Electronic Distribution of ERISA Documents to Employees

Question: What are the requirements for employers to use a website, intranet, benefits portal, or other online/electronic method to provide ERISA health and welfare documents? 

Short Answer: ERISA requires that the disclosure method of plan materials to employees be “reasonably calculated to ensure actual receipt.”  The DOL has a 2002 safe harbor approach to meet that standard, which is based on whether employees have work-related computer access integral to their job duties.  Nonetheless, many employers today are comfortable operating outside that dated safe harbor approach given the current widespread access to online materials by most employee populations. 

General Rule: ERISA Disclosures to Employees 
Employers have broad disclosure obligations under ERISA to provide various health and welfare plan-related materials to employees (and in some cases their dependents).  Examples include distribution of the wrap summary plan description (SPD), the underlying carrier and TPA materials (e.g., EOCs, policies, certificates of coverage, benefit summaries, etc.), summaries of material modifications (SMMs), summary annual reports (SARs), and other similar materials.    

For more details: 

• Newfront ERISA for Employers Guide 

• When to Distribute Updated Wrap SPDs and SMMs 

• The Summary Annual Report (SAR) for Health Plans 

The ERISA Electronic Distribution Rules 
Employers must distribute ERISA documents by using measures that are “reasonably calculated to ensure actual receipt of the material” and are “likely to result in full distribution.”    

U.S. mail and hand delivery will always satisfy this standard.  However, it is far more common at this point for employers to distribute such materials electronically.  Most employers today use some type of internet-based method of distribution such as a benefits website, company intranet, benefits administration system portal, email, Slack, Teams, etc.  

The DOL established a “safe harbor” approach in 2002 for employers to automatically meet the ERISA distribution rules using these forms of internet-based delivery methods.  The safe harbor divides employees into two different categories, each with different rules that apply.  The alternative and increasingly common approach in this modern era of widespread internet access is to operate outside of the (now rather antiquated) 2002 safe harbor. 

Safe Harbor: Opt-Out for Employees With Work-Related Computer Access Integral to Their Job Duties 
The DOL rules describe this class of employees as those who: 

1. Have the ability to effectively access documents furnished in electronic form at any location where they are reasonably expected to perform their job duties; and 

2. Access (e.g., through a computer) to that electronic format is an integral part of those job duties. 

These employees can receive electronic distribution of ERISA materials (e.g., the SPD) by default.  In other words, there is no employee consent (or “opt-in”) required to satisfy the safe harbor.  Those who prefer not to receive ERISA documents electronically can simply opt-out.  Employers must include a notice of the significance of the document in the disclosure, as well as the right to request and obtain a paper copy.    

For employees with work-related computer access integral to their job duties (e.g., employees who work at a desk with a computer), this safe harbor is relatively easy for employers to satisfy.  It provides comfort to employers that their method of electronic distribution to these “computer employees” is automatically deemed to satisfy the ERISA disclosure rules.  

Safe Harbor: Opt-In for Employees Without Work-Related Computer Access Integral to Their Job Duties 
These employees must electronically affirmatively consent to electronic distribution of ERISA materials (e.g., the SPD) to satisfy the safe harbor.  In other words, they must affirmatively consent to electronic disclosure (or “opt-in”).  The form of the affirmative consent must reasonably demonstrate the individual’s ability to access information in the electronic form that will be used (e.g., the internet or email).    

The “opt-in” electronic consent must include “clear and conspicuous” statements addressing: 

• The types of documents that will be provided electronically; 

• That the electronic consent can be withdrawn at any time; 

• The procedures for employees to withdraw their electronic consent; 

• The right to request a paper copy of any document provided electronically; and 

• The system requirements necessary to access the electronic materials. 

For employees without work-related computer access integral to their job duties, the major qualm employers face with this safe harbor is it requires employees to take an active step of approval to receive documents electronically.  In an era where the vast majority of communications are handled online, that additional step can seem cumbersome and unnecessary.  Plus, a large segment of any employee population—and perhaps particularly these “non-computer employees”—may never participate in an opt-in procedure for something they might not see as particularly important (i.e., employee benefits documents).    

This can result in the employer engaging in significant cost and administrative burdens to provide paper copies of ERISA-related documents to employees who may a) have been fine with—or even preferred—electronic versions, and b) not actually use the materials in any meaningful way to justify the added cost/burden.   

Operating Outside the DOL’s 2002 Electronic Disclosure Safe Harbor: Widely Practiced in Modern Era 
The 2002 DOL electronic disclosure safe harbor is often misunderstood as a required condition for employers to distribute ERISA materials (e.g., the SPD) electronically.  However, employers can satisfy the ERISA requirements for electronic disclosure even if they do not meet the safe harbor.  

