The Department of Labor recently published new regulations on electronic benefit communications and is already receiving support from benefit professionals. The finalized version appeared in the April 9 Federal Register.

The rule offers more options for benefit plans to use electronic technologies including the Internet or other electronic communication networks to communicate information, as well as the ability to send materials to employees' home computers if the workers agree to it. The rules provide a framework for benefit plan sponsors to use new technology, such as the Internet and electronic document storage systems, to improve the efficiency and effectiveness of both plan administration and plan communications with participants.

"We are opening the way for workers and their families to take advantage of 21^st century technologies when receiving benefit plan information," said Secretary of Labor Elaine L. Chao. " This rule is designed to encourage the use of new technologies for communicating information to participants and beneficiaries in ERISA-covered pension, group health and other employee benefit plans. We expect participants and beneficiaries to benefit through improved timeliness, quality and accessibility of information that will flow from instant, on-line availability and access tools such as hot-links and search queries. Plan sponsors will save on expenses from the elimination of printing and mailing costs associated with traditional paper disclosures."

Standards have also been set for administrators and employers who use electronic media to keep benefit plan records as required by the Employee Retirement Income Security Act (ERISA). The final rules permit electronic disclosure of additional documents beyond what was contemplated by the Department of Labor’s (DOL) earlier, proposed rules. All plan disclosure documents required under ERISA Title I and under the DOL’s jurisdiction may be provided electronically, as long as there are safeguards to protect the confidentiality of personal information. This means that COBRA notices, HIPAA certificates of health care coverage, 404(c) notices, QDRO/QMCSOs notifications, plan loan information, individual benefit statements, and other investment-related information may be furnished electronically.

These new rules do not apply to other communications under ERISA, like communications from participants (i.e. spousal consents) or communications between employers and plan administrators. However, the rules do allow a plan to dispose of the original paper records any time after they have been transferred to an electronic recordkeeping system, unless the resulting electronic record would not constitute a duplicate or substitute record under the terms of the plan and applicable federal or state law.

The rule continues to be a "safe harbor," and does not foreclose other means by which plan administrators might use electronic technologies to satisfy disclosure obligations under ERISA. The final rule applies to all reports, statements, notices and other documents required to be furnished under Title I of ERISA over which the department has regulatory and interpretive responsibility.

There are two sets of recipients with regard to electronic disclosure:

1. Those plan participants who can access such documents through their employer’s electronic information system. This system must be located in an area where they are reasonably expected to perform duties as an employee. Thus, employees working form home or on travel are covered, but distribution through a kiosk in a common area in the workplace does not comply with the requirements. The Department of Labor states that if a document is required to be shared with employees, it is not acceptable to merely make the documents available in a location (by kiosk) frequented by employees. Plan sponsors may use kiosks to make plan information available for inspection but not for documents which are required to be furnished to participants.
2. Those plan participants, beneficiaries and others who have affirmatively consented to receiving the documents electronically and who provide an electronic address. These participants must reasonably demonstrate their ability to access documents in electronic form for electronic distribution to be an acceptable means of distribution.

For non-workplace communications, participants and beneficiaries must be given certain basic information necessary to make an informed decision about receiving documents electronically, and then affirmatively consent to receive plan communications in electronic form. The consent provisions were modeled after the consumer consent provisions in the Electronic Signatures in Global and National Commerce (E-SIGN) Act. The final rule also provides that participants and beneficiaries always have a right to a paper version of electronic disclosures on request.

In order to acquire consent from participants and beneficiaries the administrator must provide:

 

1. A clear statement identifying the applicable documents;

    

    

2. A clear statement of the hardware and software requirements for accessing the documents;

    

    

3. An explanation of the recipient’s right to withdraw consent at any time without charge and to request a paper version of the document (and whether charges apply or not);

    

    

4. The procedures for withdrawing consent;

    

    

5. The procedures for updating the recipient’s address.

    

The plan administrator must also take the appropriate measures to ensure that the electronic distribution system results in actual receipt of the documents. The final rules outline various methods of receipt acknowledgement such as: return-receipts, conducting periodic reviews or surveys to confirm receipt, and notice of undelivered mail. For certain documents, like benefit statements, additional measures must be taken to assure confidentiality of the information and to verify unauthorized receipt of the documents has not occurred.

New technology offers exciting opportunities for improving the efficiency and effectiveness of both plan administration and plan communications with plan participants, beneficiaries, and others who are entitled to plan disclosures under ERISA. Electronic systems offer a workable framework that protects the rights of participants and others, while holding the promise of lower administrative expenses and improved appreciation for the value of the employee benefits. Plan administrators should review their current disclosure documents and determine their capability of distributing such information electronically.

The final rules become effective Oct. 9, 2002, and will apply to plan years beginning on or after that date.

"Labor Department Rule Expands Electronic Disclosure Options For Employee Benefit Plans." U.S. Department of Labor. (April 8, 2002). < http://www.dol.gov/dol/pwba/public/media/press/pr040802.html> (May 2, 2002).

"Three Types of Electronic Signature Laws." HR Technology X-Solutions. (n.d.) < http://www.shrm.org/hrtx/ilinx/2002/0402e1.asp> (May 2, 2002).

"Final Rules on Electronic Disclosure and Recordkeeping." MillimanUSA: Consultants & Actuaries. (April 24, 2002) < http://www.milliman.com/> (August 16, 2002).

"DOL’s Final Electronic Distribution Rules Encompass COBRA Notices." Thompson Publishing Group. (May 2002) < http://www.thompson.com/libraries/benefits/heal/samplenews/heal0205.html> (May 16, 2002).