[Federal Register Volume 62, Number 67 (Tuesday, April 8, 1997)]
[Rules and Regulations]
[Pages 16979-16985]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-8173]



  Federal Register / Vol. 62, No. 67 / Tuesday, April 8, 1997 / Rules 
and Regulations  

[[Page 16979]]



DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

29 CFR Part 2520

RIN 1210 AA55


Interim Rules Amending ERISA Disclosure Requirements for Group 
Health Plans

AGENCY: Pension and Welfare Benefits Administration, Department of 
Labor.

ACTION: Interim rules with request for comments.

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SUMMARY: This document contains interim rules governing the content of 
the summary plan description (SPD) for group health plans, the 
furnishing of summaries of material reductions in covered services or 
benefits by group health plans, and the disclosure of SPD and related 
information through electronic media. The rules contained in this 
document implement amendments to the disclosure provisions of the 
Employee Retirement Income Security Act of 1974 (ERISA) enacted as part 
of the Health Insurance Portability and Accountability Act of 1996 
(HIPAA) and the Newborns' and Mothers' Health Protection Act of 1996 
(NMHPA).
    Interested persons are invited to submit comments on the interim 
rules for consideration by the Department in developing final rules. 
The rules contained in this document are being adopted on an interim 
basis to accommodate statutorily established time frames intended to 
ensure that sponsors and administrators of group health plans, as well 
as participants and beneficiaries covered by such plans, have timely 
guidance concerning compliance with the recently enacted amendments to 
ERISA.

DATES: Comments. Written comments on these interim rules must be 
received by the Department of Labor on or before May 31, 1997.

    Effective date. This regulation is effective on June 1, 1997. 
However, affected parties do not have to comply with the information 
collection requirements in the amendments to 29 CFR 2520.102-3, 
2520.104b-1, and 2520.104b-3 made by these interim rules until the 
Department publishes in the Federal Register the control numbers 
assigned by the Office of Management and Budget (OMB) to these 
information collection requirements. Publication of the control numbers 
notifies the public that OMB has approved these information collection 
requirements under the Paperwork Reduction Act of 1995. The Department 
has asked for OMB clearance as soon as possible, and OMB approval is 
anticipated by or before June 1, 1997.
    Applicability dates. The regulatory amendments implementing 
provisions enacted as part of HIPAA generally apply as of the first day 
of the first plan year beginning after June 30, 1997. The regulatory 
amendments implementing provisions enacted as part of NMHPA generally 
apply as of the first day of the first plan year beginning on or after 
January 1, 1998.

ADDRESSES: Interested persons are invited to submit written comments 
(preferably three copies) on these interim rules to: Pension and 
Welfare Benefits Administration, Room N-5669, U.S. Department of Labor, 
200 Constitution Avenue, N.W., Washington D.C. 20210. Attention: 
Interim Disclosure Rules. All submissions will be open to public 
inspection at the Public Documents Room; Pension and Welfare Benefits 
Administration; U.S. Department of Labor; Room N-5638; 200 Constitution 
Avenue N.W.; Washington, D.C. 20210.

FOR FURTHER INFORMATION CONTACT: Eric A. Raps, Office of Regulations 
and Interpretations, Pension and Welfare Benefits Administration, (202) 
219-8515 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

A. Background

    The rules contained in this document implement amendments to the 
disclosure provisions of ERISA enacted as part of HIPAA 1 and 
NMHPA. 2 The amendments affect group health plans as defined in 
section 733 of ERISA. 3 ERISA section 733(a) defines a ``group 
health plan'' as an ``employee welfare benefit plan to the extent that 
the plan provides medical care (as defined in paragraph (2) and 
including items and services paid for as medical care) to employees or 
their dependents (as defined under the terms of the plan) directly or 
through insurance, reimbursement or otherwise.'' 4
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    \1\ Pub. L. 104-191, enacted on August 21, 1996.
    \2\ Pub. L. 104-204, enacted on September 26, 1996.
    \3\ Section 733 was enacted as section 706 of ERISA by section 
101(a) of HIPAA and subsequently redesignated as section 733 of 
ERISA pursuant to section 603(a)(3) of NMHPA.
    \4\ ``Medical care'' is defined in paragraph (a)(2) of section 
733 to mean ``amounts paid for--(A) the diagnosis, cure, mitigation, 
treatment, or prevention of disease, or amounts paid for the purpose 
of affecting any structure or function of the body, (B) amounts paid 
for transportation primarily for and essential to medical care 
referred to in subparagraph (A), and (C) amounts paid for insurance 
covering medical care referred to in subparagraphs (A) and (B).''
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    As discussed herein, these rules affect the content of SPDs, the 
furnishing of summaries of material reductions in covered services or 
benefits to participants, and the disclosure of SPD and related 
information through electronic media. As also discussed herein, these 
rules are being adopted on an interim basis in order to accommodate 
statutorily established time frames for provision of regulatory 
guidance. The Department, however, is inviting public comment on the 
interim rules to assist in the formulation of final rules in this area.