For example, employers often choose to operate outside the safe harbor by using electronic disclosure for employees who do not have work-related computer access integral to their job duties, and regardless of whether those employees have completed a safe harbor-approved “opt-in” affirmative consent.  When following this approach, employers must meet the general standard that they “use measures reasonably calculated to ensure actual receipt of the materials” and are “likely to result in full distribution.”    

Employers operating outside the safe harbor should take care to monitor for any employee concerns or issues accessing the materials provided electronically.  This will ensure they have taken all appropriate steps to defend the position that they have met that general standard (as opposed to the safe harbor) if ever challenged by the DOL or a participant.  The main advantage to operating outside of the safe harbor is that employers are not required to seek affirmative consent for electronic disclosure for those “non-computer employees” (i.e., those who do not have work-related computer access that is integral to their job duties).  

• Bottom Line: If all of the company’s employees have work-related computer access that is integral to their job duties, the DOL safe harbor makes it clear that no authorization is required to distribute ERISA documents electronically.  If there are employees in the workforce who do not meet this standard, the conservative approach is to meet the DOL’s 2002 safe harbor by receiving their affirmative consent to electronic disclosure of ERISA documents.  However, many employers today will confidently take the position that electronic disclosure outside the safe harbor (i.e., without an “opt-in” affirmative consent) is still valid as “reasonably calculated to ensure actual receipt” because electronic media (e.g., benefits website, company intranet, benefits administration system portal, email, Slack, Teams, etc.) is now so commonly used and easily accessed that it is “likely to result in full distribution.” 

Will the DOL Modernize the Safe Harbor Approaches for Health and Welfare? 
For many years now, employers have been exasperated by the antiquated structure of the 2002 DOL safe harbor approach to electronic disclosure, particularly with respect to the opt-in structure for employees who do not have work-related computer access that is integral to their job duties.    

In response to President Trump’s Executive Order 13847 during his first term, the DOL issued a new modernized safe harbor approach in 2020 for retirement plans.  Most significantly, this new 2020 safe harbor does not categorize employees by whether they have work-related computer access that is integral to their job duties, nor does it impose an affirmative consent (i.e., opt-in) requirements on any specific population.    

However, the new 2020 safe harbor applies only for retirement plan disclosures.  In discussing the issue, the DOL stated that any consideration of extending the new approach to include health and welfare plans “warrants careful consideration and analysis that goes beyond the scope of this final rule. The Department, therefore, has decided not to expand the scope of the final rule to cover welfare benefit plans at this time. The Department will continue exploring whether, and under what circumstances, to extend the safe harbor in the final rule to welfare benefit plans, and may undertake rulemaking in the future.”  

At this point, there does not appear to be any clear intent for the DOL to provide similar relief for health and welfare plans in the immediate future.  Nonetheless, it is possible that another executive order (such as the one in 2018 focusing on retirement plans) could spur the DOL into action with a more modernized safe harbor approach to electronic delivery on the health and welfare plan side.  

Best Practice: Notify Employees of Newly Posted Documents 
As discussed above, the ERISA disclosure rules require that employers “use measures reasonably calculated to ensure actual receipt of the materials.”  Where utilizing an online distribution approach such as the employer’s intranet, benefits website, or benefits administration system portal, employers should not assume that the mere posting of new ERISA materials on the intranet/site/portal is sufficient in itself to fully satisfy their obligation to meet this standard.  

There has been bad case law in the past of employers posting new ERISA documents an online portal without notifying their employees.  For example, in Gertjejansen v. Kemper Ins. Cos. (9^th Cir. 2008), the court found that an employer that posted an updated SPD on its intranet site without notice to employees failed to take appropriate and necessary measures reasonably calculated to ensure that the employees actually received the document.  The court held that “the mere placement of an updated SPD on its intranet site” was not sufficient, and therefore the employer could not rely on the terms of that updated SPD.  The court reviewed the claim “de novo,” instead of the standard “abuse of discretion” deferential standard of review from the SPD.  

That case was decided in 2008 when online disclosure was relatively new, and employees were not nearly as likely to assume that new documents would be posted to an online source.  It is less likely in the current era that a plaintiff would succeed in arguing they were unaware of the need to access new forms of ERISA documents though the employer’s intranet/website/portal.    

