Many employers are devoting most (if not all) of their compliance time focused on the requirements of the Affordable Care Act (ACA). Employers and other plan sponsors should, of course, work diligently to ensure that they are meeting (or getting ready to meet) the complex ACA requirements, but they should be ever diligent and mindful of all of the rules generally applicable under the Employee Retirement Income Security Act of 1974 (ERISA).
A recent case in the U.S. District Court for the Eastern District of New York – Raymond Thomas v. CIGNA Group Insurance, et al. (No 09-CV-5029)-provides an instructive reminder that those who rely on electronic delivery of plan-related documents must follow fairly specific rules.
Thomas v. CIGNA: SPD Posted on Company Intranet
The facts in Raymond Thomas are fairly straightforward: Judith Thomas participated in Countrywide Financial Group’s benefit plans, including a buy-up voluntary life insurance plan. The buy-up plan required premium payments by employees. When Judith went out on disability, she could have filed a waiver-of-premium form that would have kept the insurance in place without requiring premium payments while she was out on disability. Judith did not timely file the waiver after going out on disability.
When Judith’s brother, Raymond, the beneficiary on the life insurance, made a claim for benefits after Judith’s death, his claim for the life insurance proceeds was denied based of Judith’s failure to timely file the waiver; that is, the employer and the insurer claimed the policy lapsed because of non-payment of premium and the failure to timely request a waiver.
The central question of the case: was Judith adequately provided with information so that she knew about the waiver requirements, including the timing requirements? The plan argued that the life insurance plan documents, including its summary plan description (SPD), were furnished to all employees via a posting on the company’s intranet for all to see. The court, however, disagreed that merely furnishing the SPD and other documents was sufficient under ERISA. Not surprisingly-because the regulations are pretty clear-the court ruled that because ERISA’s rigid requirements for electronic delivery were not followed, the plan sponsor and the insurer could not prove that the SPD that included the waiver requirements were provided to Judith Thomas. Accordingly, the court held for Raymond Thomas.
Brief Overview of ERISA’s Electronic Delivery Requirements
The Raymond Thomas case may be surprising to some employers, other plan sponsors and their consultants and advisors who believe that simply posting plan information (including SPDs, notices and other required documents) is sufficient to meet ERISA’s electronic delivery requirements. Raymond Thomas serves a reminder to all that ERISA’s electronic delivery rules are complex; simply posting documents and notices to an intranet system will not satisfy these requirements.
Basic Requirements for Electronic Delivery of Plan-Related Documents
ERISA’s basic requirements for electronic delivery include:
- When an electronic document is furnished, a notice must be provided to each recipient describing the significance of the document-in other words, simply posting is not enough: participants must know that there are documents to be reviewed.
- The steps taken for furnishing the documents must be reasonably calculated to result in the actual receipt of the documents; plan sponsors should consider using return-receipt or notice of undelivered e-mail features and/or should conduct periodic reviews or surveys to confirm actual receipt by participants.
- Reasonable and appropriate confidentiality safeguards should be used to protect the privacy of personal information related to an individual’s accounts and benefits.
- The electronically delivered documents must be prepared and furnished in a manner that is consistent with the style, format and content requirements applicable to the particular document.
- A paper version of the electronic document must be readily available
Once the foregoing basic requirements are met, ERISA documents may be furnished to two classes of potential recipients:
1. Actively employed participants whose access to the employer’s electronic information system is an integral part of their job and who have the ability to access documents through the electronic information system that is located where they are expected to perform their duties.
There is a common misconception that this requirement can be met for employees who do not have computers at their desks or other work stations by the use of a centrally located computer, such as a kiosk. Using kiosks or placing computers in break rooms, locker rooms or other worksite locations does not meet this requirement.
2. Terminated or retired participants, beneficiaries and others as long as they (i) affirmatively consent to receive the documents electronically, (ii) provide an electronic address and (iii) reasonably demonstrate their ability to access documents in electronic form.
If documents and notices are sent via e-mail attachment (including by providing a link that recipients can click to obtain copies), employers and other plan sponsors can ensure the three consent requirement are met if the e-mail requires recipients to affirmatively consent via email from the email address at which they agree to receive the information.
Before consent is obtained the plan sponsor must provide a statement that includes the following specific information:
- the types of documents that will be provided electronically;
- that the individual receiving the documents or notices has the ability to withdraw consent to electronic delivery along with the procedure for withdrawing consent and updating information;
- that a paper version of all documents and notices is available upon request and whether a charge applies (no charge applies in the case of SPDs); and
- what electronic delivery system will be used and the hardware and software needed to use it.
These electronic delivery rules apply to all documents and notices required to be provided under ERISA. These include: open enrollment materials, SPDs, Summaries of Material Modifications (SMMs), Summary Annual Reports (SARs), QMCSO notices, COBRA notices, and retirement plan and 401(k) plan notices such as “blackout period” notices, 404(c) notices, and information on participant loans.
ACA’s SBC Electronic Delivery Requirements
The new Summary of Benefits and Coverage (SBC) under the ACA may be distributed electronically in accordance with the rules set out above. However, the DOL expanded electronic distribution of SBCs to individuals without work-related access to make the requirements easier to meet (http://www.dol.gov/ebsa/faqs/faq-aca9.html). Under these rules, an employer or plan sponsor may distribute the SBC without the prior consent of an individual who does not have work-related computer access when:
- the individual enrolls online or renews their coverage online; or
- the individual requests an SBC online.
In either case, the individual must always have the option to receive a paper copy upon request.
If you have any questions or concerns regarding your current process and whether it conforms with ERISA compliance requirements, contact the CM Smith Agency.
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Originally published by Benefit Advisors Network (BAN): ERISA Electronic Delivery: A Friendly Reminder. Produced in conjunction with the law firm of Marathas, Barrow & Weatherhead LLP
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The author, Peter Marathas, Jr., Esq., speaks and writes frequently on the requirements of the Affordable Care Act. He provides counsel and assists the members of the Benefit Advisors Network (BAN) with compliance support. Contact C.M. Smith to get in touch with Peter Marathas at 1-860-990-6400, or use our contact us page.