On October 22, 2019, the Department of Labor (DOL) proposed new regulations giving employers a new safe harbor regarding the electronic delivery of required retirement plan notices under Title I of the Employee Retirement Income Security Act (ERISA). Under these proposed regulations, which were published in the Federal Register on October 23, plan administrators can satisfy their notice delivery requirements by posting retirement plan notices to a website, provided several specific requirements are satisfied.
The current 2002 Safe Harbor electronic disclosure is available only to those participants who have electronic media at work, or to those individuals who affirmatively opt in to electronic documentation.
The proposed new regulations do not replace the current 2002 Safe Harbor, but merely expands upon them. Employers may continue to rely on the 2002 Safe Harbor rule if and when the proposed new regulations become final.
The regulations are proposed to be effective 60 days after the October 23 published date. There also is an accompanying Request for Information (RFI) on additional measures (beyond the proposed electronic delivery safe harbor) that the DOL could consider in the future to improve the effectiveness of ERISA disclosures. Comments on the RFI are due 30 days after publication in the Federal Register.
The DOL estimates that expanding the use of internet technology to furnish covered disclosures to workers will result in approximately $2.4 billion net cost savings over the next 10 years for ERISA-covered retirement plans by eliminating materials, printing and mailing costs associated with furnishing printed disclosures.
However, the proposed regulations do not eliminate paper distributions. Covered individuals must be permitted to request any document in paper form (without charge) and would have the right to opt out of electronic delivery and receive only paper versions of some or all covered documents. In fact, before making use of this safe harbor (upon it becoming final), plan administrators must provide covered individuals with a paper notification of the use of the electronic delivery, with information about the right to request paper versions and to opt out.
Following are highlights of the proposed rule:
Retirement Plans Only: The proposed rule applies only to retirement plans; it does not cover welfare benefit plans
Covered Individuals: Retirement plan disclosures under the proposed rule could be sent to participants, beneficiaries, or other individuals entitled to receive required notices and documents who provide an e-mail address or smartphone number. An employee with a work-related electronic address assigned by an employer is treated as having provided the electronic address.
Covered documents: The safe harbor would apply to any retirement plan-related document required to be furnished under ERISA, such as Summary Plan Descriptions (SPDs), Summary of Material Modifications (SMM), Summary Annual Reports (SARs), pension benefit statements and blackout notices. Documents that must be furnished upon request (such as a retirement plan document) are excluded from the proposed rule.
Notice of internet availability: Plan administrators must provide a notice of internet availability for each covered document they plan to provide under the new safe harbor. If there are eight different documents, eight different notice of internet availability must be provided. However, the proposed rule provides for combining certain documents into one Notice.
Content of notice of internet availability: The notice, which must be written in a prescribed readability standard and which cannot contain technical or legal terminology, must include: (i) a prominent statement, such as a subject line that reads, “Disclosure About Your Retirement Plan,” (ii) a statement that includes this language “Important information about your retirement plan is available at the website address below. Please review this information,” (iii) a brief description of the covered document, (iv) the website address where the covered document is available, (v) a statement of the right to request and obtain a paper version of the covered document, free of charge, and an explanation of how to exercise this right, (vi) a statement of the right to opt out of receiving covered documents electronically, with an explanation of how to exercise this right, and (vii) a telephone number to contact the administrator or other designated plan representative. The website address must connect either directly to the covered document or to a login page that provides a prominent link to the covered document.
Technical Standards: The plan administrator would be required to ensure that each document is available on a website accessible by covered individuals. Password protection is permitted, and any individual’s personal information must be protected. The regulations also address formatting requirements (e.g., the online document must be suitable for searching, printing, and saving electronically) and technical issues (e.g., regarding confirming validity of email addresses). The website does not need to be maintained by the plan sponsor; it can be a website of a third-party service provider.
Timing of notice of internet availability: The notice must be furnished no later than the deadline for providing the underlying ERISA disclosure (there are special timing guidelines for combined notices), and must remain posted until superseded.
Severance from employment: The proposed rule recognizes the need to continue to furnish information following an employee’s severance from employment; therefore, the administrator will need to ensure the continued accuracy of the covered individual’s electronic address or number.
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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.