B. Content of SPDs

    Pursuant to ERISA section 101(a)(1), the administrator of an 
employee benefit plan is required to furnish an SPD to each participant 
covered under the plan and to each beneficiary who is receiving 
benefits under the plan. Section 102(b) and the Department's 
regulations issued thereunder, 29 CFR 2520.102-3, describe the 
information required to be contained in the SPD.
    Section 101(c)(2) of HIPAA amended ERISA section 102(b) to require 
SPDs of group health plans to include information indicating whether a 
health insurance issuer (as defined in section 733(b)(2)) 5 is 
responsible for the financing or administration of the plan. This 
amendment, in the view of the Department, is intended to ensure that 
SPDs clearly inform participants and beneficiaries about the role of 
insurance issuers with respect to their group health plan, particularly 
in those cases when the plan is self-funded and an insurance issuer is 
serving as a contract administrator or claims payor, rather than an 
insurer. In such instances, it is important that participants and 
beneficiaries understand that the insurance issuer is not acting as 
insurer of their health benefits under the plan. In this regard, the 
Department is amending paragraph (q) of Sec. 2520.102-3, relating to 
the identification of funding media through which benefits are 
provided, to add at the end thereof a requirement that, where a health 
insurance issuer is responsible, in whole or in part, for the financing 
or administration of a group health plan, the SPD of such plan include 
the name and address of the issuer, whether and to what extent benefits 
under the plan

[[Page 16980]]

are guaranteed under a contract or policy of insurance issued by the 
issuer, and the nature of any administrative services (e.g., payment of 
claims) provided by the issuer.
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     5 ``Health insurance issuer'' is defined in section 
733(b)(2) to mean ``an insurance company, insurance service, or 
insurance organization (including a health maintenance organization, 
as defined in paragraph (3)) which is licensed to engage in the 
business of insurance in a State and which is subject to State law 
which regulates insurance (within the meaning of section 514(b)(2)). 
Such term does not include a group health plan.''
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    Section 101(c)(2) of HIPAA also amended ERISA section 102(b) to 
require SPDs of group health plans to include the office at the 
Department of Labor through which participants and beneficiaries may 
seek assistance or information regarding their rights under ERISA and 
HIPAA with respect to health benefits. Currently, individualized 
participant assistance on all aspects of ERISA is offered through the 
Pension and Welfare Benefits Administration's field offices and, in the 
national office, the Division of Technical Assistance and Inquiries. To 
ensure that participants and beneficiaries are provided assistance 
information consistent with HIPAA section 101(c)(2), the Department is 
amending the model statement of ERISA rights, at Sec. 2520.102-3(t)(2), 
to replace for group health plans the last sentence of that statement 
with an updated sentence that reads as follows: ``If you have any 
questions about this statement or about your rights under ERISA, you 
should contact the nearest office of the Pension and Welfare Benefits 
Administration, U.S. Department of Labor, listed in your telephone 
directory or the Division of Technical Assistance and Inquiries, 
Pension and Welfare Benefits Administration, U.S. Department of Labor, 
200 Constitution Avenue, N.W., Washington, D.C. 20210.'' Administrators 
may include in the statement the address and telephone number of the 
nearest office or offices of the Pension and Welfare Benefits 
Administration (PWBA). A directory of current PWBA regional and 
district offices is printed below.

PWBA Offices

Atlanta Regional Office, 61 Forsyth St., S.W., Suite 7B54, Atlanta, 
Georgia 30303, Phone: 404/562-2156
Boston Regional Office, One Bowdoin Square, 7th Floor, Boston, MA 
02114, Phone: 617/424-4950
Chicago Regional Office, 200 West Adams Street, Suite 1600, Chicago, IL 
60606, Phone: 312/353-0900
Cincinnati Regional Office, 1885 Dixie Highway, Suite 210, Ft. Wright, 
KY 41011-2664, Phone: 606/578-4680
Dallas Regional Office, 525 Griffin Street, Rm. 707, Dallas, Texas 
75202-5025, Phone: 214/767-6831
Detroit District Office, 211 West Fort Street, Suite 1310, Detroit, MI 
48226-3211, Phone: 313/226-7450
Kansas City Regional Office, City Center Square, 1100 Main, Suite 1200, 
Kansas City, MO 64105-2112, Phone: 816/426-5131
Los Angeles Regional Office, 790 E. Colorado Boulevard, Suite 514, 
Pasadena, CA 91101, Phone: 818/583-7862
Miami District Office, 111 NW 183rd St., Suite 504, Miami, Florida 
33169, Phone: 305/651-6464
New York Regional Office, 1633 Broadway, Rm. 226, New York, N.Y. 10019, 
Phone: 212/399-5191
Philadelphia Regional Office, Gateway Bldg., 3535 Market Street, Room 
M300, Philadelphia, PA 19104, Phone: 215/596-1134
St. Louis District Office, 815 Olive Street, Rm. 338, St. Louis, MO 
63101-1559, Phone: 314/539-2691
San Francisco Regional Office, 71 Stevenson St., Suite 915, P.O. Box 
190250, San Francisco, CA 94119-0250, Phone: 415/975-4600
Seattle District Office, 1111 Third Avenue, Suite 860, MIDCOM Tower, 
Seattle, Washington 98101-3212, Phone: 206/553-4244
Washington D.C. District Office, 1730 K Street, N.W., Suite 556, 
Washington, D.C. 20006, Phone: 202/254-7013

