ERISA’s disclosure rules require plan administrators to inform participants of circumstances that may cause a loss of benefits. But just what counts as a disclosure?
This question was recently litigated in the U.S. District Court for the Eastern District of New York. The case involved the denial of a payout from a group life insurance policy after an employee died without completing a waiver of premium request.
The plaintiff was the beneficiary of his sister’s two group life policies provided by her employer. The sister later ceased working because of disability and stopped paying premiums. She never returned to work and ultimately died in 2008. The insurance policies’ summary plan description (SPD) provided that a waiver-of- premium option was available for employees who became disabled, but they had to submit proof of their disability status within a set time period, which the sister failed to do. The plaintiff stated that his sister had never received information explaining the waiver of premium standard.
The employer countered that it had disclosed the information by posting the SPD — along with hundreds of other pages of information regarding various benefits — on the company’s intranet site. Because of the large amount of information on the intranet site, a benefits administrator testified that employees rarely read every page of the information available and rely on benefit summaries.
The court noted that ERISA requires more than simply making the SPD available — the delivery method must be reasonably calculated to ensure actual receipt. Based on this information, the judge found that the sister hadn’t been adequately informed of the eligibility requirements for the premium waiver.
This verdict may add some clarity to what “disclosure” actually means in a real world setting. Bottom line: Don’t count on an intranet posting to satisfy a disclosure requirement for an SPD.