Electronic Delivery of Plan Information

E-mail and internal or external web sites are the communication tools of choice for many (if not most) Plan Sponsors and Plan Administrators. When electronically delivering documents or when setting up a web site, it’s easy to overlook the following:

Disclaimers

When a third party sets up a web site for plan participants, the web site generally contains numerous “fine print” disclaimers. It’s tedious, but important, for Plan Sponsors and Plan Administrators to review this fine print. Failure to do so can lead to unintended consequences. Plan Sponsors/Plan Administrators may, for example, encounter the following:

  • Disclaimers that protect the third party service provider who set up the web site, but not the Plan Sponsor or the Plan Administrator whose employees will be accessing the web site
  • Disclaimers implying that the Plan Sponsor/ Plan Administrator is liable for actions taken (or not taken) by participants as a result of information found (or not found) on the web site. For example, we’ve seen language similar to the following:IF YOU SUFFER DAMAGES ARISING FROM YOUR USE OF THIS SITE OR ANY SERVICES, YOU MAY SEEK RECOURSE THROUGH YOUR EMPLOYER OR BENEFIT PLAN.

HIPAA Privacy Notice

Generally, a Plan Sponsor/Plan Administrator is permitted, but not required, to rely on electronic disclosure. Regulations interpreting the privacy requirements of the Health Insurance Portability and Accountability Act (“HIPAA”) contain an exception to this general rule. These Regulations state that notices describing the privacy practices of a covered entity (e.g., an employer-sponsored health plan) that are provided to individuals receiving services from that covered entity (e.g., health plan participants) must be provided electronically under certain circumstances. Specifically, Section 164.520(c)(3) of these Regulations provides as follows:

A covered entity that maintains a web site that provides information about the covered entity’s customer services or benefits must prominently post its notice on the web site and make the notice available electronically through the web site.Summary Plan Descriptions

Plan Sponsors and Plan Administrators often ask about electronic delivery of Summary Plan Descriptions. Use of electronic delivery for this purpose is appealing because Summary Plan Descriptions can be bulky to mail, and because electronic delivery permits the Plan Sponsor/Plan Administrator to update Summary Plan Descriptions quickly and cost effectively. Department of Labor (“DOL”) Regulations provide a Safe Harbor upon which Plan Sponsors and Plan Administrators are encouraged to rely in order to show they are using measures reasonably calculated to ensure actual receipt when distributing a Summary Plan Description electronically.

The DOL electronic delivery Safe Harbor is easiest to satisfy if the intended recipient has the ability to access electronic documents at any location where he or she works, and the intended recipient’s access to the Plan Sponsor’s information system is an integral part of the recipient’s duties as an employee. Under these circumstances, the intended recipient need not specifically consent to receiving a Summary Plan Description electronically. Certain reasonable requirements do however apply. For example, the intended recipient must receive an affirmative communication describing the significance of the Summary Plan Description, and an offer to provide the recipient, upon request, with a paper copy of the Summary Plan Description.

Intended recipients who do not routinely use the Plan Sponsor’s computer or e-mail system (for example retirees) present a greater challenge to Plan Sponsors and Plan Administrators. In order to rely on the DOL’s electronic delivery Safe Harbor when providing Summary Plan Descriptions to these individuals, the Plan Sponsor/Plan Administrator and the intended recipient must satisfy additional requirements, including the following consent procedures:

  • The intended recipient must affirmatively consent to receive the Summary Plan Description electronically. This consent must be provided electronically, in a manner that reasonably demonstrates the recipient’s ability to access the Summary Plan Description in electronic form.
  • If there is a change in the hardware or software requirements needed to access or retain the Summary Plan Description and this change creates a material risk that the intended recipient will be unable to access or retain the Summary Plan Description, the recipient must receive a statement of the revised hardware or software requirements and must again consent to receiving the Summary Plan Description electronically.

Kiosks

The Preamble to the DOL electronic delivery Safe Harbor regulations indicates that, in the Department of Labor’s opinion, providing a Summary Plan Description through a common area computer, such as a kiosk, is not an acceptable form of delivery. This position is based on Department of Labor regulations, which specifically provide that it is not sufficient “merely to make the documents available in a location frequented by participants.”¹ Similarly, a recent, unpublished case, Gertjejansen v. Kemper Insurance Companies, Inc.² confirms that placing the Summary Plan Description on a web site without affirmatively providing the participant with a link to that site and an explanation of the significance of the Summary Plan Description would not constitute proper delivery of the Summary Plan Description. Here is an excerpt from this opinion:

Under ERISA, ‘[t]he administrator shall furnish to each participant, and each beneficiary receiving benefits under the plan, a copy of the summary plan description, and all modifications and changes” within 120 days after the plan takes effect. A plan administrator satisfies those disclosure requirements by furnishing documents through electronic media as long as the administrator “takes appropriate and necessary measures reasonably calculated to ensure that the system for furnishing documents…[r]esults in actual receipt of transmitted information. [Plan Administrator] has submitted nothing on the record to suggest that the mere placement of an undated SPD on its intranet site could ensure that [participant] would actually receive the transmitted information. [internal citations omitted]Similar but Not Identical Regulations

DOL regulations govern electronic delivery of certain information, including Summary Plan Descriptions and Summaries of Material Modifications. IRS regulations govern electronic delivery of other information, including loan documentation, distribution option notices, rollover notices, and beneficiary designations. In general, the IRS electronic disclosure regulations are less stringent than the DOL electronic disclosure regulations with respect to affirmative consent requirements imposed on potential recipients. The Department of Labor currently is reviewing its rules relating to the use of electronic media for disclosures under ERISA.³ Presumably this review will lead to a more uniform electronic disclosure regime for documents governed by the Department of Labor and documents governed by the Internal Revenue Service. Stay tuned!

¹See Department of Labor Regulation 2520.104b–1(b).

²Gertjejansen v. Kemper Insurance Companies, Inc., 274 Fed. App 569 (9th Cir. 2008).

³See, e.g., the Preamble to the final QDIA Regulations, 72 Federal Register No. 205 at 60458.