    The Department notes that, in the case of group health plans not 
utilizing the model statement in Sec. 2520.102-3(t)(2), the foregoing 
information is required to be included in a statement of ERISA rights 
intended to satisfy the requirements of paragraph (t)(1) of that 
section.
    Pursuant to HIPAA section 101(g), the foregoing amendments to the 
SPD content requirements apply with respect to group health plans for 
plan years beginning after June 30, 1997. The Department is amending 
Sec. 2520.102-3 to add a new paragraph (v), ``applicability dates'', 
that treats the HIPAA content changes as changes in the information 
required to be contained in the SPD and applies the requirements of 29 
CFR 2520.104b-3 6 to the disclosure of such changes, except that 
the changes have to be disclosed to participants and beneficiaries not 
later than 60 days after the first day of the first plan year for which 
the changes are applicable to the plan.
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    \6\ Section 2520.104b-3 prescribes the requirements applicable 
to the furnishing of summaries of material modifications to the plan 
and changes in the information required to be included in the 
summary plan description.
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    While the interim rule amendment of the model statement of ERISA 
rights corrects outdated name and address information for contacting 
the U.S. Department of Labor, and therefore has obvious applicability 
beyond group health plans, the Department is limiting the interim rule 
to group health plans in view of directive under HIPAA section 
101(c)(2). The Department, however, specifically invites public comment 
on the extent to which application of the rule should be extended to 
other plans.
    Section 603(a) of the NMHPA also amended ERISA by adding a new 
section 711 establishing restrictions on the extent to which group 
health plans and health insurance issuers may limit hospital lengths of 
stay for mothers and newborn children following delivery. In an effort 
to ensure that participants and beneficiaries are apprised of the 
limitations established under NMHPA, paragraph (d) of section 711 
provides that ``[t]he imposition of the requirements of this section 
[section 711] shall be treated as a material modification in the terms 
of the plan * * * except that the summary description required to be 
provided under the last sentence of section 104(b)(1) with respect to 
such modification shall be provided by not later than 60 days after the 
first day of the first plan year in which such requirements apply.'' 
7 Pursuant to NMHPA section 603(c), the provisions of section 603 
apply to group health plans for plan years beginning on or after 
January 1, 1998. In this regard, the Department is amending 
Sec. 2520.102-3, the SPD content regulations, by adding a new paragraph 
(u) requiring that the SPDs of group health plans offering maternity 
benefits include a statement indicating that ``group health plans and 
health insurance issuers offering group health insurance coverage 
generally may not, under Federal law, restrict benefits for any 
hospital length of stay in connection with childbirth for the mother or 
newborn child to less than 48 hours following a normal vaginal 
delivery, or less than 96 hours following a caesarean section, or 
require that a provider obtain authorization from the plan or insurance 
issuer for prescribing a length of stay not in excess of the above 
periods.'' To facilitate compliance, the Department views the statement 
included in this new paragraph (u) of the regulation as sample language 
that may be used by administrators to satisfy this content requirement 
for group health plan SPDs.
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    \7\ Section 104(b)(1) generally requires summary descriptions of 
material modifications to the plan to be furnished to participants 
and beneficiaries not later than 210 days after the end of the plan 
year in which the change is adopted.
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    Consistent with NMHPA section 603(c), new paragraph (v) of 
Sec. 2520.102-3, relating to applicability dates, provides that the 
information described in paragraph (u) of Sec. 2520.102-3 shall be 
furnished to each participant covered

[[Page 16981]]

under the plan and each beneficiary receiving benefits under the plan 
not later than 60 days after the first day of the first plan year 
beginning on or after January 1, 1998.

