In the ever-increasing push to “go green,” many employers are opting to distribute required notices and disclosures to employees via e-mail or through website postings. Plan sponsors are asking: Can an employer rely on an employee’s generalized consent to receive employee benefit materials electronically as consent to receive the Form 1095-C via e-mail? And, with respect to non-personalized disclosures, such as the Summary Plan Description (SPD), updated plan documents, and Summary Annual Reports (SARs), can an employer satisfy the requirements by just posting on the company’s intranet or on a TPA’s website? The short answer to these two questions is “no, and no.”
This advisory explains why employers must proceed with caution when providing disclosures electronically, and describes the requirements for consent to receive the Form 1095-C electronically, and highlights the lessons that can be learned from a recent case,Thomas v. CIGNA Group Ins., 2015 WL 893534 (E.D.N.Y 2015), regarding ERISA disclosure requirements for non-personal disclosures, such as Summary Plan Descriptions.
What Consent is Necessary to Provide the Form 1095-C Electronically?
IRS Form 1095-C can be provided in paper form or electronically.1 To provide Form 1095-C electronically, an employer must obtain an informed consent from the employee. A general consent from employees to receive materials electronically, or consent to receive Form W-2 electronically, is not sufficient. In particular, the consent to receive Form 1095-C electronically must specifically identify Form 1095-C.
The regulations have the following specific instructions:
- E-Mail Delivery – If the consent to receive Form 1095-C is made electronically, the actual consent must be made in a manner that reasonably demonstrates the employee’s ability to access the statement in the electronic format in which it will be furnished. An employer can also obtain a consent using a paper format.
- Website Access to Form 1095-C – The regulations allow recipients of Form 1095-C to consent to access Form 1095-C in response to a notice on a website. If an employer will furnish the Form 1095-C on a website, the employer must notify the recipient that the Form 1095-C is posted. The notice may be delivered by mail, e-mail, or in person, and must 1.) provide instructions on how to access and print the statement, and 2.) include the following statement in capital letters, “IMPORTANT TAX RETURN DOCUMENT AVAILABLE.” If the notice of the Form 1095-C posting is provided to employees via email, this all-caps statement must be included in the subject line of the e-mail.
The lesson? If you plan to distribute Form 1095-C either through e-mail or through a link on your intranet, first confirm that you have received proper consent from each employee to receive the form electronically.
ERISA Disclosures: Simple Posting Is Not Enough
A Department of Labor safe-harbor allows employers to distribute required ERISA disclosures to participants electronically, as long as certain requirements are met. In particular, an employer may post disclosures, such as SARs, on its intranet or the TPA’s website if the employer separately alerts employees of the posting.
This requirement to provide a separate notice of a posting was tested this year in Thomas v. CIGNA Group Ins., 2015 WL 893534 (E.D.N.Y 2015). In Thomas, an employer denied benefits from a life insurance policy to a beneficiary because the participant allowed the policy to lapse. The participant’s beneficiary filed a lawsuit, claiming that the procedures for continuing the policy, which were in the SPD, had not been communicated to the participant because she was not given a copy of the SPD.
The plan’s administrative record showed that SPDs were posted to the employer’s intranet, but there was no evidence that participants received a copy of the SPDs nor that participants had been given proper notice of the SPD posting, as is required under DOL rules. The court held that the plan administrator’s (1) posting of the SPD on the employer’s intranet was insufficient disclosure, and as a result, (2) denial of benefits was arbitrary and capricious because there was no evidence that the plan administrator had properly furnished the participant with a copy of the SPD which would have given the participant adequate information to continue her policy.
The lesson? It is not enough to simply post an ERISA-required disclosure, in this instance, the SPD, on an employer’s or TPA's intranet. The plan administrator must notify participants of the posting. In addition, as best practices, the plan administrator should keep good records showing (1) when the notice was distributed, and (2) who received the notice.
In addition to specifically alerting employees each time an ERISA disclosure is posted on the intranet, employers must comply with other DOL requirements for electronic disclosures, such as limiting electronic disclosures to those individuals who are permitted to receive them, confirming receipt of the disclosure and following the timing and content requirements for the notice of posting. If an employer opts to send paper copies of the notice, the employer should keep a list of the participants to whom the paper notice was sent and the date of mailing or distribution, along with a copy of the SPD that was posted.