In April 1997, the Department of Labor (DOL) issued interim regulations which established, on a temporary basis, a safe harbor for electronic distribution of summary plan descriptions (SPDs), summaries of material modifications (SMMs), and summary annual reports (SARs). In February 2000, the IRS issued final regulations regarding the use of electronic media for providing certain participant notices and obtaining participant consent to certain plan distributions.
On April 9, 2002, the DOL’s Pension and Welfare Benefits Administration (PWBA) issued final safe harbor rules for disclosure of employee benefit plan information to participants and beneficiaries, as well as rules regarding the maintenance and retention of employee benefit plan records in electronic form. The final rules for disclosure of plan information to participants and beneficiaries using electronic media became effective on October 9, 2002. The rules for the maintenance and retention of plan records became effective with the first day of the first plan year beginning on or after October 9, 2002.
TYPES OF DISCLOSURES THAT CAN BE SENT ELECTRONICALLY
The regulations allow plan administrators to electronically send disclosures required under Title I of ERISA. ERISA Title I disclosures include:
Summary plan descriptions,
Summaries of material modifications,
Summary annual reports,
Individual benefit statements,
Qualified domestic relations order notifications,
Qualified medical child support order notices,
Information containing participant loans under ERISA 401(b)(1), and
HIPAA certificates of creditable coverage. (The electronic distribution standards do not alter any requirements related to what individuals are entitled to a disclosure, the content of the disclosure, or the timing of the disclosure.)
The final regulations indicate that the safe harbor rules apply to two groups of individuals.
Group #1:Participants who work with and have direct access to the employer’s electronic information system, inside and outside of the immediate work area. This group includes employees who may work from home, as well as those whose position requires travel, as long as they have ready access to the employer's system.
It also includes employees that have the ability to effectively access documents furnished in electronic form at any location where the employee is reasonably expected to perform his duties, and are expected to have access to the employer's electronic information system as an integral part of those duties.
Merely providing employees access to a computer in a common area (e.g. computer kiosks) is not a permissible means by which to deliver documents required to be furnished to plan participants. The DOL does not consider them to be a direct form of communication for the employee. Requiring participants to actively seek out the information regarding their rights, benefits and obligations under the Plan, is not an effective means of providing timely and important information to the individual.
Group #2:Participants, beneficiaries and others who are entitled to receive disclosures under Title I of ERISA and who have consented to receive these documents through electronic measures outside the workplace. Certain conditions need to be met before the employer can rely on using any other electronic media that is not within the control of the employer or plan sponsor. This is discussed in more detail below.
CONSENT TO RECEIVED DISCLOSURES ELECTRONICALLY
A plan administrator must obtain written consent prior to electronically delivering ERISA disclosures to beneficiaries and other plan participants that do not have work-related access to a computer. Participants must deliver their consent (or confirmation of their consent) to the plan administrator electronically. This method of delivery will ensure compatibility of both hardware and software applications. It also serves to demonstrate that the plan administrator has taken appropriate steps to ensure that the method of delivery results in actual receipt of the documents. A consent must include a clear and conspicuous statement that explains:
The types of documents to which the consent will apply;
That consent can be withdrawn at any time without charge;
The procedures for withdrawing consent and for updating the address used for receipt of electronically furnished documents;
The right to request and obtain a paper version of an electronically furnished document, including whether the paper version will be provided free of charge; and
Hardware or software needed to access and retain the documents delivered electronically.
Plan administrators must also provide notice to these individuals when the hardware or software needed to access and retain the document is changed. This notice must include the revised hardware or software requirements as well as the individual’s right to withdraw, free of charge, consent to receive the documents via electronic measures. After receipt of this notice, individuals must either (1) reconfirm their consent to receive the documents electronically under the new hardware or software conditions, or (2) withdraw their consent.
GENERAL DISCLOSURE REQUIREMENTS
Plan administrators are required to use measures reasonably calculated to ensure actual receipt of the material by plan participants and beneficiaries. The regulations provide some guidance on what measures are reasonably calculated to ensure actual receipt when electronic delivery is used.
NOTICES. A notice must be sent either electronically or in paper form to each plan participant or beneficiary at the time the document is provided electronically. The notice must a) indicate the significance of the document when it is not otherwise reasonably evident as transmitted, and b) explain the participant's right to request a paper copy.
CONFIRMATION OF RECEIPT. The plan administrator must make use of electronic mail features such as return-receipt or notice that the email was not delivered. The plan must also conduct periodic reviews to confirm receipt of the transmitted information.
CONFIDENTIALITY. When personal information pertaining to an individual's benefits or accounts is transmitted electronically, steps must be taken to protect the confidentiality of the information.
STYLE, FORMAT AND CONTENT REQUIREMENTS. Documents delivered electronically must continue to be furnished in a manner consistent with the applicable style, format, and content requirements contained within ERISA. For example, summary plan descriptions provided electronically must contain all the disclosures otherwise required by ERISA's disclosure requirements. The Department of Labor's comments within the preamble to the regulations indicate that the appearance of paper and electronic versions need not be identical.
PAPER COPY. Plan participants and beneficiaries are entitled to receive a paper copy of any ERISA disclosure provided electronically. Where a plan participant or beneficiary requests a paper copy of a document originally provided electronically, the general rules governing whether a plan administrator may or may not charge for paper copies apply.
FORMS OF ELECTRONIC DISCLOSURES
The regulations do not require the use of any specific form of electronic media. Examples of permissible forms of electronic disclosure include delivery of documents by email, attachment to an email, posting documents on a company Web site, or on CD-ROM or DVD.
Under the guidelines contained within the regulations, merely placing an SPD on a company Web site available to employees will not by itself satisfy ERISA's disclosure requirements. The plan administrator must send a written or electronic notice to participants and beneficiaries of the significance of the document, as well as direct them to the Web site location where the document can be accessed. The document must remain available on the Web site for a reasonable period of time after notification is provided to participants and beneficiaries..
A plan administrator that intends to distribute SPDs, SMMs, and SARs electronically might do the following:
Post SPDs, SMMs, and SARs on a company Web site available to all employees.
Obtain consent to electronically deliver SPDs, SMMs, and SARs from employees and COBRA participants that do not have regular work-related computer access. For example, employees working for a manufacturer in the plant may agree to access the Web site from his or her home computer.
Send an email notice to all employees that have work-related computer access or that have provided consent each time an SPD, SMM, or SAR is posted on the Web site. Use email features such as return receipt and notice of non-delivery.
Continue to provide in paper form copies of SPDs, SMMs, and SARs to employees that do not have regular work-related computer access and that have not provided consent.
Continue to provide in paper form copies of SPDs, SMMs, and SARs upon request free of charge.Note: The plan administrator is generally not required to distribute SPDs, SMMs, or SARs to each beneficiary under the plan. Therefore, the plan administrator is not required to obtain consent from each beneficiary under the plan (e.g. spouses, dependents).