoply of legal tools at their disposal to pursue the claim on behalf of their clients, often getting to expose questionable decisions and practices of the administrators along the way. If you are a participant in an exempt plan, you may experience the same frustration in dealing with the plan administrator, but you will have much more leverage if you have to go to court.