C. Material Reductions In Covered Services or Benefits

    Section 104(b)(1) of ERISA requires, among other things, that 
participants and beneficiaries be furnished summary descriptions of 
material modifications in the terms of their plans and changes in the 
information required to be included in the SPD not later than 210 days 
after the end of the plan year in which the change is adopted. Section 
101(c)(1) of HIPAA amended ERISA section 104(b)(1) to provide that in 
the case of any modification or change that is a ``material reduction 
in covered services or benefits provided under a group health plan'', 
participants and beneficiaries must be furnished the summary of such 
modification or change not later than 60 days after the adoption of the 
modification or change, unless plan sponsors provide summaries of 
modifications or changes at regular intervals of not more than 90 days.
    The interim rules contained herein amend the regulations governing 
the furnishing of summaries of material modifications, at 29 CFR 
2520.104b-3, to establish a special rule for the furnishing of 
summaries of material modifications and changes by group health plans 
when such modifications or changes constitute a material reduction in 
covered services or benefits under the plan. The rules governing the 
furnishing of such summaries are contained in a new paragraph (d) of 
Sec. 2520.104b-3.
    Section 2520.104b-3(d)(1) provides, consistent with HIPAA section 
101(c)(1), that the administrator of a group health plan must furnish 
to each participant covered under the plan and each beneficiary 
receiving benefits under the plan, a summary of any modification to the 
plan or change in the information required to be included in the SPD 
that is a material reduction in covered services or benefits not later 
than 60 days after the date of adoption of the modification or change.
    Section 2520.104b-3(d)(2) provides that the 60-day period for 
furnishing summaries of modifications or changes, described in 
paragraph (d)(1), does not apply to any participant covered by the plan 
or any beneficiary receiving benefits who would reasonably be expected 
to be furnished such summary in connection with a system of 
communication maintained by the plan sponsor or administrator, with 
respect to which plan participants and beneficiaries are provided 
information concerning their plan, including modifications and changes 
thereto, at regular intervals of not more than 90 days. For example, a 
summary of material reduction in services or benefits would not have to 
be furnished to participants within the prescribed 60-day period if 
such summary is included as an insert in a union newspaper or a company 
publication regularly furnished to participants at intervals of not 
more than 90 days. It should be noted that the use of such periodicals 
must otherwise meet the requirements of 29 CFR 2520.104b-1.8 It 
should also be noted that if a plan has participants or beneficiaries 
(e.g., separated participants, qualified beneficiaries with 
continuation coverage, etc.) that do not receive the newspaper, company 
publication or periodic disclosure, such participants and beneficiaries 
must be furnished the summaries of material reductions in services or 
benefits under the group health plan not later than 60 days after the 
date of adoption.
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    \8\ Section 2520.104b-1 permits the disclosure of plan 
information through periodicals, such as union newspapers and 
company publications, if the distribution list for the periodical is 
comprehensive and up-to-date and a prominent notice on the front 
page of the periodical advises the reader that the issue contains an 
insert with important information about the plan which should be 
read and retained for future reference.
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    Section 2520.104b-3(d)(3) defines the term ``material reduction in 
covered services or benefits'' provided under a group health plan. For 
purposes of furnishing summaries of material modifications or changes, 
paragraph (d)(3)(i) defines a ``material reduction in covered services 
or benefits'' to mean any modification to the plan or change in the 
information required to be included in the SPD that, independently or 
in conjunction with other contemporaneous modifications or changes, 
would be considered by the average plan participant to be an important 
reduction in covered services or benefits.
    While it is the view of the Department that determinations as to 
whether a particular plan modification or SPD change constitutes a 
``material reduction in covered services or benefits'' generally will 
depend on the facts of each case, the Department believes that in 
making such determinations it is appropriate, given the nature of the 
required disclosure, to assess in each case whether the average 
participant in the plan would view the modification or change as an 
important reduction in covered services or benefits under the plan. 
Also, recognizing that the significance of plan modifications or 
changes may be affected by other contemporaneous modifications or 
changes, it is the view of the Department that plan modifications and 
SPD changes must be viewed in the aggregate for purposes of determining 
whether such modifications or changes, individually or together, result 
in a ``material reduction in covered services or benefits.''
    To facilitate compliance, paragraph (d)(3)(ii) sets forth a listing 
of modifications or changes that generally would constitute a 
``reduction in covered services or benefits.'' In this regard, 
paragraph (d)(3)(ii) provides that a ``reduction in covered services or 
benefits'' generally would include any modification or change that: 
eliminates benefits payable under the plan; reduces benefits payable 
under the plan, including a reduction that occurs as a result of a 
change in formulas, methodologies or schedules that serve as the basis 
for making benefit determinations; increases deductibles, co-payments, 
or other amounts to be paid by a participant or beneficiary; reduces 
the service area covered by a health maintenance organization; 
establishes new conditions or requirements (e.g., preauthorization 
requirements) to obtaining services or benefits under the plan.
    The interim rules add a new paragraph (e) to Sec. 2520.104b-3 
setting forth the dates on which the requirements of Sec. 2520.104b-
3(d) take effect. Under Sec. 2520.104b-3(e), the requirements of 
paragraph (d) apply to material reductions in covered services or 
benefits under a group health plan adopted on or after the first day of 
the first plan year beginning after June 30, 1997.

D. Alternative Delivery Mechanisms--Disclosure Through Electronic 
Media

    In addition to amending ERISA section 104(b)(1) to provide for the 
furnishing of summaries of material reductions in covered services or 
benefits, section 101(c) of HIPAA amended section 104(b)(1) to provide 
that ``[t]he Secretary shall issue regulations within 180 days after 
the date of enactment of the Health Insurance Portability and 
Accountability Act of 1996, providing alternative mechanisms to 
delivery by mail through which group health plans (as so defined) may 
notify participants and beneficiaries of material reductions in covered 
services or benefits.''
    The Department has issued a regulation, at 29 CFR 2520.104b-1, 
governing the delivery of information required to be furnished to 
participants

[[Page 16982]]

