Question: When does ERISA require that employees provide an electronic disclosure authorization? How about an acknowledgement of receipt?
Compliance Team Response:
ERISA Electronic Disclosure Rules (SPDs, SMMs, etc.)
The standard ERISA disclosure rules provide that ERISA-required documents must be provided to participants in a manner that’s “reasonably calculated to ensure actual receipt” by the intended recipient.
The DOL has a safe harbor under which plans will be deemed to meet this standard. This method is sometimes misunderstood as a requirement—it is not. It is merely the only guaranteed way to satisfy ERISA’s disclosure requirements by electronic media. The safe harbor generally requires either (a) the employee has work-related computer access that is integral to his or her job duties (i.e., employee works at a desk with a computer), or (b) the employee’s electronic affirmative consent to electronic disclosure.
There are no specific penalties for failure to properly distribute these documents (unless there is a written request for the document, in which case the penalty is $110/day if the employer does not provide the document within 30 days of the request). However, the employer may not be able to enforce the written terms of the plan in a claim for benefits lawsuit if the plan documentation was not properly disclosed. There are many unfortunate cases where courts have come to this conclusion.
Summary: If all of the company’s employees have work-related computer access that is integral to their job duties, it is clear that no authorization is required to distribute ERISA documents electronically. If there are employees who don’t meet this standard, the safer approach is to meet the DOL’s safe harbor by receiving their affirmative consent to electronic disclosure of ERISA documents.
Note that special relaxed electronic delivery rules apply for the SBC.
Proof of Delivery
There is no requirement under ERISA that employers get confirmation that an employee has received an ERISA document. The company must show that an acceptable method of distribution was used, and that method was reasonably calculated to ensure actual receipt—but not that a particular participant actually received the document.
If they are currently using an acknowledgement of receipt form, they can eliminate that piece if they prefer.
29 CFR §2520.104b-1(b)(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. For example, in-hand delivery to an employee at his or her worksite is acceptable. However, in no case is it acceptable merely to place copies of the material in a location frequented by participants. It is also acceptable to furnish such material as a special insert in a periodical distributed to employees such as a union newspaper or a company publication if the distribution list for the periodical is comprehensive and up-to-date and a prominent notice on the front page of the periodical advises readers that the issue contains an insert with important information about rights under the plan and the Act which should be read and retained for future reference. If some participants and beneficiaries are not on the mailing list, a periodical must be used in conjunction with other methods of distribution such that the methods taken together are reasonably calculated to ensure actual receipt. Material distributed through the mail may be sent by first, second, or third-class mail. However, distribution by second or third-class mail is acceptable only if return and forwarding postage is guaranteed and address correction is requested. Any material sent by second or third-class mail which is returned with an address correction shall be sent again by first-class mail or personally delivered to the participant at his or her worksite.
29 CFR §2520.104b-1(c):
(c) Disclosure through electronic media.
(1) Except as otherwise provided by applicable law, rule or regulation, 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) 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
(B) Protects the confidentiality of personal information relating to the individual’s accounts and benefits (e.g., incorporating into the system measures designed to preclude unauthorized receipt of or access to such information by individuals other than the individual for whom the information is intended);
(ii) 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;
(iii) 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 (e.g., the attached document describes changes in the benefits provided by your plan) and of the right to request and obtain a paper version of such document; and
(iv) Upon request, the participant, beneficiary or other individual is furnished a paper version of the electronically furnished documents.
(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;
(C) Prior to consenting, is provided, in electronic or non-electronic form, a clear and conspicuous statement indicating:
(1) The types of documents to which the consent would apply;
(2) That consent can be withdrawn at any time without charge;
(3) The procedures for withdrawing consent and for updating the participant’s, beneficiary’s or other individual’s address for receipt of electronically furnished documents or other information;
(4) 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
(5) Any hardware and software requirements for accessing and retaining the documents; and
(D) Following consent, if a change in hardware or software requirements needed to access or retain electronic documents creates a material risk that the individual will be unable to access or retain electronically furnished documents:
(1) Is provided with a statement of the revised hardware or software requirements for access to and retention of electronically furnished documents;
(2) Is given the right to withdraw consent without charge and without the imposition of any condition or consequence that was not disclosed at the time of the initial consent; and
(3) Again consents, in accordance with the requirements of paragraph (c)(2)(ii)(A) or paragraph (c)(2)(ii)(B) of this section, as applicable, to the receipt of documents through electronic media.
About the author
Lead Benefits Counsel
Brian Gilmore is the Lead Benefits Counsel at Newfront. He assists clients on a wide variety of employee benefits compliance issues. The primary areas of his practice include ERISA, ACA, COBRA, HIPAA, Section 125 Cafeteria Plans, and 401(k) plans. Brian also presents regularly at trade events and in webinars on current hot topics in employee benefits law. Connect with Brian on LinkedIn.
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