Employers know that they must prepare and distribute a summary plan description (SPD) for their ERISA benefit plans, including retirement benefits, health insurance, life insurance and disability insurance. Because of the length of such documents, employers may prefer to distribute the documents electronically. Some would like simply to post the SPDs to a company intranet. A recent district court decision from New York highlights the risk of only posting the SPD. http://www.gpo.gov/fdsys/pkg/USCOURTS-nyed-1_09-cv-05029/pdf/USCOURTS-nyed-1_09-cv-05029-1.pdf
The New York case involved a life insurance claim relating to an employee who went out on disability and lost his group term life insurance coverage because he was no longer actively at work. The plan had a waiver of premium provision under which an employee who was disabled could request that life insurance coverage continue without premium payment during the period of disability. The employee did ask for the waiver of premium and died after the life insurance coverage lapsed. The employee’s estate made a claim for the life insurance benefits, arguing that the coverage should be granted because the employee did not know that he needed to request the waiver of premium.
The employer said that the employee should have known from the SPD that the employee needed to request the waiver of premium. However, the only evidence of delivery of the SPD was the employer’s claim that the SPD was posted to the company intranet. The court noted that posting the SPD was considered insufficient delivery for ERISA plans under Department of Labor guidance. The court found that the employee’s estate was entitled to the death benefit. Because there was no waiver of premium, presumably the employer, rather than the insurance company, will be required to pay that benefit.
Employers may wish to check their procedures to ensure that they are properly delivering SPDs to plan participants and that they have evidence they have done so.