and beneficiaries under ERISA. The Department notes that the regulation 
does not require delivery by mail where other methods of delivery are 
reasonably calculated to ensure actual receipt of materials by 
participants and beneficiaries and likely to result in full 
distribution of the information. See Sec. 2520.104b-1(b). In this 
regard, paragraph (b) of Sec. 2520.104b-1 cites, as an example, in-hand 
delivery of materials to employees at their worksite locations. The 
regulation also references the use of union newsletters and company 
publications as a means by which an administrator may satisfy its 
disclosure obligation. An alternative to mail delivery not specifically 
referenced in the current regulation is delivery of disclosure 
materials through electronic media. Accordingly, the Department is 
amending Sec. 2520.104b-1 to clarify the circumstances under which a 
group health plan administrator will be deemed to satisfy its 
disclosure obligation under Sec. 2520.104b-1 with respect to the 
delivery of SPDs, summaries of material reductions in covered services 
or benefits and other summaries of plan modifications and SPD changes 
through electronic media.9 This amendment is intended to 
establish, on an interim basis, a ``safe harbor'' on which 
administrators of group health plans may rely in delivering plan 
disclosures through electronic media. The amendment is not intended to 
represent the exclusive means by which the requirements of 
Sec. 2520.104b-1 may be satisfied in using electronic media as a method 
of delivering plan disclosures.
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    \9\ In the Department's view, a method of delivery, and 
conditions applicable thereto, appropriate for furnishing summaries 
of material reductions in covered services or benefits is 
necessarily appropriate to the furnishing by group health plans of 
other types of material modifications, SPDs and updated SPDs, given 
the similar, if not identical, nature of the information being 
provided.
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    Under the interim rule, Sec. 2520.104b-1 is amended by adding a new 
paragraph (c) setting forth the conditions under which the use by a 
group health plan of electronic media for furnishing documents 
described in ERISA section 104(b)(1), i.e., SPDs and summaries of 
material modifications and changes, will be deemed to be a method of 
delivery that is calculated to ensure actual receipt and result in full 
distribution, within the meaning of paragraph of Sec. 2520.104b-1. New 
paragraph (c)(1) of Sec. 2520.104b-1 sets forth criteria that are 
generally intended to ensure that the system of electronic 
communication utilized by a plan administrator for distribution of 
disclosure information results in the actual delivery of such 
information to participants and that the information delivered is 
equivalent in both substance and form to the disclosure information the 
participants would have received had they been furnished the 
information in paper form. In general, paragraph (c)(1) (i)-(ii) 
provides for the utilization of an electronic delivery system that: (i) 
the administrator takes appropriate and necessary steps to ensure 
results in actual receipt by participants of transmitted information, 
such as through the use of a return-receipt electronic mail feature or 
periodic reviews or surveys by the plan administrator to confirm the 
integrity of the delivery system; and (ii) results in the furnishing of 
disclosure information that is consistent with the style, format and 
content requirements applicable to the disclosure (See 29 CFR 2520.102-
2 et seq.). New paragraph (c)(1)(iii) requires notification to each 
participant, through electronic or other means, apprising the 
participant of the disclosure documents furnished electronically (e.g., 
SPDs, summaries of material changes to the plan and changes to 
information included in the SPD), the significance of the documents 
(e.g., the document contains summary descriptions of changes in the 
benefits described in your SPD), and the participant's right to request 
and receive, free of charge, a paper copy of each such document from 
the plan administrator. The Department believes such notification is 
necessary so that participants who, for example, receive a disclosure 
document as an attachment to an electronically transmitted message will 
be put on notice that the attachment contains important plan 
information.
    It is the view of the Department that participants have a general 
right to receive required plan disclosures in paper form from the plan 
administrator. Accordingly, the Department believes that where a plan 
administrator elects to utilize electronic media as the method for 
delivering required plan disclosures, participants must be afforded the 
opportunity to obtain the disclosures from the plan administrator in 
paper form, free of charge. The obligation to furnish paper copies of 
documents furnished through electronic media is set forth in paragraph 
(c)(1)(iv). The Department specifically invites public comment on the 
relative costs and benefits of this requirement to furnish paper copies 
to participants on request of documents furnished through electronic 
media.
    New paragraph (c)(2) describes the participants with respect to 
whom the electronic delivery of plan disclosures will be deemed to be 
an acceptable method of delivery for fulfilling the disclosure 
obligation described in Sec. 2520.104b-1(b)(1). Such participants, in 
the view of the Department, must have: the ability to effectively 
access at their worksite documents furnished in electronic form; and 
the opportunity at their worksite to readily convert furnished 
documents from electronic form to paper form, free of charge. In this 
regard, the Department believes that, however effective an electronic 
system may be for delivering plan disclosures, the critical 
determination in assessing the adequacy of the system, as a means for 
communicating to plan participants, will be the extent to which 
participants can readily access and retain the delivered information.
    While the Department believes the criteria set forth in the interim 
rule have applicability beyond group health plans, the Department is 
limiting the interim rule ``safe harbor'' to group health plans in view 
of directive under HIPAA section 101(c)(1) and the absence of a public 
record on the matter. The Department, however, specifically invites 
public comment on the criteria established by the interim rule, the 
extent to which application of the rule should be extended to other 
plans, the extent to which application of the rule should be expanded 
to other plan disclosures (e.g., summary annual reports, individual 
benefit statements) and, if expanded, whether additional criteria may 
be necessary to ensure private, confidential communications of 
individual account or benefit-related information.
    Administrators of group health plans may rely on this interim 
amendment on or after June 1, 1997.

E. Interim Rules and Request for Comments

    The rules contained herein are being adopted on an interim basis in 
order to ensure that plan sponsors and administrators of group health 
plans, as well as participants and beneficiaries, are provided timely 
guidance concerning compliance with recently enacted amendments to 
ERISA. Specifically, HIPAA section 101(a) adds a new ERISA part 7, and 
within this new part, section 707 (redesignated as section 734 by 
section 603(a)(3) of the NMHPA) provides that the Secretary of Labor 
may promulgate any interim final rules as the Secretary determines are 
appropriate to carry out this part. The rules herein complement changes 
made in the new part 7 of ERISA and are being adopted on an interim 
basis because the Department finds that issuance of such regulations in 
interim

[[Page 16983]]

final form with a request for comments is appropriate to carry out the 
new regulatory structure imposed by HIPAA on group health plans and 
health insurance issuers, and is necessary to ensure that plan sponsors 
and administrators of group health plans, as well as participants and 
beneficiaries, are provided timely guidance concerning compliance with 
new and important disclosure obligations imposed by HIPAA. The 
Department also finds for the above reasons that the publication of a 
proposed regulation would be impracticable, unnecessary, and contrary 
to the public interest.
    The statutory provisions of HIPAA and NMHPA implemented by the 
pertinent regulatory amendments in this document are generally 
applicable for group health plans for plan years beginning on or after 
July 1, 1997, and January 1, 1998, respectively. Plan administrators 
and sponsors, and participants and beneficiaries, will need guidance on 
how to comply with the new statutory provisions before these effective 
dates. Pursuant to section 101(g) of HIPAA, the Secretary must first 
issue regulations necessary to carry out the amendments made by section 
101 by April 1, 1997. Issuance of a notice of proposed rulemaking with 
a period for comments prior to issuing a final rule could delay the 
issuance of essential guidance and prevent the Department from 
complying with its deadline. Furthermore, although the rules herein are 
being adopted on an interim basis, the Department is inviting 
interested persons to submit written comments on the rules for 
consideration in the development of final rules in this area. Such 
final rules may be issued in advance of the above July 1, 1997, and 
January 1, 1998, dates.

