Summary Plan Description: Paper or Electronic?

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Employers who sponsor ERISA benefits that require a plan document and summary plan description (SPD) often ask:

Do I really need to provide paper copies of SPDs to employees?

Can I just email employees SPDs or post the information on our intranet site?

Department of Labor (DOL) regulations describe when an employer can distribute benefit information including the Summary Plan Description (SPD), Summary of Annual Report (SAR), Summary of Benefits and Coverage (SBC), and other required benefit notices (i.e. Medicare Part D, Women’s Heath and Cancer Rights Act, Privacy Notices, etc.) electronically to plan participants.

DOL Regulation §2520.104b-1(c) provides a “safe harbor” which gives employers a guideline for electronic distribution to the following types of plan participants:

  • Participants with ready access to the employer’s computer system (which does not include mere access to a central computer or kiosk at the job site);
  • Participants whose computer access is in the same area where they are expected to perform job duties (which can include the home, in the case of participants who work from home); and
  • Participants who regularly access a computer as an integral part of their job duties.

Under the safe harbor, employers may still provide benefit plan documents electronically to participants who do not meet the above criteria if:

  • The participants provide an e-mail address where the documents can be delivered; and
  • The participants complete a consent form electronically, agreeing to receive the documents digitally.
    • The consent must occur after they receive a statement that, among other things, explains the digital delivery system and what hardware or software is required to use it.
    • Consent must be provided again if system hardware or software requirements change.

The DOL safe harbor does not limit electronic disclosure to any particular types of electronic media. Examples of acceptable delivery methods include: delivery by email, attachment to email, magnetic disk, CD-ROM, DVD and posting the documents to the employer’s website or intranet.

The safe harbor also requires that:

  • Employers take “appropriate and necessary measures” to ensure actual receipt of the transmitted information (e.g. read-receipt or notification of undelivered email).
  • Participants receive notice prior to electronic distribution stating that the documents will be delivered digitally.
    • Courts cases* have clarified that employers must also notify plan participants when documents have been posted on the website or intranet. Merely posting the plan documents without providing notice to participants of the posting does not satisfy the DOL’s electronic delivery rules.
  • Employers provide an explanation of why the information is important to participants.
  • Employers provide notice to participants that they have the right to request and obtain a paper version of the plan documents at no charge.

What happens if an employer does not follow the safe harbor rules on electronic distribution?

Fines and penalties can be imposed and when multiplied by the number of employees, can be quite costly.

The following is a court case that outlines why employers should be mindful of the DOL’s rules on electronic distribution.

*In Thomas v. CIGNA Group Ins., 2015 WL 893534 (E.D.N.Y. 2015); Rosenberg v. CNA Fin. Corp., 41 EBC 2902 (N.D. Ill. 2007) the court found in favor of the employee’s beneficiary that denial of life insurance benefits was arbitrary and capricious because there was no evidence that the plan administrator (i.e., employer) had provided the participant with an SPD and that the insurer, in denying benefits, had never considered whether the SPD distribution method was appropriate.

The employer's posting of an amendment on intranet was inadequate notice because there was no evidence showing that the participant received notice that SPDs had been posted to the intranet or that SPDs had been furnished to her in any other manner. The DOL safe harbor specifies that a written or electronic notice must be provided to participants each time a new electronic SPD is posted.

The Bottom Line: Failure to follow the DOL electronic distribution rules can result in employer penalties.  Employers who want to distribute benefit plan information electronically to plan participants can do so but should carefully review and follow the DOL safe harbor rules for electronic delivery described above.



Categories: Benefits in General, Compliance | Tags: SPD , DOL , Summary Plan Description , Department of Labor , Electronic Distribution , Safe Harbor , Thomas v. CIGNA Group Ins , SAR , SBC , Employee Notices | Return