Electronic Distribution Requirements Under ERISA
Most employers like to electronically distribute their required plan disclosure materials, such as the Summary Plan Description (SPD), initial COBRA notice, adverse benefit determinations, etc. They typically choose this delivery option because they are considering that it would eliminate, or significantly cut down, the amount an employer spends in print and postage fees. However, most employers fail to recognize that there is a difference between "distributing" the SPD and merely making it available on the intranet/Internet.
In 2002, the Department of Labor (DOL) issued regulations to assist employers in complying with their distribution requirements under ERISA. The regulations provide that an employer may distribute documents electronically, provided the following requirements are met:
First, steps must be taken to ensure that the system furnishing the documents will result in actual receipt of the transmitted information and that the system will protect the confidentiality of personal information relating to the individual's accounts and benefits.
Second, the document must be prepared and furnished in a manner that is consistent with the style, format and content requirements applicable to the particular document.
Third, notice must be provided to each plan participant either electronically or in writing that states (1) the SPD is being distributed electronically, (2) the significance of the document being distributed if it is not reasonably evident and (3) that the plan participant has the right to request and obtain a paper version of the document.
Fourth, employees must have the ability to access electronic data successfully at any location where they are reasonably expected to perform their duties (e.g., at home for telecommuters); and they must have integral access to the company's intranet as a part of their job duties. If these requirements are not met, then the employee may still receive the SPD electronically, provided they have affirmatively consented to the electronic distribution as discussed below.
Finally, "affirmative consent" must be obtained from any plan participants (i.e., retirees, COBRA participants, employees who do not meet the requirements above) agreeing to receive the SPD electronically and a valid email address to which the SPD can be sent must be provided. Consent will be considered valid if a clear and conspicuous statement (either electronically or by hard copy) has been provided to the plan participant containing the following elements:
- Identification of the type of documents to which the consent applies;
- A statement advising the plan participant that the consent can be withdrawn at any time without charge;
- Procedures for withdrawing consent and how plan participants should inform the employer of a change in their email address;
- A statement identifying the right to request and obtain a paper version free of charge; and Electronic Distribution Requirements Under ERISA
- Any description of any hardware/software requirements that may be needed to access and retain the documents.
- The consent must be provided and obtained in a manner that reasonably demonstrates the plan participant's electronic "competence." If a change is made in hardware/software that could materially impact actual receipt of the SPD, then new consents advising plan participants of the this change and reminding them that their consent can be withdrawn at any time without charge or penalty must be provided.
The DOL is currently reviewing ways to expand the 2002 regulations taking into account current technology and best practices while still protecting the rights and interests of plan participants. However, additional information has not been released. So, for now, employers should take a few moments to carefully examine whether or not electronic distribution is the best option. If they choose electronic delivery, the employers need to ensure the necessary steps being taken to ensure full compliance.
Compliance Quarterly is being provided as an informational tool. It is recommended that plans consult with their own experts or counsel to review all applicable federal and state legal requirements that may apply to their group health plan. By providing this publication and any attachments, Meritain Health is not exercising discretionary authority over the plan and is not assuming a plan fiduciary role, nor is Meritain Health providing legal advice.