Claims Denial Faces Stricter Review Because Sponsor Failed to Meet DOL Electronic Delivery Requirements

A ruling by the 9th U.S. Circuit Court of Appeals emphasizes the importance of compliance with the U.S. Department of Labor’s regulations on delivering plan documents electronically. In Gertjejansen v. Kemper Insurance Companies, Inc., the court applied a stricter standard of review to a claims denial because the employer’s delivery of the summary plan description (SPD) did not meet DOL requirements.

There are two standards of review in claims denial cases under ERISA: abuse of discretion and de novo. An abuse of discretion review hinges on whether: (1) the plan administrator abused its discretion in determining such denial, and (2) the plan documents specifically give the plan administrator discretionary authority to interpret the plan’s provisions. This method of review typically favors employers and the plan.

In a de novo review, the court uses all information in the record and no deference is given to the plan administrator’s earlier determination. A de novo review typically favors plan participants.

SPD delivery requirement
Under ERISA, plan sponsors must deliver SPDs to participants within certain time periods, and electronic delivery is an increasingly popular means of doing so. According to the current rules, SPDs generally may be delivered electronically to plan participants who regularly use a computer at work. Employers may not deliver SPDs to kiosks with computer stations for participants who do not regularly work with computers.

If an employer delivers SPDs electronically, the plan administrator must implement measures to ensure that participants receive them. The employer can follow up by sending an e-mail (with return receipt or an “undeliverable” notice) to participants, referring them or linking them to the intranet site. Merely posting the SPD on the intranet site is not enough. For many employers, paper delivery will still be the standard method of delivery.

The case
In Gertjejansen v. Kemper Insurance Companies, Inc., the employer delivered the disability plan SPD via the company’s intranet and took no additional steps to ensure that participants received it. The plan documents specifically gave the plan administrator discretionary authority to interpret the plan’s provisions. Gertjejansen, the employee, filed a disability claim, which the insurance company denied. The reason for the denial was that Gertjejansen did not attend case management conferences as required by the plan and as clearly stated in the SPD.

The court determined that delivering the SPD over the intranet did not meet the DOL’s requirements for electronic delivery. For that reason, the court reviewed the denial under the de novo standard of review and disregarded the plan language giving the administrator discretion. However, in evaluating the claim, the Circuit Court noted Gertjejansen’s failure to cooperate with repeated attempts to engage her in case management, which made it impossible to know whether she was disabled. So the court affirmed the denial.

An apparent incongruity in the ruling is that the court decided the employer had not delivered the SPD to the claimant because it was merely posted on the intranet, but held the claimant to the terms of the undelivered SPD.

Implications
Plan sponsors should ensure that their plan documents clearly give the plan administrator full discretionary authority to interpret the plan provisions. And electronic distribution of SPDs must meet all DOL requirements; otherwise, plan sponsors risk having the courts subject a claims denial to a stricter standard of review.