For most employers, creating and distributing summary plan descriptions (SPDs) for each health plan option is viewed as a necessary evil, to be postponed as long as possible. Despite SPDs' value to plan participants as comprehensive sources of information about their benefits, employers are often reluctant to issue them any more often than is legally required due to the sheer cost of production and distribution.
Complicating matters are the current Department of Labor (DOL) regulations on distribution—regulations that haven't been updated in almost 15 years.
Who Must Receive SPDs and When They Must Be Distributed
As reported in HR Magazine, "Most private-sector health plans are covered by the Employee Retirement Income Security Act (ERISA), which requires sponsors of both insured and self-funded health plans to create a comprehensive plan document that includes extensive legal language and a more succinct and reader-friendly SPD that covers the salient points plan participants need to know about the plan and their rights under it."
SPDs must be provided to all plan participants within 90 days of becoming covered by the plan, although sponsors of a new plan have 120 days after the plan becomes subject to ERISA to distribute the SPD. Updated SPDs must be furnished every five years if changes were made to SPD information or if the plan was amended. Otherwise, SPDs must be furnished every 10 years.
The Safe Harbor Rules
In October 2002, the DOL issued guidance around distribution of SPDs and similar materials. According to the guidance, paper is the preferred distribution method and employers wishing to distribute materials electronically must ensure that the following very specific requirements are met:
- Participants who can access electronic documents at their work location (whether on site, in the office, at home or on the road), and for whom such access is an integral part of their work duties, may receive electronic materials automatically (i.e., without affirmatively consenting to electronic distribution).
- Participants who don't meet these access requirements (e.g., retirees, beneficiaries, active employees who don't use a computer as part of their jobs) must provide consent in a manner that shows they are able to receive SPDs electronically.
Before consent is obtained, participants must be told:
- That they can withdraw their consent at any time without charge.
What the procedures are for withdrawing consent and for updating an address or other information.
- What software and hardware is required to access and save the documents.
In addition, the delivery system must:
- Result in actual receipt of the document (e.g., using return receipt notices).
- Protect the confidentiality of any personal information.
- Use the same style and format as the paper document.
- Provide notice, when the document is distributed, of why it's important and saying that the participant can ask for a free paper copy of the SPD.
Employers interested in using electronic distribution methods must solicit consent, track responses, store e-mail addresses and monitor delivery—an administrative headache few want to take on.
Yet, printing and mailing SPDs is often not an appealing option either. The average SPD costs around $5 per participant to print and mail—that's one SPD for one person. Given that most employers offer multiple types of coverage (dental, vision, disability, life, retirement, etc.), each with its own SPD requirement, SPD distribution can quickly make a substantial dent in the HR budget.
[SHRM members-only HR Q&A: What is the difference between a plan document and a summary plan description?]
The Case for Electronic Distribution
In the almost 15 years since the regulations were last updated, Internet access has skyrocketed—84 percent of adults now use the Internet (up from 60 percent in 2002) and usage is almost universal for those of working age. In addition, people are using smartphones and tablets everywhere.
Today, most employees are used to electronic distribution being the default method for materials regarding 401(k) savings plans, and more employers are providing their annual open enrollment benefits materials online only.
Similarly, online SPDs for health plans would provide up-to-the-minute, 24/7 access to important information on multiple platforms and from any location, and would even allow enrollees to share information about plan coverage with their doctors over their smartphones.
Online SPDs also offer the opportunity to include outside links to additional information and resources, and can be made more visually appealing at a lower cost (no fancy paper and colored ink). And, with today's increasing focus on accessibility, electronic documents are far more adaptable to requirements of special needs audiences.
Because SPDs tend to be lengthy and not visually appealing, employees often leave them to gather dust, tossing them out when new ones are issued or when they move on to another employer—adding to already bulging landfills.
Interestingly, the rules on electronic distribution are inconsistent within the government. IRS regulations addressing distribution of other types of benefits materials are far more liberal, as are the DOL's rules under the Affordable Care Act relating to health plan Summaries of Benefits and Coverage that must be provided to employees at open enrollment. These differing requirements can be tremendously frustrating to keep track of.
For all of these reasons, the time may be right for the new administration to revisit these outdated regulations.
Kim Buckey is vice president of client services at DirectPath, a Birmingham, Ala.-based employee engagement and health care compliance firm.
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