Executive Order 12866 Statement

    Under Executive Order 12866 (58 FR 51735, Oct. 4, 1993), it must be 
determined whether a departmental action is ``significant'' and 
therefore subject to review by the Office of Management and Budget 
(OMB) and the requirements of the Executive Order. Under section 3(f), 
the order defines a ``significant regulatory action'' as an action that 
is likely to result in a rule (1) having an annual effect on the 
economy of $100 million or more, or adversely and materially affecting 
a sector of the economy, productivity, competition, jobs, the 
environment, public health or safety, or State, local or tribal 
governments or communities (also referred to as ``economically 
significant''); (2) creating a serious inconsistency or otherwise 
interfering with an action taken or planned by another agency; (3) 
materially altering the budgetary impacts of entitlement, grants, user 
fees, or loan programs or the rights and obligations of recipients 
thereof; or (4) raising novel legal or policy issues arising out of 
legal mandates, the President's priorities, or the principles set forth 
in the Executive Order.
    Pursuant to the terms of the Executive Order, it has been 
determined that the action that is the subject of the interim rules is 
``significant'' under category (4), supra, and subject to OMB review on 
that basis. The estimated cost of compliance with HIPAA and the interim 
rules are set forth in the Paperwork Reduction Act Analysis, below. The 
benefits of the interim rules, as yet unquantified, will arise as 
participants and beneficiaries become better informed about their 
health care coverage because of additional disclosures and more timely 
distribution of plan information.

Paperwork Reduction Act Analysis

    The Department of Labor has submitted this emergency processing 
public information collection request (ICR) to the Office of Management 
and Budget for review and clearance under the Paperwork Reduction Act 
of 1995 (Pub. L. 104-13, 44 U.S.C. Chapter 35). The Department has 
asked for OMB clearance as soon as possible, and OMB approval is 
anticipated by or before June 1, 1997. As part of its continuing effort 
to reduce paperwork and respondent burden, the Department conducts a 
pre-clearance consultation program to provide the general public and 
Federal agencies with an opportunity to comment on ICRs in accordance 
with the Paperwork Reduction Act of 1995 (PRA 95)(Pub. L. 104-13, 44 
U.S.C. Chapter 35) and 5 CFR 1320.11. This program helps to ensure that 
requested data can be provided in the desired format, reporting burden 
(time and financial resources) is minimized, collection instruments are 
clearly understood, and the impact of collection requirements on 
respondents can be properly assessed. Currently, the Pension and 
Welfare Benefits Administration is soliciting comments concerning the 
revised collection of Summary Plan Description Requirements under 
ERISA.

Dates: Written comments must be submitted to the offices listed in the 
addressee section below on or before May 31, 1997. In light of the 
request for OMB clearance by June 1, 1997, submission of comments 
within the first 30 days is encouraged to ensure their consideration.
    The Department and the Office of Management and Budget are 
particularly interested in comments which:
     evaluate whether the proposed collection is necessary for 
the proper performance of the functions of the agency, including 
whether the information will have practical utility;
     evaluate the accuracy of the agency's estimate of the 
burden of the proposed collection of information, including the 
validity of the methodology and assumptions used;
     enhance the quality, utility, and clarify the information 
to be collected; and
     minimize the burden of the collection of information on 
those who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology, e.g., permitting 
electronic submissions of responses.

ADDRESSES: Comments and questions about the ICR should be forwarded to: 
Gerald B. Lindrew, Office of Policy and Research, U.S. Department of 
Labor, Pension and Welfare Benefits Administration, 200 Constitution 
Avenue, Room N-5647, Washington, D.C. 20210, Telephone: (202) 219-4782 
(this is not a toll-free number), Fax: (202) 219-4745; and the Office 
of Information and Regulatory Affairs, Attn: OMB Desk Officer for the 
Pension and Welfare Benefits Administration, Office of Management and 
Budget, Room 10235, Washington, D.C. 20503, Telephone: (202) 395-7316. 
Additional PRA 95 Information:
    I. Background: The administrator of an employee benefit plan is 
required to furnish an SPD to each participant covered under the plan 
and to each beneficiary who is receiving benefits under the plan. The 
SPD must be written in a manner calculated to be understood by the 
average plan participant and must be sufficiently comprehensive to 
apprise the plan's participants and beneficiaries of their rights and 
obligations under the plan. To the extent that there is a material 
modification in the terms of the plan or a change in the information 
required to be contained in the SPD, ERISA requires that the 
administrator furnish participants covered under the plan and 
beneficiaries receiving benefits with a summary of such changes.
    II. Current Actions: HIPAA and NMHPA amend certain reporting and 
disclosure provisions of ERISA
    Type of Review: Revision of currently approved collection.

