How does the financial privacy regulation affect insurance provided through an employee benefit plan?
Participants in an employee benefit plan are treated in a similar manner as claimants under a workers’ compensation plan. An insurance company that carries and sells an employee benefit plan is only required to provide a privacy and opt-out notice to an individual employee if the insurance company wishes to disclose the employee’s nonpublic personal financial information to a nonaffiliated third party outside the exceptions provided in the regulation. In that situation, the employee is the insurance company’s “consumer” and notices and an opportunity to opt-out must be provided. However, if the insurance company that carries and sells the employee benefit plan does not disclose nonpublic personal information about the individual employees covered by the plan, the regulation’s requirements would be met by providing the policyholder (i.e., the employer sponsoring the plan) with all of the applicable notices.
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