Judith Thomas was covered by her employer’s Group Life Insurance Plan (the Plan), which contained a “waiver of premium due to disability” provision. Thomas v. CIGNA Group Ins. (E.D.N.Y. 2015). This provision allows a life insurance plan to continue offering benefits at no cost to the participant, in the event she becomes permanently disabled and exercises a timely continuation option. After being covered for several years, Ms. Thomas became disabled, left employment, and subsequently died, leaving her brother Raymond as the beneficiary.
Beneficiary Raymond Thomas filed for life insurance benefits from the employer’s policy. The carrier determined that Judith Thomas had never exercised her right to waiver of premium and denied payment. Mr. Thomas filed suit claiming his sister had never been notified of the waiver provision or how to exercise it. The insurance company asserted that the waiver provision was described in the Summary Plan Description (SPD), which was posted on the employer’s website. Mr. Thomas successfully argued that the posting was not a proper notification method, and the case was sent back for further review.
Mr. Thomas, the beneficiary, prevailed because the employer failed to follow the Department of Labor’s (DOL) guidelines for making a benefit plan SPD available via company intranet. The court also noted that the language in the SPD waiver provision was unclear.
Electronic posting of SPDs may be an acceptable method of distribution, but only where the employer meets specific requirements of DOL Technical Release 2011-03. Here, the employer placed the SPD on their internal website but failed to follow the other requirements for electronic posting. Specifically, the employer failed to send timely notice that a revised SPD was being posted, to provide a link to that electronic SPD, to describe what the SPD contained, and to remind employees that they could obtain a paper copy at no cost.
Be sure to provide complete and accurate SPDs to your employees and ensure that the method of SPD distribution meets the DOL rules. If you are uncertain, contact MSEC.