Spencer Fane LLP Logo

Electronic Distribution of SPDs

More and more employers are choosing to post employee handbooks and related documents on the employer’s intranet site. In many respects, this is an elegant solution to the problem of ensuring that the latest version of each such document is readily and conveniently available to all employees. Updates can be made electronically — and incorporated directly into the text of the document — so that employees can always access a single document containing all of the latest provisions. Unfortunately, employers who rely solely on their intranet sites for distributing a Summary Plan Description (“SPD”), as required for each ERISA plan, may find that this approach carries a costly downside.

ERISA requires that an SPD be “furnished” to each plan participant (as well as to each pension plan beneficiary and alternate payee). The Department of Labor (“DOL”) has long interpreted this to mean that an employer may not merely make paper copies of an SPD available — for instance, in the Human Resources Department. Instead, SPDs must be either mailed or hand-delivered.

As electronic communication has become the norm, the DOL has taken the position that merely posting an SPD on an employer’s intranet site is functionally equivalent to simply making paper copies available. Accordingly, doing so will not satisfy ERISA’s SPD requirements.

The courts agree with the DOL on this point. For instance, in the recent case of Gertjejansen v. Kemper Insurance Companies, Inc., the 9th U.S. Court of Appeals refused to defer to a plan administrator’s interpretation of a substantive plan provision – despite “Firestone” language in the plan’s SPD that would otherwise require such deference – because the employer had merely posted the SPD on its intranet site and could not prove that the participant had actually read the provision in question.

The failure to “furnish” an SPD could have other adverse consequences for an employer. For instance, a court might refuse to consider language in the SPD that would clarify an ambiguous plan provision in favor of the employer. Or a health plan sponsor might be unable to enforce the COBRA notification procedures specified in the SPD – thereby exposing the plan to unexpected and unnecessary COBRA liability. And, in the event of benefits-related litigation, a court might even assess a penalty of up to $110 per day for failing to provide an SPD upon request.

Does this mean that SPDs should not be posted on an intranet site? Not at all. Even if paper copies continue to be furnished to participants, there is great value to an employer in being able to update an SPD electronically and to have that update immediately available to all plan participants.

Moreover, the electronic distribution of an SPD may well satisfy ERISA’s requirements — even without furnishing a paper copy — if a plan sponsor can demonstrate that its electronic delivery method was reasonably calculated to ensure that participants actually received the SPD. For instance, the DOL has approved of delivery methods whereby an SPD (or a link to an SPD as posted on a website) is attached to an e-mail message that is sent to plan participants, so long as the employer’s e-mail system uses a return-receipt or notice of undelivered e-mail feature.

Alternatively, an employer might conduct periodic reviews or surveys to confirm that employees are actually receiving these e-mail messages. There are even procedures for transmitting SPDs to employees’ home e-mail addresses, although the conditions laid down for doing so are so onerous as to make them largely impractical.

The bottom line is that sponsors should ensure that whatever procedures they use for distributing SPDs — whether they involve paper or electronic versions — comply with ERISA’s requirement that such documents be “furnished” to participants. Posting SPDs on an intranet site may be an excellent starting point, so long as the process does not stop there.