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ERISA Compliance: How to Electronically Distribute Required Documents

| August 09, 2019
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Most private-sector group health benefits plans are covered by the Employee Retirement Income Security Act (ERISA), which requires plan sponsors to distribute certain documents to participants. The Department of Labor (DOL) provided rules in 1977 governing the distribution of plan materials, and according to that guidance, paper was the preferred mode of delivery. Examples of acceptable delivery methods include hand distribution, inclusion in a union or company periodical, and first-class mail.

The DOL’s disclosure requirements were last updated in 2002. In the more than 17 years that have passed since that time, over half of the worlds’ population is using the internet and the majority of smartphone owners are using their devices to conduct financial transactions, including enrolling on employee benefit programs. The 1977 disclosure guidelines never anticipated our current electronic lifestyle, nor the use of benefit administration platforms such as Employee Navigator or Ease.

Fortunately, the DOL’s updated disclosure guidelines do provide safe harbor requirements for employers wishing to distribute welfare plan materials electronically. It is important to note that these rules reflect electronic media and delivery methods available in 2002, primarily email.

Electronic Disclosure Rules Extend to the Following Materials

The electronic disclosure rules apply to the following documents:

  • Summary Plan Descriptions (SPD)
  • Summary of Material Modifications (SMM)
  • Summary of Benefits and Coverage (SBC)
  • Required Health Plan and Reform Notices
  • Medicare Creditable and Non-Creditable Coverage Notice
  • COBRA Notices
  • Financial Reporting (Form 5500, Summary Annual Report (SAR)

Basic Requirements for Electronic Disclosure

In all cases, plan sponsors must meet the DOL’s basic requirements for electronic disclosure of welfare plan documents. These requirements include:

  1. Take steps to ensure actual receipt by the participant (e.g. return-receipt and undeliverable e-mail features, periodic audits or surveys to confirm receipt).
  2. Safeguard the confidentiality of any personal information.
  3. Use the same style, format, and content of the paper document version.
  4. Provide notice describing the importance of the document, and that a free paper version is available upon request.

The Two Classes of Potential Recipients Plan sponsors must take specific distribution steps based on the ability of participants to access the information. There are two kinds of participants to consider:

A. Participants who access electronic information as an integral part of their work duties at all locations where they work (e.g. employees who regularly work on computers).

B. Participants (including retirees and COBRA recipients) who do not use a computer as part of their jobs.

Plan sponsors MUST obtain affirmative written consent to distribute documents electronically to participants in class “B”.

Affirmative Consent for Electronic Distribution

Upon obtaining written consent from a plan participant to receive documents electronically, the plan sponsor must provide a clear and conspicuous statement indicating:

  1. The types of documents to which the consent applies;
  2. That consent can be withdrawn at any time;
  3. The procedures for withdrawing consent and for updating the participant's receipt address;
  4. The right to request and obtain a paper version of the document(s) free of charge; and
  5. Any hardware and software requirements for accessing and retaining the document(s).
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