Nonetheless, employers should still operate in the shade of that bad case law by taking steps to notify employees on some regular basis (e.g., each time new document posted, quarterly, tied to other routine company announcements) of new ERISA-related benefits documents posted to the site.  Simply posting an ERISA document the site without notification to employees is therefore not best practice. Providing notice is a relatively low-burden step to foreclose that potential line of argument by an employee’s counsel in litigation.  

Template Notice to Employees of New ERISA Document Posted 
These newly posted documents are part of your Summary Plan Description (SPD) to the [Enter Plan Name] (Plan). You should review this information carefully, share it with your covered dependents, and keep it with other Plan materials for future reference. In the event of a conflict between the official Plan Document and these materials, other components of the SPD, or any other communication related to the Plan, the official Plan Document will govern.  Contact People Operations with any questions or to obtain a paper copy.  

This type of notice could be sent by email, Slack, Teams, or any other regular communication method used by the organization.  Nonetheless, there is no need to send the actual ERISA documents with the notice—notifying employees that the documents are posted on the site is sufficient.  The preamble to the 2002 DOL regulations suggests the documents should “remain on the website for a reasonable period of time after participants and beneficiaries are notified of their availability” as part of the general obligation to “take appropriate and necessary measures to ensure the website system for furnishing documents results in actual receipt.”  

Enforcement of ERISA Distribution Requirements 
Although there is no specific penalty for failure to satisfy the ERISA SPD, SMM, and SAR disclosure requirements, there are potential $110/day penalties for failure to provide the document within 30 days of receiving a written request from an employee or dependent.    

• For more details: Written Requests for ERISA Documents 

Even if the employee does not make a written request for the document, failure to properly distribute the SPD could result in the employer not being able to enforce the written terms of the plan in a claim for a benefits lawsuit.  There are many unfortunate court cases addressing this concern.  

• Bottom Line: Numerous cascading potential problems in a DOL investigation, participant lawsuit, or other multiple other adverse situations could arise if employers do not have these foundational documents in place or properly distribute them to employees. 

Providing SBCs to Employees Electronically 
The ACA added the Summary of Benefits and Coverage (SBC) document requirement for group health plans and insurance carriers to provide participants and beneficiaries with a short document in uniform format describing the benefits and coverage offered under the plan. Given that the SBCs were introduced in 2012 (a decade after the 2002 safe harbor described above), the SBC rules added special new electronic disclosure safe harbors that apply only to distribution of the SBC.  The SBC approach more realistically reflects modern employer practices and widespread employee access to online disclosures.   

SBC Relaxed Electronic Disclosure Rule: Online Enrollment 
Where the employer has online enrollment, the employer may distribute the SBC electronically in connection with the online enrollment to any employee.  This special expanded electronic disclosure safe harbor for SBCs applies only for employees enrolling online (initial enrollment or open enrollment) where the SBCs are made available to the employee as part of the employee’s online enrollment process.  

SBC Relaxed Disclosure Rule: Online Requests 
Employers may also distribute the SBC electronically in response to an online request for the SBC from an employee or dependent.  The SBC must always be available in paper form free of charge upon request.  

SBC Relaxed Disclosure Rule: No Online Enrollment System 
Where the employer does not have online enrollment, a different relaxed rule applies for eligible employees who are not enrolled in the plan.  In that case, the employer may distribute the SBC electronically provided: 

1. The format is readily accessible; and 

2. If the SBC is provided on the internet, the employer must timely notify the employee in paper form (e.g., a postcard) or by email that the documents are available on the internet, including the internet address and notice that SBCs are available in paper form upon request. 

For covered employees where the employer does not have online enrollment, the standard ERISA electronic disclosure rules described above apply. 

For more details: 

• Newfront SBCs for Employers Guide 

• Providing SBCs to Employees 

Providing Health Plan Annual Notices to Employees Electronically
Employers provide a number of health plan-related annual notices to employees each year to inform them of their rights and obligations related to the plan under various laws.  These notice requirements all derive from different legal schemes, but they generally follow the same ERISA electronic disclosure rules as described above.  Accordingly, employers typically handle distribution of the annual notices through a benefits website, company intranet, benefits administration system portal, email, Slack, Teams, etc.  

• For more details: The Required Annual Notices to Employees 

Providing COBRA Notices: Best Practice is to Distribute Paper Notice by U.S. Mail 
COBRA initial notices should be sent by mail and addressed to both the covered employee and the covered spouse (if applicable).  Electronic or hand delivery is not recommended for the COBRA initial notice because it is generally considered insufficient to satisfy the requirement that the spouse also receive the initial notice.  

