SPDs and ERISA Electronic Disclosure Requirements

Per federal regulations, ERISA plans have certain requirements when it comes to providing their participants with up-to-date SPDs. The Department of Labor’s “Reporting and Disclosure Guide” provides the following guidance:

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Essentially, the plan administrator must provide the SPD when an employee is hired, when a participant requests it, and when significant changes are made to the document. To avoid the cost and hassle of handing out paper copies of SPDs, many plan administrators are storing these documents on their company intranets. While convenient and cost effective, this method of SPD dispersal does still have its requirements.

In a recent New York case, the beneficiary of a deceased participant sued over a denied life insurance claim and won. The basis for this win? The plan’s SPD and its availability to participants.

In this case, the benefit claim was initially denied by the insurer because the participant had ceased paying her premiums, which was a result of her becoming disabled and no longer working. Had the participant completed a timely request for a premium waiver, her claim would not have been denied, but this was not done. However, the beneficiary argued that the participant had not known of this requirement because the plan administrator had not done its required duty: providing its current SPD to participants.

The plan administrator had posted their SPD to its company intranet and also sent an employment confirmation letter to the participant when she was hired, referencing the location of their SPD. Nevertheless, by the time the participant had left the job, a new SPD was in place and no notice had been sent of this revised document, which now included the premium wavier requirement. Because of this failure to notify the participant of the new SPD, the court ruled that the claim should not have been denied since the participant had no knowledge of the revised document and hence no knowledge of the need for a premium waiver.

The lesson to be learned from this is always follow ERISA requirements concerning SPDs. Provide participants with access to these documents and notify them of any revisions that occur. As the court in this particular case determined, simply posting the SPD to the company’s intranet without giving adequate notice to participants is similar to merely placing paper copies of these documents in areas that employees frequent, which is not acceptable. Adequate effort must be made to ensure participants receive their SPDs, whether on paper or online.

For more information on SPD disclosure requirements, see the applicable federal regulation at:

http://www.gpo.gov/fdsys/pkg/CFR-2014-title29-vol9/pdf/CFR-2014-title29-vol9-sec2520-104b-1.pdf