Is Electronic Disclosure of Benefit Plan Documents an Option For You?
Whether their goal is cost-cutting, educating employees, going green, accommodating tech-savvy employees or some combination of these, employers have been increasingly asking: Can we distribute benefit plan documents and other notices required by Title I of ERISA electronically?
The short answer is, yes — in some cases.
The longer answer is that electronic disclosure is permitted as long as the employer uses a method reasonably calculated to ensure actual receipt of the information. In 2002, the Department of Labor (DOL) issued rules creating a safe harbor for electronic disclosures. If an employer follows this safe harbor when making an electronic disclosure, the employer will satisfy the requirement that the disclosure be done through a method that is reasonably calculated to ensure actual receipt of the information.
Disclosures Covered by DOL Rules
Before examining the steps an employer must take for a disclosure to fall within the DOL safe harbor, it may help to have some basic information about the types of disclosures that are covered by the DOL rules.
ERISA Title I Disclosures: All statements, notices, requirements and other documents that are required to be furnished under Title I of ERISA are covered by the DOL safe harbor. For example, this includes summary plan descriptions (SPDs) for retirement, health and welfare plans; summary annual reports; benefits statements; investment information; COBRA notices; and Qualified Domestic Relations Order notices. However, electronic disclosure must not alter the style, format, content or timing requirements of the documents disclosed.
Recipients: The DOL safe harbor applies to disclosures that must be made to participants. It also applies to disclosures that must be made to beneficiaries and other individuals to whom the plan is required to provide information under Title I of ERISA.
Approved Forms of Electronic Media: Several forms of electronic media may be used under the DOL’s safe harbor for electronic disclosures. The term “electronic media” specifically includes disclosures through any of the following: a Web site (including an employer Intranet site), e-mail, disk, CD or DVD.
DOL Safe Harbor Requirements
If an employer wishes to use electronic media to make a disclosure required by Title I of ERISA to a participant, beneficiary or other individual and receive the protection of the DOL's safe harbor, the employer must satisfy several requirements described in the DOL rules. There are two sets of requirements depending on the group to which information is being disclosed. One set applies to plan participants who can regularly access documents provided through electronic media at work and must do so as an integral part of their jobs. The other set covers participants who do not have regular access to electronic media at work and any beneficiaries or other individuals who are not employees.
Participants With Electronic Media Access at Work: To make an electronic disclosure to participants who have regular access to electronic media at work, the employer must take the following steps:
Notify each individual at the time a document is disclosed electronically in a way that communicates the significance of the document (e.g., by sending an e-mail with the document attached which notes the title and purpose of the attached document)
Furnish a paper version of the document upon request
Take steps to ensure actual receipt of the documents (e.g., send e-mails with a return-receipt request, follow up on undeliverable messages or conduct a survey to confirm receipt)
Protect the confidentiality of any personal information that may be communicated in the document being disclosed
Participants Without Electronic Media Access at Work and Other Recipients Who Are Not Employees: An employer may choose to provide paper copies of documents to any individuals who do not fall in the group discussed above. Alternatively, the employer may use electronic disclosure for the individuals outside that group if they take a few extra steps in addition to those outlined above. Those extra steps are as follows:
- Obtain consent from the individual to disclose documents electronically
- Before consent is given, inform the individual of the types of documents to be disclosed, the right to withhold or withdraw consent, the procedure for withdrawing consent or changing contact information, the right to a paper version, and any hardware or software needed to access the information
- Where documents are furnished through a Web site or other electronic communication network, have the individual consent in a manner that demonstrates the individual's ability to access the information electronically
- Communicate changes in hardware or software that may affect the individual's access to the document and request that the individual consent to electronic disclosure after the individual is notified of the change and given the chance to withdraw consent
Safe Harbor Limitations
If you are using, or considering using, electronic disclosure, it is important to note that the rules above only apply to disclosures required under Title I of ERISA. There are separate IRS rules that apply to disclosures governed by the Internal Revenue Code (e.g., for beneficiary designations or 402(f) notices). You should also be aware that the DOL rules described above are safe harbor rules. You are not legally required to follow these rules and can use another delivery method if you are confident it meets the applicable legal requirements. If you decide to do this, we recommend consulting us first to get more information on the legal requirements that apply.
Regardless of the reason for using electronic disclosure, we are seeing more employers move to this practice and we expect to see this trend continue. If you are among those using electronic disclosure, it is important to confirm you are satisfying the steps outlined above.
Even if you are not using electronic disclosure at this point, you could still circulate documents by e-mail or post them on a Web site. If you do this, it could also be helpful to include information regarding the electronic location of the documents in benefit plan materials (such as the SPD) so employees know where they can access those documents if they need copies. While this will not satisfy the safe harbor, it could decrease the number of document requests you must handle.
If you are considering electronic disclosure or have concerns about your current disclosure practices, you can contact any member of Warner Norcross & Judd's Employee Benefits Practice Group for more information.