Employers and employees have embraced benefit portals to enroll in coverage and access benefit information. Despite the near ubiquity of electronic benefits media, rules that govern the electronic distribution of materials required to be disclosed by ERISA haven’t kept pace – having been written more than a decade ago.
Today’s rules have an over-arching requirement for distribution of plan documents – that the employer or plan administrator must use a means that is “reasonably calculated to ensure actual receipt” of required notices by plan participants. The method also has to achieve “full” distribution. These sweeping requirements have led many employers to provide documents by first-class mail as this continues to be the “gold standard” for sending notices.
For a variety of reasons, including the cost of printing and mailing documents, employers want to use electronic means to send notices. In a recent comment letter NAHU sent to the ERISA Advisory Council they recounted an employer’s expense of $35,000 to prepare and mail ERISA required documents.
The rules on electronic distribution consider two groups of employees:
- Those employees with regular work-related computer access
- Employees without regular work-related computer access.
Employers may distribute documents to employees with regular access to computers as a part of their workday without obtaining consent from employees to receive them electronically. The employees don’t have to have a means to print the documents but only to access them. Importantly, the employee must be able to access the documents where they are performing their duties. As such, a computer kiosk in the break room does not meet these requirements.
For all others, the employer must provide paper copies of documents unless an employee “affirmatively consents” to electronic distribution of documents. This consent must be obtained prospectively, i.e., before any documents are distributed. Furthermore, the consent must include an electronic address to receive the information.
An employer must provide the following information as a part of affirmative consent to receive documents electronically:
- If documents will be sent electronically, then the employee must affirmatively consent from the email address that they agree to use to receive information
- A statement regarding the types of documents that will be provided electronically
- Notice that the employee can withdraw consent, how to do so and that paper copies can be requested and whether there is a charge to receive paper documents
- How to notify the employer of changes to the address for electronic disclosure
- Any requirements relative to hardware or software to obtain the information.
The method must also result in actual receipt of the information. This may require a confirmation of receipt of transmitted notices or a process to address undelivered electronic mail.
Confidentiality of electronic documents that contain personal information is also required.
There are also format requirements that must be met. In short, the electronic documents must be consistent with the style, format and content requirements applicable to the particular document.
And, it must be clear to the recipient that the information has significance. For example, if the document relates to changes in the benefits, that should be evident in the transmittal.
DOL rules on disclosure can be found here. Technical release 2011-03 on the topic can be found here.
Electronic Distribution of Forms 1095-B and 1095-C
The rules to distribute the Employer Shared Responsibility Forms to individuals are similar to those established by the DOL for ERISA purposes. Any electronic notice must contain all of the required information that also complies with the guidelines in IRS Publication 5223. Publication 5223 is titled “General Rules and Specifications for Affordable Care Act Substitute Forms 1095-A, 1094-B, 1095-B, 1094-C and 1095-C.”
Affirmative consent to receive the statements electronically is required and must not have been withdrawn prior to the statement being issued. As with the ERISA document distribution rules, the consent must be made electronically in a way that shows that the individual can access the statement in the electronic format in which the form will be furnished.
The employer must also inform the recipient that the statement is ready to be accessed and printed, if desired. The employer may provide this information by mail or electronically. Notably, this notice must include the capitalized statement “IMPORTANT TAX RETURN DOCUMENT AVAILABLE.” This statement would be the subject line if the notice is being sent by email.
The IRS has not provided a safe harbor for distribution of the 1095-B and 1095-C by electronic means. As such, the rules should be strictly followed.
In the letter to the ERISA Advisory Council as well as other communications with the federal Departments of Labor and Treasury, NAHU has called for an update to the electronic distribution guidance for employers to make use of electronic means more flexible. NAHU has called for making use of a “reasonably accessible” standard where an employee could acknowledge through online enrollment that disclosure documents provided online are reasonably available.
NAHU has also recommended accommodation for apps to store and access notices and plan documents. And, reflecting on today’s electronic media norms, NAHU suggested that a valid address for electronic delivery notifications should include phone numbers for text messages as well as social media accounts.
NAHU’s recommendations also include a call for harmonizing requirements for electronic distribution across government agencies. Employers would gain administrative and compliance efficiencies if the DOL and Department of the Treasury had the same disclosure requirement rules.
In the meantime, employers sanguine about these distribution requirements do so at their peril. A 2015 court case, Thomas v. CIGNA Group Ins., found in favor of the employee’s beneficiary because there was no evidence that the participant received the SPD on the company intranet.