[[Page 16984]]

    Agency: Pension and Welfare Benefits Administration.
    Title: The title of the interim rule is Amendment of Summary Plan 
Description and Related ERISA Regulations To Implement Statutory 
Changes In the Health Insurance Portability and Accountability Act of 
1996 (HIPAA).
    OMB Number: 1210-0039.
    Affected Public: Business or other for-profit, not-for-profit.
    Total Responses (annual): 43,952,715 (1997), 62,728,915 (1998), 
31,896,715 (1999).
    Total Respondents (annual): 176,315 (1997), 194,235 (1998), 163,515 
(1999).
    Frequency: On occasion.
    Average Time per Response:
    Average SPD/SMM--We estimate it takes an average of 6 hours for 
preparation of SPDs/SMMs, including the time to copy, assemble, and 
mail the document to the Department of Labor.
    SMM Compliance--We estimate that preparation of an SMM sufficient 
to satisfy the requirements of this regulation will take an average of 
1 hour.
    Distribution--We estimate that 2 minutes per participant is the 
time needed to distribute an SMM/SPD, including time spent reproducing 
the document and mailing the document.
    Estimated Total Burden Hours: 1,007,425 (1997), 1,130,282 (1998), 
942,980 (1999).
    There is estimated to be no capital/start-up cost. Total Burden 
Cost for operating/maintenance is estimated to be $72,310,858 in 1997, 
$82,338,958 in 1998 and $65,002,858 in 1999.

    Note: The Average Time Per Response, Estimated Total Burden 
Hours, and Total Burden Cost have been estimated without accounting 
for those respondents that will implement the ``alternative 
mechanisms to delivery by mail'' provision contained in the interim 
rule. It is expected that some respondents will use these 
alternatives, and that these alternatives will reduce burden hours 
and costs.

    Comments submitted in response to this notice will be summarized 
and/or included in the request for OMB approval of the information 
collection request; they will also become a matter of public record.

Congressional Review

    This interim rule has been transmitted to Congress and the 
Comptroller General for review under section 801(a)(1)(A) of the Small 
Business Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 801 et 
seq.).

Unfunded Mandates Reform Act

    For purposes of the Unfunded Mandates Reform Act of 1995 (Pub. L. 
104-4), as well as Executive Order 12875, this interim rule does not 
include any Federal mandate that may result in expenditures by State, 
local or tribal governments, and does not impose an annual burden 
exceeding $100 million on the private sector.

Statutory Authority

    This interim regulation is adopted pursuant to authority contained 
in section 505 of ERISA (Pub. L. 93-406, 88 Stat. 894, 29 U.S.C. 1135) 
and sections 104(b) and 734 of ERISA, as amended, (Pub. L. 104-191, 110 
Stat. 1936, 1951 and Pub. L. 104-204, 110 Stat. 2935, 29 U.S.C. 1024 
and 1191c) and under Secretary of Labor's Order No. 1-87, 52 FR 13139, 
April 21, 1987.

List of Subjects in 29 CFR Part 2520

    Employee benefit plans, Employee Retirement Income Security Act, 
Group health plans, Pension plans, Welfare benefit plans.

    For the reasons set forth above, Part 2520 of Title 29 of the Code 
of Federal Regulations is amended as follows:

PART 2520--[AMENDED]

    1. The authority for Part 2520 is revised to read as follows:

    Authority: Secs. 101, 102, 103, 104, 105, 109, 110, 111(b)(2), 
111(c), and 505, Pub. L. 93-406, 88 Stat. 840-52 and 894 (29 U.S.C. 
1021-1025, 1029-31, and 1135); Secretary of Labor's Order No. 27-74, 
13-76, 1-87, and Labor Management Services Administration Order 2-6.

    Sections 2520.102-3, 2520.104b-1 and 2520.104b-3 also are issued 
under sec. 101 (a), (c) and (g)(4) of Pub. L. 104-191, 110 Stat. 1936, 
1939, 1951 and 1955 and, sec. 603 of Pub. L. 104-204, 110 Stat. 2935 
(29 U.S.C. 1185 and 1191c).
    2. Section 2520.102-3 is amended by adding a sentence at the end of 
paragraph (q) to read as follows:


Sec. 2520.102-3  Contents of summary plan description.

* * * * *
    (q) * * * If a health insurance issuer, within the meaning of 
section 733(b)(2) of the Act, is responsible, in whole or in part, for 
the financing or administration of a group health plan, the summary 
plan description shall indicate the name and address of the issuer, 
whether and to what extent benefits under the plan are guaranteed under 
a contract or policy of insurance issued by the issuer, and the nature 
of any administrative services (e.g., payment of claims) provided by 
the issuer.
* * * * *
    3. Section 2520.102-3 is further amended by revising the last 
sentence of the undesignated paragraph following paragraph (t)(2) to 
read as follows:


Sec. 2520.102-3  Contents of summary plan description.

* * * * *
    (t) * * *
    (2) * * *
    If you have any questions about this statement or about your rights 
under ERISA, you should contact the nearest office of the Pension and 
Welfare Benefits Administration, U.S. Department of Labor, listed in 
your telephone directory or the Division of Technical Assistance and 
Inquiries, Pension and Welfare Benefit Administration, U.S. Department 
of Labor, 200 Constitution Avenue N.W., Washington, D.C. 20210.
    4. Section 2520.102-3 is further amended by adding paragraphs (u) 
and (v) to read as follows:


Sec. 2520.102-3  Contents of summary plan description.

* * * * *
    (u) In the case of a group health plan, as defined in section 
733(a)(1) of the Act, that provides maternity or newborn infant 
coverage, a statement indicating that group health plans and health 
insurance issuers offering group insurance coverage generally may not, 
under Federal law, restrict benefits for any hospital length of stay in 
connection with childbirth for the mother or newborn child to less than 
48 hours following a normal vaginal delivery, or less than 96 hours 
following a caesarean section, or require that a provider obtain 
authorization from the plan or the insurance issuer for prescribing a 
length of stay not in excess of the above periods.
    (v) Applicability dates. (1) The information described in the last 
sentence of paragraph (q) and in the last two sentences of paragraph 
(t)(2) shall be treated as a change in the information required to be 
included in the summary plan description for a group health plan for 
purposes of 29 CFR 2520.104b-3, except that such information shall be 
furnished to each participant covered under the plan and each 
beneficiary receiving benefits under the plan not later than 60 days 
after the first day of the first plan year beginning after June 30, 
1997.
    (2) The information described in paragraph (u) of this section 
shall be furnished to each participant covered under a group health 
plan and each beneficiary receiving benefits under a group health plan 
not later than 60 days after the first day of the first plan year 
beginning on or after January 1, 1998.

