We live in an era of expanding electronic communications — but there are limits for ERISA plans, as a recent federal court ruling reminds us.
As paper virtually disappears from the workplace, we will surely see a softening of the conditions imposed by the DOL on the electronic distribution of summary plan descriptions. At some point, electronic communication will probably become the norm. But a recent decision by a federal court in New York confirms that we are not yet at that point.
In Thomas v. CIGNA Group Insurance, an employer posted its SPDs on its intranet rather than distributing paper copies. Among those SPDs was one for a life insurance plan under which an employee had more than $200,000 in coverage. The employee terminated employment due to disability in 2004, and subsequently died in 2008 — having allowed her life insurance coverage to lapse due to non-payment of premiums.
As it turns out, the insurance policy included a “waiver-of-premium benefit” that would have allowed a disabled employee to maintain coverage simply by submitting proof of disability within 12 months after becoming disabled. But the disabled worker had failed to submit the necessary proof — a result which her designated beneficiary argued was due to the fact that the employee had never received a copy of the SPD.
The court concluded that the employer did not comply with DOL’s regulations governing the electronic distribution of SPDs, which limit the electronic distribution option to participants who can effectively access electronic documents wherever the participant is reasonably expected to perform his or her duties and for whom access to the employer’s electronic information system is a regular part of those duties. While the employee may have had the requisite level of access before she became disabled, that was not the case after she terminated employment due to her disability. As a result, she could not access the SPD during the 12-month period in which she was required to submit proof of her disability.
The court also noted that even if the employee had continued to have access to the employer’s intranet, the employer fell short on another account: failure to notify her when the SPD was posted. The DOL’s 2002 regulations specify that at the time an electronic document is furnished, each recipient must receive notice (in writing or electronically) of the significance of the document when it’s not otherwise evident, as well their right to receive a paper version upon request.
Finding no evidence that the deceased ever received such a notice, the court concluded the claim denial was arbitrary and capricious because it was both "unsupported by substantial evidence" and "erroneous as a matter of law." The court denied the defendants’ motion for summary judgment and remanded the case for further proceedings.