DOL Proposes Rule to Modernize ERISA Health Plan Disclosure Delivery

In a welcome move, the U.S. Department of Labor (DOL) issued a proposed rule that would bring health plans in line with the already applicable to retirement plans, creating a safe harbor to allow health plans to provide required disclosures electronically.

As noted by the DOL, group health plans currently print and mail up to 11 billion sheets of paper each year. The change aims to reduce this environmental impact, increase efficiencies, lower costs, and provide participants and beneficiaries with more reliable access to their health plan information.

The proposed rule supplements existing rules; if you are happy with your current disclosure methods, group health plans may continue to follow the 2002 safe harbor rule for electronic delivery or provide paper documents.

A Quick Recap

ERISA requires plan administrators to deliver plan-related information using methods reasonably calculated to ensure actual receipt. Hand delivery or first-class mail automatically pass this test under current rules, but electronic delivery ("e-delivery") generally does not.

The DOL's approach to e-delivery for retirement plans has been to offer two safe harbors. The first safe harbor requires an employee's actual consent to e-delivery, and the second requires an employee to be "wired at work," meaning the employee uses a computer as an integral part of their job duties and can access the electronic plan documents at any location the employee is expected to work.

In 2020, the DOL finalized a new rule creating a safe harbor allowing retirement plans to use a new e-delivery method. That rule expressly excluded health and welfare plans, meaning those plans were still stuck in 2002.

New Proposed Rule

Under the proposal, group health plan sponsors could post required ERISA health plan disclosures on a website or portal and send participants a Notice of Internet Availability (NOIA) electronically instead of mailing paper documents. Unlike the retirement plan rule, disclosures cannot be sent directly to participants—instead, citing privacy protections, participants and beneficiaries can access the documents through a protected website after receipt of a NOIA.

Participants would retain the right to request paper copies at no cost and to opt out of electronic delivery altogether.

Does the proposed rule apply to all welfare plans? No. The proposed rule would apply only to ERISA group health plans as defined in ERISA § 733. It would not apply to other welfare arrangements, including disability plans, life insurance plans, vacation benefits, apprenticeship programs, or dependent care programs.

Who can receive electronic notices? The safe harbor applies to participants or beneficiaries if the plan has an electronic address for the individual, such as an email address or a phone number capable of receiving electronic notices. This electronic address can be provided directly by the individual, collected during employment/enrollment, or assigned by the employer for a work-related purpose. The employer must monitor emails for undeliverable notifications or other bounce backs and send a paper copy if the email address is no longer valid. 

What documents would it cover? All of them! The proposal broadly covers virtually any document that ERISA requires a group health plan administrator to furnish, including summary plan descriptions, summaries of material modifications, summary annual reports, COBRA notices, HIPAA special enrollment notices, and even notices required to be furnished upon request only.

What steps are required to use the new safe harbor? Before using the new safe harbor, administrators must provide an initial notice describing:

• Electronic delivery procedures;
• Electronic address being used;
• How to access documents;
• Paper-copy rights; and
• Opt-out rights

This notice can be provided by paper or electronically to those employees who satisfy the prior e-delivery safe harbors (NOTE: retirement plans must continue to send a paper initial notice to all participants/beneficiaries under the 2020 safe harbor). 

The administrator must also set up a compliant website or portal to house the electronic disclosure. The website must:

• Make documents available by the applicable disclosure deadline;
• Keep documents available for at least one year (or until superseded);
• Present documents in an understandable manner;
• Use searchable formats;
• Allow participants to save or print documents;
• Protect personal information and confidentiality.

When a disclosure is posted online, the administrator must send the participant a NOIA to their electronic address informing them that the document is available.

For now, this rule is only in proposed form and subject to revision after the comment period closes. If finalized, the rule would take effect on the first day of the first calendar year following publication of the final rule. Plan sponsors should work with ERISA counsel to ensure e-delivery requirements are met. Please contact your DWT benefits attorney for more information.

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Christine Hawkins is counsel in DWT's Bellevue office and she advises clients on a wide range of employee benefits and ERISA compliance matters. If you have questions about how the proposed rule affects your organization or need assistance updating your policies and practices, please contact the authors or another member of our employment services team. To stay informed, sign up for our alerts.