New ERISA Proposed Electronic Disclosure Rule

The U.S. Department of Labor’s Employee Benefits Security Administration (Department) issued a long-awaited proposed electronic disclosure rule (Proposed Rule) [See here] for group health plans (Plans) governed by the Employee Retirement Income Security Act of 1974 (ERISA). The Proposed Rule offers Plans an updated safe harbor to use electronic media to furnish ERISA-required documents and information to Plan participants.

The Proposed Rule, if finalized, allows a Plan administrator to provide Covered Individuals (defined below) with a notice that Covered Documents (defined below) will be made available electronically on a website. Covered Individuals who prefer to receive these disclosures in paper form may request paper copies and opt out of electronic delivery.

The Proposed Rule is similar to the ERISA safe harbor that currently applies only to pension plans; however, under the pension plan safe harbor, a plan administrator may email the applicable documents to a participant, provided that the requirements of 29 CFR 2520.104b-31(k)(1) through (4) are satisfied. The Proposed Rule does not permit the Plan administrator to email Covered Documents due to Health Insurance Portability and Accountability Act (HIPAA) privacy concerns.

Background

The Department published a 2002 electronic disclosure safe harbor that has long been considered outdated. Under the 2002 rule, Plans are permitted to send participant disclosures electronically to two categories of participants: (1) to participants who can access electronically-furnished documents at any location where the participant is reasonably expected to perform his or her duties as an employee and with respect to whom access to the Plan’s electronic information system is an integral part of those duties, and (2) to participants, beneficiaries, and other individuals who do not fall under (1) but who affirmatively consent to electronic disclosure. Before consenting, the individual must be provided a clear and conspicuous statement indicating the types of documents to which the consent would apply; that consent can be withdrawn at any time without charge; the procedures for withdrawing consent and for updating the individual’s address for receipt of electronically-furnished documents or other information; the right to request and obtain a paper version of an electronically-furnished document; and any hardware and software requirements for accessing and retaining the documents.

For employers with large manufacturing, retail, or other non-office worker populations, and for employers with large retiree or other non-employee populations, the 2002 safe harbor is too limiting and administratively burdensome.

Proposed Rule

Under the Proposed Rule, the Department is streamlining the process as described below. However, before relying on the new final electronic disclosure safe harbor, the Plan administrator must first provide an initial paper notification to Covered Individuals. There is an exception to this for individuals already receiving electronic disclosures under the 2002 safe harbor.

Covered Documents - Are defined as any document or information that a Plan administrator is required to furnish to participants and beneficiaries under Title I of ERISA, (i.e., summary plan descriptions (SPDs), summaries of material modification (SMMs), summary annual reports (SARs), Consolidated Omnibus Budget Reconciliation Act (COBRA) notices, HIPAA special enrollment notices, summaries of benefits and coverage (SBCs), and other Part 6 and Part 7 disclosures) (Covered Documents). Covered Documents include both documents that the Plan administrator has an affirmative obligation to furnish, as well as documents that must be furnished only upon request.

Covered Individuals - Are defined as any participant, beneficiary or other individual age 18 or older entitled to Covered Documents who has provided the employer, Plan sponsor, or Plan administrator with an electronic address, such as an email address or smartphone number. If an employer has assigned an employee an electronic address for employment-related purposes, this will be treated as if the employee provided an electronic address.

Notice of Internet Availability (NOIA) - Similar to the pension plan safe harbor, each time a Covered Document is posted online, Plan administrators must send a NOIA electronically. The NOIA must include, (i) a prominent heading, legend or subject line that reads "Disclosure About Your Health Plan" or similar, (ii) a statement that reads: "Important information about your health plan is now available. Please review this information", (iii) identification of the Covered Document by name along with a brief description (if the name of the document would not reasonably convey the nature of the document), (iv) a website address or hyperlink to where the Covered Document is available, (v) a statement regarding the right to request paper copies free of charge, and how to exercise this right, (vi) a statement regarding how to opt out of electronic delivery, and how to exercise this right, (vii) a cautionary statement that the Covered Document is not required to be available on the website for more than one year or, if later, after it is superseded by a subsequent version of the covered document, and (viii) contact information (telephone number) for the Plan administrator or other Plan designated representative.

Plan administrators may furnish one combined NOIA per year for certain documents, including for example, the SPD, certain annually required disclosures, and documents furnished with annual enrollment materials.

Website Standards - Plan administrators must maintain a website where Covered Documents are accessible, searchable, printable, and downloadable, and remain available for at least one year, or, if later, after they are superseded by subsequent versions of the documents. The Covered Documents must be available on the website no later than the date on which the Covered Documents must be furnished under ERISA. The website must protect the confidentiality of personal information relating to any Covered Individual.

Severed Employees - For employees severed from employment, the Plan administrator must take measures to ensure continued accuracy of the electronic address or obtain a new one. This requirement is particularly important when the Covered Individual’s electronic address was assigned by the employer. Although not mentioned, this presumably would also apply to any retired employee disclosures.

Notices Provided by Health Insurance Issuers – In recognition that Plan administrators often contract with health insurance issuers to provide required communications to participants, the Proposed Rule permits the insurer to utilize the safe harbor if the Plan administrator/Plan sponsor and insurer enter into a written agreement under which the insurer agrees to provide the required ERISA disclosure.

Application Date

The Department proposes that the safe harbor will be applicable on the first day of the first calendar year following the Department’s publication of the final rule. Because it is optional, Plan administrators are not required to adopt it, but may rely on it anytime on or after that date. Plan administrators may also continue to rely on the prior 2002 safe harbor.

Winston Takeaway 

For Plans considering submitting comments, the Department is soliciting comments for the next 60 days. Because a final rule could be issued before the end of the year, Plan administrators should consider how this may impact a calendar year Plan’s open enrollment and other Covered Document disclosure deadlines. Note that these new proposed rules do not extend to ERISA welfare benefits that are not group health plans, such as life insurance and disability benefits. For those benefits, only the 2002 safe harbor electronic disclosure rules will continue to apply.