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Electronic Disclosures: It is Not as Simple as Sending an E-mail

Posted in Plan Administration, Retirement Plans, Welfare Plans

In light of all the PPACA disclosure requirements, and with the year-distributions required for retirement plans, employers tend to want to distribute benefit plan notices electronically.  Maybe companies want to post them on a company website or e-mail them to employees, but there is no question that mailing paper notices to employees is the least preferred method for employers.  Unfortunately, it is the preferred method for plan communications from a regulatory perspective. ERISA does permit the electronic disclosure of certain plan communications under certain circumstances.  But employers should be very careful to follow these rules.

Plans can distribute all manner of plan communications electronically, including SPDs, open enrollment materials, summaries of material modification, COBRA and HIPAA notices and even the summary of benefits coverage notice required under PPACA.  But the rules for electronic distribution are difference depending on whether employees have work-related computer access.  The primary difference is the requirement of obtaining consent.

For employees with work-related access to a computer and the company intranet, a notice can be delivered electronically if (1) the plan administrator uses appropriate means to ensure actual receipt of the notice, (2) the notices meet all of the requirements required for the notice (such as timing of distribution and content) and, (3) the recipient is provided with an explanation of the significance of the notice and is given the opportunity to obtain a hard copy of the notice (and any fee if applicable).

For employees without work-related computer access, an employer must get affirmative consent from the employee to receive notices electronically.  The consent is only valid if, before obtaining the consent, the employer specifically identifies those documents that will be provided electronically and provides an ability to withdraw the consent at any time.  Then all notices must satisfy the 3 requirements for employees who have work access.  So unless your employee has regular work-related access to a computer, e-mailing a disclosure without prior consent is not an effective distribution.

By the way, a recent survey conducted about benefits communications revealed that 29% of employees preferred direct communications with HR, 19% said they preferred direct mail and only 17% said that preferred e-mail or website notices. This is not to suggest that electronic disclosures are not appropriate communications, but it does suggest that just sending notices via e-mail without some explanation of the purpose causes more confusion (which can lead to bigger headaches).  So employers should be aware that if they are going to distribute benefit notices electronically, follow the disclosure rules carefully so that confusion is not compounded and compliance is assured.  And make sure to ask your attorneys at Fox Rothschild for assistance if you have questions about required disclosures and their distributions.