Request for Information Regarding Electronic Disclosure by Employee Benefit Plans
The DOL has asked 30 questions seeking to obtain views and suggestions regarding electronic disclosure. The DOL previously provided a safe harbor for electronic distribution in 2002. The IRS also issued guidance regarding electronic distribution in 2006. The SEC has provided guidance on the electronic distribution of proxy and prospectus material. The Supplementary Information section of the RFI provides feedback received from numerous ERISA Advisory working groups as it relates to the need for changes to the current guidance.
In response to the President’s Executive Order which “reaffirmed the importance of achieving regulatory goals through the most innovative and least burdensome tools available” the DOL is seeking input from participants, beneficiaries, plan sponsors, plan administrators as well as the general public. Comments must be submitted by June 6, 2011; let’s hope that this deadline is extended.
The crux of the issue
ERISA requires certain plan related disclosures to plan participants and beneficiaries. ERISA’s overarching requirement (emphasis added to certain words) is that the disclosures:
- Be provided in a form and manner prescribed by the government
- Written in a manner understandable by the average plan participant and
- Provided in written, electronic, or other form “reasonably accessible” to recipients.
In addition, DOL regulation §2520.104b-1 provides that “…..the plan administrator shall use measures reasonably calculated to ensure actual receipt of the material by plan participants, beneficiaries and other specified individuals.”
The reasonably accessible, reasonably calculated to ensure actual receipt and the integral part of duties requirements noted below can be a hindrance to plan sponsors eager to embrace electronic disclosure.
As noted above, both the DOL and IRS have provided guidance on electronic distribution:
DOL
The existing guidance is a safe harbor and doesn’t represent the only method for electronic distribution; many plan sponsors with advice of counsel have “adapted” the safe harbor rules for their own situation. The DOL safe harbor is only available if:
- The plan administrator takes appropriate and necessary measures reasonably calculated to ensure the system for furnishing documents results in actual receipt of the transmitted information and protects the confidentiality of personal information relating to the individual’s accounts and benefits
- The electronically delivered documents are prepared and furnished in a manner that is consistent with the style, format and content requirements applicable to the particular document
- Notice is provided to each participant, beneficiary or other individual in electronic or non-electronic form, at the time a document is furnished electronically, that apprises the individual of the significance of the document when it is not otherwise reasonably evident as transmitted and of the right to request and obtain a paper version of such document and
- Upon request, the participant, beneficiary or other individual is furnished a paper version of the electronically furnished documents.
The safe harbor is available to two categories of recipients:
- Participants who have the ability to effectively access document furnished in electronic form at any location where the participant is reasonable expected to perform his or her duties as an employee and with respect to whom access to the employer’s or plan sponsor’s electronic information system is an integral part of those duties.
- Participants and beneficiaries entitled to a disclosure but don’t fit within group previously described and who agree to receive documents electronically. In addition, prior to obtaining consent, a detailed disclosure statement must be provided to the recipient.
Observation: The safe harbor works for plan sponsors with active employees who access the computer on a regular basis but probably doesn’t work for many plan sponsors, e.g., those with employees in the manufacturing and nursing home industries.
The IRS
The IRS provides two methods for electronic distribution:
- Consumer consent which follows E-SIGN requiring recipient consent and
- Alternative method which doesn’t require recipient consent but requires indication that the recipient be “effectively able” to access the electronic medium used to provide the notice and the recipient must be advised that they can receive the notice in writing at no charge.
Why you should consider responding?
You may be a plan sponsor with a non-grandfathered health care plan who is currently unable to use the DOL’s safe harbor; you have just reviewed and distributed your SPDs when a change occurs (for example, the DOL decides not to enforce the 24 hour urgent care claims timeline that you included in your SPD); wouldn’t it be great if you could update a continuously accessible on line version of the SPD and notify participants of the change.
Not that you need reminding, (for H&W plans, you may also wish to refer to our H&W disclosure tool) but here is a list of many of the disclosures required by the government:
DOL
- SPDs
- SMMs
- SARs
- Summary of material reduction in covered services or benefits
- Notice of benefit determinations (claims notices or EOBs)
- QDRO notices
- QMSCO notices
- COBRA notices
- HIPAA notices
- CHIPRA notice
- Investment related information under 404(c)
- Deferred vested terminated benefit statements
- 4 page summary soon to be required by Health Care Reform
IRS
- Joint & survivor notice
- Rollover notice
- §204(h) notice
- Minimum distribution
- Funding notices
- Participant fee disclosures soon to be required
What the DOL is asking
As mentioned above, the DOL has asked 30 questions; we are not going to list the 30 questions, just provide some general themes as it would relate to a plan sponsor:
- Statistics – what percentage of your employees has access to the Internet at home or work? How does it vary by demographics, e.g., employees on a manufacturing line vs employees in an office environment (physical or virtual)? Active employees vs retired/terminated employees.
- What disclosures do you currently provide and how do you provide them?
- What prevents you from utilizing electronic disclosures?
- Do you think your participants would utilize electronic media (think facebook, twitter, intranet, texting, company website, other)
- Should the DOL revise their safe harbor? Why or why not? How would you change it? should different disclosures have different rules (e.g., COBRA, benefit statements)
- Should the DOL encourage use of required disclosures through the use of a continuous access website? How would participants opt out of electronic disclosures? Should there be restrictions on what a participant can opt out of?
- What is the impact of electronic disclosure on former participants?
- How should time sensitive disclosures be addressed? E.g., COBRA notices, special enrollment, claim denials
- If less restrictive electronic disclosures are permitted, how would you keep track of email addresses? How would you get around spam filters and firewalls when sending to non-work computers, tablets, phones etc.
What should Plan Sponsors do?
- At a minimum, codify your thoughts and provide to your consultant/attorney who can incorporate into their comment letter.
- Think about writing your own comment letter.
- Think about the cost savings of electronic distribution.
- Think about what it will cost you to set-up or enhance your electronic communication system vs the current costs, both internal and external.
- Think about how you will be able to get the most current, up to date information in participant’s hands and how you will control who can update what and when.
- Don’t forget about your terminated employees and retirees. There is probably a good chance that a fair share of your retirees will want paper.
- Will maintaining email addresses be any more difficult than maintaining physical mailing addresses?
- Do you have current telephone numbers? Will having the ability to text announcements to a participant’s phone with links to the company website/intranet work for your demographics?
- Bottom line: think about how you communicate, how your employee population best absorbs information, how much you will save in mailing costs, how much it may cost to capture and maintain email addresses and make system enhancement; think about your ability to impact future guidance that will have an immediate impact on what you do.
You may want to check our new blog periodically for quick updates on compliance issues.
Note: all links are active as of the date of issuance of this ErisaALERT.
Disclaimer: This material is for the sole purpose of providing general information and does not under any circumstances constitute legal advice and should not be used as a substitute for legal advice. You should seek the advice of counsel when applying the requirements to your plan. For more information on this ErisaALERT contact us by phone at 610-524-5351 and ask for Mary Andersen or 973-994-7539 and ask for Theresa Borzelli.
