Intranet Posting of ERISA Summary Plan Description Found Insufficient

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An interesting decision by a New York court last week should put New York employers on notice to take great care in how they distribute information for their ERISA benefit plans.

Employers are advised and should already be aware that they must prepare and distribute summary plan descriptions (SPDs) to their employees at least on a yearly basis, and also as well when changes are made to the plans, including retirement benefits, health insurance, life insurance, and disability insurance. Because of the length of some of these documents, and just for ease of distribution, some employers prefer to deliver these electronically. And some take the even easier approach of posting the SPDs to a company intranet. However, this decision in New York reveals the risk in so doing.

Here, the case involved a life insurance claim relating to an employee who went out on disability and then subsequently 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 only evidence of notice to the employee was that it had been posted to the company’s intranet. The employee did ask for the waiver of premium and died after the life insurance coverage lapsed. The employee’s estate made claim and subsequently sued his employer arguing that the coverage should be granted because the employee did not know he needed to request the waiver of premium based on lack of notice.

The employer argued that the intranet posting was sufficient, but the court disagreed, holding that posting the SPD was insufficient delivery for ERISA plans under Department of Labor guidance. The court found that the estate of the former employee was entitled to the life insurance payout.

New York employers will want to check their means of delivery of ERISA SPDs and ensure that they are properly giving notice and maintain evidence of such for protection.

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Posted In: Legal