The COBRA rules say that sending one notice to the employee’s home address is sufficient where: 

• The notice is addressed to both the covered employee and the covered spouse; and 

• Based on the most recent information available to the plan, the covered spouse resides with the covered employee. 

The COBRA TPA industry has largely adopted this approach and made mailing the initial notice part of their standard services.  For more details: 

• Newfront COBRA for Employers Guide 

• COBRA Initial Notices 

Relevant Cites:  

29 CFR §2520.104b-1: 
(b) Fulfilling the disclosure obligation. 
(1)   Except as provided in paragraph (e) of this section, where certain material, including reports, statements, notices and other documents, is required under Title I of the Act, or regulations issued thereunder, to be furnished either by direct operation of law or on individual request, the plan administrator shall use measures reasonably calculated to ensure actual receipt of the material by plan participants, beneficiaries and other specified individuals. Material which is required to be furnished to all participants covered under the plan and beneficiaries receiving benefits under the plan (other than beneficiaries under a welfare plan) must be sent by a method or methods of delivery likely to result in full distribution.  
… 
(c) Disclosure through electronic media. 
(1)   Except as otherwise provided by applicable law, rule or regulation, including the alternative methods for disclosure through electronic media in paragraph (f) of this section, the administrator of an employee benefit plan furnishing documents through electronic media is deemed to satisfy the requirements of paragraph (b)(1) of this section with respect to an individual described in paragraph (c)(2) of this section if: 
(i)   The administrator takes appropriate and necessary measures reasonably calculated to ensure that the system for furnishing documents— 
(A)   Results in actual receipt of transmitted information (e.g., using return-receipt or notice of undelivered electronic mail features, conducting periodic reviews or surveys to confirm receipt of the transmitted information); and 
… 
(2)   Paragraph (c)(1) shall only apply with respect to the following individuals: 
(i)   A participant who— 
(A)   Has the ability to effectively access documents furnished in electronic form at any location where the participant is reasonably expected to perform his or her duties as an employee; and 
(B)   With respect to whom access to the employer's or plan sponsor's electronic information system is an integral part of those duties ; or 
(ii)   A participant, beneficiary or any other person entitled to documents under Title I of the Act or regulations issued thereunder (including, but not limited to, an “alternate payee” within the meaning of section 206(d)(3) of the Act and a “qualified beneficiary” within the meaning of section 607(3) of the Act) who— 
(A)   Except as provided in paragraph (c)(2)(ii) (B) of this section, has affirmatively consented, in electronic or non-electronic form, to receiving documents through electronic media and has not withdrawn such consent; 
(B)   In the case of documents to be furnished through the Internet or other electronic communication network, has affirmatively consented or confirmed consent electronically, in a manner that reasonably demonstrates the individual's ability to access information in the electronic form that will be used to provide the information that is the subject of the consent, and has provided an address for the receipt of electronically furnished documents; 

Gertjejansen v. Kemper Ins. Cos., 274 Fed. Appx. 569 (9th Cir. 2008): 
Although Lumbermens has shown that the Summary Plan Description ("SPD") unambiguously confers upon the Plan administrator discretionary authority to determine eligibility for benefits and to construe the terms of the plan,  see Ingram v. Martin Marietta Long Term Disability Income Plan, 244 F.3d 1109, 1112 (9th Cir. 2001), it has failed to show that it properly furnished Gertjejansen with the SPD as required by ERISA regulations. 
… 
A plan administrator satisfies those disclosure requirements by furnishing documents through electronic media as long as the administrator "takes appropriate and necessary measures reasonably calculated to ensure that the system for furnishing documents . . . [r]esults in actual receipt of transmitted information." 29 C.F.R. § 2520.104b-1(c)(1)(i). Lumbermens has submitted nothing on the record to suggest that the mere placement of an updated SPD on its intranet site could ensure that Gertjejansen would actually receive the transmitted information. The district court correctly reviewed the denial of benefits de novo. When de novo review applies, "the court simply proceeds to evaluate whether the plan administrator correctly or incorrectly denied benefits."  

Disclaimer: The intent of this analysis is to provide the recipient with general information regarding the status of, and/or potential concerns related to, the recipient’s current employee benefits issues. This analysis does not necessarily fully address the recipient’s specific issue, and it should not be construed as, nor is it intended to provide, legal advice. Furthermore, this message does not establish an attorney-client relationship.  Questions regarding specific issues should be addressed to the person(s) who provide legal advice to the recipient regarding employee benefits issues (e.g., the recipient’s general counsel or an attorney hired by the recipient who specializes in employee benefits law).