Cost Savings for Plan Administrators: Electronic Distribution of Summary Plan Descriptions
Under recently finalized regulations of the U.S. Department of Labor, administrators of employee benefit plans may be able to reduce the costs associated with the distribution of summary plan descriptions ("SPDs") by distributing them electronically. While electronic distribution can be significantly less expensive than conventional distribution, certain notice, consent, and accounting requirements must be complied with under the Employee Retirement Income Security Act of 1974 ("ERISA").
Under ERISA, plan administrators are generally required to furnish to each participant in a benefit plan (and each beneficiary receiving benefits under the plan) a copy of the SPD for the plan. As recently finalized, Labor Regulation § 2520.104b-1 (the "Disclosure Regulation") requires plan administrators to "use measures reasonably calculated to ensure actual receipt" of any materials that the administrator is obligated to furnish to plan participants and beneficiaries under Title I of ERISA.
The Disclosure Regulation sets forth a "safe harbor" (discussed below) for the distribution of plan documents, including SPDs, by electronic media. The safe harbor includes several requirements regarding participant notice of the availability of the SPD in electronic format, participant consent to receipt of the SPD in electronic format, and measures to ensure actual receipt of the SPD. There are also separate requirements relating to SPD distribution via the Internet or an electronic communications network (such as e-mail).
In the Preamble to the Disclosure Regulation, the Labor Department states that the safe harbor is not intended to be the exclusive means by which the requirements of the Disclosure Regulation may be satisfied using electronic media. However, plan administrators may safely rely on the criteria set forth in the Disclosure Regulation to ensure compliance with their disclosure obligations under ERISA.
The Disclosure Regulation Safe Harbor
The Disclosure Regulation safe harbor requires the following:the plan administrator must take appropriate and necessary measures reasonably calculated to ensure that the system for furnishing documents—
- the plan administrator must take appropriate and necessary measures reasonably calculated to ensure that the system for furnishing documents—
--results in actual receipt of transmitted information; and
--protects the confidentiality of personal information relating to the individual's accounts and benefits;
the electronically delivered documents must be prepared and furnished in a manner that is consistent with the style, format and content requirements applicable to SPDs; and
notice must be provided to the recipient of the SPD, in electronic or non-electronic form, at the time the SPD is furnished electronically, that apprises the recipient of the significance of the SPD and of the right to request and obtain a paper version of the SPD.
The Disclosure Regulation provides for two classes of individuals who may receive an SPD via electronic media. First, an SPD may be distributed to a participant via electronic media if: 1) the participant has the ability to effectively access documents furnished in electronic form at any location where he or she may be reasonably expected to perform his or her duties as an employee; and 2) the participant's access to an electronic information system is an integral part of his or her duties as an employee. In other words, plan participants may receive an SPD via electronic media if, for example, they regularly perform their duties as employees at a workstation that is furnished with a computer that allows them to read the SPD and they use the computer every day to perform their duties as employees.
The second class of individuals who may receive an SPD via electronic media includes participants, beneficiaries, or any other person entitled to receive an SPD under Title I of ERISA. This class of individuals may receive an SPD via electronic media only after consenting, in electronic or non-electronic form, to receipt via electronic media. Prior to consenting, these individuals must be provided with notice in electronic or non-electronic form of several rights and procedures relating to SPD distribution, including the right to withdraw consent at any time and the right to request a paper version of the SPD. Finally, this class of individuals has additional rights regarding consent if a change in hardware or software requirements subsequent to the initial consent creates a material risk that the individual will be unable in the future to access the SPD in electronic form.
Electronic Distribution Options
One obvious attraction of distribution of an SPD via electronic media is the significant savings such distribution makes possible as compared to preparing and distributing a printed version of the SPD. In this regard, provision of an SPD via e-mail or the Internet may be even less expensive than furnishing the SPD via other electronic alternatives, such as CD-ROM. However, there are potentially significant administrative problems under the Disclosure Regulation relating to distribution via e-mail or the Internet that may make it less attractive than CD-ROM distribution. Such requirements include the plan administrator's obligation to ensure receipt of the SPD and to obtain participant consent to such distribution electronically.
A plan administrator must take measures reasonably calculated to ensure receipt of the SPD, regardless of the electronic media used. However, ensuring receipt via e-mail or the Internet may be more complicated than ensuring receipt of a hand-delivered CD-ROM. For example, distribution via e-mail requires using return-receipt or notice of undelivered e-mail features (and following up when e-mail is not received). Verifying receipt of an SPD via the Internet may be even more complex, requiring periodic reviews or surveys of all eligible recipients.
More importantly, the class of eligible recipients who must consent to receipt of an SPD via electronic media must do so electronically if the SPD is furnished via e-mail or the Internet. Moreover, such recipients must consent in a manner that reasonably demonstrates the individual's ability to access information in the electronic form that will be used to provide the SPD. Such recipients must also provide an address for the receipt of electronically furnished documents. These additional requirements imply a significant burden on the plan administrator to evaluate in each case whether an eligible recipient has adequately demonstrated the ability to receive an SPD via e-mail or the Internet. On the other hand, the Preamble to the Disclosure Regulation specifically exempts electronic delivery via CD-ROM from these requirements.
Hence, while it may be less expensive than furnishing a CD-ROM to eligible recipients, distribution via e-mail or on the Internet entails administrative burdens that may outweigh the cost savings. On the other hand, distribution via CD-ROM does not obligate plan administrators to obtain consent electronically, and a plan administrator's measures to ensure receipt could be as simple as a contemporaneous record of all recipients who have been furnished the CD-ROM.