[[Page 16985]]

    5. Section 2520.104b-3 is amended by revising the second sentence 
of paragraph (a), redesignating paragraphs (d) and (e) as paragraphs 
(f) and (g), respectively, and adding new paragraphs (d) and (e) to 
read as follows:


Sec. 2520.104b-3  Summary of material modifications to the plan and 
changes in the information required to be included in the summary plan 
description.

    (a) * * * Except as provided in paragraph (d) of this section, the 
plan administrator shall furnish this summary, written in a manner 
calculated to be understood by the average plan participant, not later 
than 210 days after the close of the plan year in which the 
modification or change was adopted. * * *
* * * * *
    (d) Special rule for group health plans. (1) General. Except as 
provided in paragraph (d)(2) of this section, the administrator of a 
group health plan, as defined in section 733(a)(1) of the Act, shall 
furnish to each participant covered under the plan and each beneficiary 
receiving benefits under the plan a summary, written in a manner 
calculated to be understood by the average plan participant, of any 
modification to the plan or change in the information required to be 
included in the summary plan description, within the meaning of 
paragraph (a) of this section, that is a material reduction in covered 
services or benefits not later than 60 days after the date of adoption 
of the modification or change.
    (2) 90-day alternative rule. The administrator of a group health 
plan shall not be required to furnish a summary of any material 
reduction in covered services or benefits within the 60-day period 
described in paragraph (d)(1) of this section to any participant 
covered under the plan or any beneficiary receiving benefits who would 
reasonably be expected to be furnished such summary in connection with 
a system of communication maintained by the plan sponsor or 
administrator, with respect to which plan participants and 
beneficiaries are provided information concerning their plan, including 
modifications and changes thereto, at regular intervals of not more 
than 90 days and such communication otherwise meets the disclosure 
requirements of 29 CFR 2520.104b-1.
    (3) ``Material reduction''. (i) For purposes of this paragraph (d), 
a ``material reduction in covered services or benefits'' means any 
modification to the plan or change in the information required to be 
included in the summary plan description that, independently or in 
conjunction with other contemporaneous modifications or changes, would 
be considered by the average plan participant to be an important 
reduction in covered services or benefits under the plan.
    (ii) A ``reduction in covered services or benefits'' generally 
would include any plan modification or change that: eliminates benefits 
payable under the plan; reduces benefits payable under the plan, 
including a reduction that occurs as a result of a change in formulas, 
methodologies or schedules that serve as the basis for making benefit 
determinations; increases deductibles, co-payments, or other amounts to 
be paid by a participant or beneficiary; reduces the service area 
covered by a health maintenance organization; establishes new 
conditions or requirements (e.g., preauthorization requirements) to 
obtaining services or benefits under the plan.
    (e) Applicability date. Paragraph (d) of this section is applicable 
as of the first day of the first plan year beginning after June 30, 
1997.
* * * * *
    6. Section 2520.104b-1 is amended by redesignating paragraph (c) as 
paragraph (d) and adding a new paragraph (c) to read as follows:


Sec. 2520.104b-1  Disclosure.

* * * * *
    (c) Disclosure through electronic media. (1) The administrator of a 
group health plan furnishing documents described in section 104(b)(1) 
of the Act through electronic media will be deemed to satisfy the 
requirements of paragraph (b)(1) of this section with respect to 
participants described in paragraph (c)(2) of this section if:
    (i) The administrator takes appropriate and necessary measures to 
ensure that the system for furnishing documents results in actual 
receipt by participants of transmitted information and documents (e.g., 
uses return-receipt electronic mail feature or conducts periodic 
reviews or surveys to confirm receipt of transmitted information);
    (ii) Electronically delivered documents are prepared and furnished 
in a manner consistent with the applicable style, format and content 
requirements (See 29 CFR 2520.102-2 through 2520.102-5);
    (iii) Each participant is provided notice, through electronic means 
or in writing, apprising the participant of the document(s) to be 
furnished electronically, the significance of the document (e.g., the 
document describes changes in the benefits provided by your plan) and 
the participant's right to request and receive, free of charge, a paper 
copy of each such document; and
    (iv) Upon request of any participant, the administrator furnishes, 
free of charge, a paper copy of any document delivered to the 
participant through electronic media.
    (2) For purposes of paragraph (c)(1) of this section, the 
furnishing of documents through electronic media satisfies the 
requirements of paragraph (b)(1) of this section only with respect to 
participants:
    (i) Who have the ability to effectively access at their worksite 
documents furnished in electronic form; and
    (ii) Who have the opportunity at their worksite location to readily 
convert furnished documents from electronic form to paper form free of 
charge.
    (3) This paragraph (c) applies on or after June 1, 1997.
* * * * *
    Signed at Washington, D.C., this 27th day of March, 1997.
Olena Berg,
Assistant Secretary, Pension and Welfare Benefits Administration, U.S. 
Department of Labor.
[FR Doc. 97-8173 Filed 4-1-97; 12:52 pm]
BILLING CODE 4510-29-P