DOL Proposes New Electronic Delivery Rules for Health Plan Documents

The landscape of how group health plan documents are delivered in the United States is on the brink of transformation. On July 23, 2023, the U.S. Department of Labor (DOL) unveiled a proposed rule aimed at establishing a new electronic disclosure safe harbor for Employee Retirement Income Security Act (ERISA)-covered group health plans. This move, which seeks to modernize regulations that have remained largely unchanged since 2002, reflects a growing recognition that the current system—heavily reliant on physical paper and hand delivery—no longer meets the needs of a digital-first workforce.

The proposed rule would allow employers and plan administrators to provide necessary documents online and notify participants about their availability via a notice of internet availability (NOIA), rather than mailing paper copies. This shift not only promises to streamline communication but also has significant implications for compliance and administrative procedures surrounding health plan disclosures.

Understanding the Proposed Rule

The DOL's proposed rule is a direct response to years of advocacy for modernization in how health plan communications are handled. The existing framework, established in 2002, permits electronic delivery only to employees who have regular computer access as part of their job. For those without such access, the rule mandates affirmative opt-in consent or default paper delivery.

In light of these outdated provisions, a coalition of lawmakers, including a Republican-led group in the House of Representatives, urged the DOL to create a new default electronic delivery safe harbor for health and welfare plan disclosures. The proposed rule aims to enhance efficiency and improve access to critical information for all employees, regardless of their job roles.

What the New Safe Harbor Entails

Under the proposed electronic delivery system, group health plans providing medical, dental, vision, and related health benefits would benefit from the new safe harbor. However, it's important to note that this rule does not extend to other ERISA welfare benefits, such as disability, life insurance, or prepaid legal plans. The DOL has sought public comments on whether these benefits should also be included in the proposed safe harbor.

To utilize this safe harbor, plan administrators must adhere to specific requirements:

• They must collect and maintain valid electronic addresses from each participant, such as email addresses or smartphone numbers for text message notifications.
• Prior to implementing electronic delivery, administrators must send an initial paper notice to each participant, explaining the change and their right to opt out.
• Whenever a required document becomes available, the administrator must send an NOIA to the participant's electronic address, directing them to access the document online.
• Documents must be posted on a website or electronic repository by the required deadline and remain accessible for at least one year or until superseded by a new version.
• Documents must be searchable, printable, and saveable in electronic form.

Key Compliance Considerations

As employers and plan administrators prepare for the potential implementation of this rule, compliance with existing regulations and new requirements will be crucial. For instance, while the proposed rule allows for electronic delivery, it does not alter any record-retention obligations that apply under ERISA or other laws. Employers must still honor opt-out requests and provide free paper copies upon request, with no limits on the number of copies requested.

One notable difference from a similar framework adopted for retirement plans in 2020 is that this proposal does not permit the email delivery of documents themselves. Instead, while employers can send NOIA via email, participants must visit a separate website or portal to access the documents. The rationale for this distinction has not been clearly articulated by the DOL, leaving many benefits attorneys puzzled.

Managing Data Security and Participant Rights

Data security and participant privacy will be paramount as plan administrators transition to electronic delivery methods. The proposed rule stipulates that if an employer-assigned email address becomes unavailable—such as in the case of a terminated employee who retains COBRA continuation coverage—the employer must either keep the address active or obtain a replacement. Failing to do so will revert the individual to paper delivery.

This provision raises important questions for the relationship between employers and third-party administrators (TPAs), as the TPA may be responsible for maintaining the document website on behalf of the plan sponsor. Brokers and employers need to clarify which party in the service chain is responsible for document posting and NOIA distribution, ensuring that written service agreements clearly outline these responsibilities.

The Wrap Document Dilemma

A significant area of concern involves employers who utilize wrap summary plan descriptions (SPDs). Many organizations combine various benefits—including group health plans and non-health welfare benefits—into a single wrap document. The DOL has yet to clarify whether the new safe harbor would apply to the entire wrap document or solely to the group health plan components.

This ambiguity means that employers with wrap SPDs covering disability, life insurance, or other non-health benefits may need to maintain two separate delivery methods, potentially complicating compliance efforts until the DOL provides further guidance.

Engaging in Proactive Compliance Conversations

The proposed rule is currently open for public comment until September 21, 2023, and brokers advising employer clients should seize this opportunity to initiate compliance conversations. Employers need to evaluate which plan documents will fall under the new safe harbor, how they will collect and store participant electronic addresses, and what the implications are for data management once an employee terminates.

Additionally, discussions about coordination between the plan sponsor, TPA, and COBRA administrator should be prioritized to ensure seamless implementation of electronic delivery methods when the final rule is established. Brokers who proactively engage in these discussions will be better positioned to support their clients during the transition period.

Key Takeaways

• The DOL's proposed rule aims to modernize group health plan document delivery through electronic means.
• Employers must collect valid electronic addresses and provide clear notices about changes to delivery methods.
• Compliance with existing ERISA obligations remains critical, including honoring opt-out requests.
• Security and privacy considerations are paramount, especially regarding data management and participant rights.
• Brokers should initiate compliance conversations with clients to prepare for the proposed changes.

Frequently Asked Questions

What are the main changes introduced by the DOL's proposed rule?

The DOL's proposed rule aims to create a new electronic disclosure safe harbor for ERISA-covered group health plans, allowing employers to deliver required documents online and inform participants via a notice of internet availability (NOIA). This change seeks to modernize the delivery process, moving away from traditional paper methods.

How will this affect employers and plan administrators?

Employers and plan administrators will need to adapt their practices to comply with the new electronic delivery requirements. This includes collecting valid electronic addresses from participants, sending initial notices about delivery changes, and ensuring that all documents are posted online in a searchable and printable format.

What should brokers do in response to the proposed rule?

Brokers should proactively engage in compliance conversations with their employer clients to discuss the implications of the proposed rule. This includes evaluating which documents will fall under the new safe harbor, how to manage participant electronic addresses, and ensuring data security and privacy compliance.

Is there a timeline for the finalization of this rule?

As of now, there is no set timeline for the finalization of the proposed rule. The public comment period is open until September 21, 2023, and the DOL will review feedback before making any final decisions regarding the implementation of the electronic delivery safe harbor.