On October 22, 2019, the U.S. Department of Labor (DOL) announced proposed regulations that would allow disclosures for retirement plans to be posted online. The proposal aims to make retirement plan disclosures more accessible to participants while reducing the costs they impose on employers.

Background

The Employee Retirement Income Security Act of 1974 (ERISA) imposes several requirements with respect to retirement plan disclosures, including the requirement that plans furnish multiple documents per year to participants and beneficiaries. Specific delivery methods are mandated to ensure that participants receive the disclosures. Prior to 2002, ERISA required that information be furnished to participants and beneficiaries using delivery methods reasonably calculated to ensure actual receipt (e.g., sending documents by first class mail or hand delivering them to employees at their workplace). In 2002, the DOL amended the delivery standards to establish a safe harbor allowing the use of electronic media to distribute the mandatory documents (the 2002 safe harbor). The 2002 safe harbor only allowed electronic disclosure to participants who either had email addresses through their employers or affirmatively opted in to receive electronic documentation.

Proposed Rule

Under the DOL’s proposed electronic disclosure safe harbor rule, employers will have the option to make retirement plan disclosures of “covered documents” accessible to “covered individuals” on a website. However, before an employer relies on the new safe harbor, the plan administrator must furnish each individual a paper notification stating that: some or all documents will be provided electronically; participants have a right to request and obtain paper copies of the document, free of charge; and individuals may opt out of receiving documents electronically, with instructions how to do so.

The covered documents to which the proposed rule applies are documents that the pension benefit plan administrator is required to automatically provide to participants and beneficiaries under Title I of ERISA, except for documents that must be furnished upon request, and includes pension benefit statements, summary annual reports, SMMs and blackout notices. The proposed regulations only apply to pension plan disclosures; the proposed safe harbor does not currently apply to welfare plan disclosures, but the DOL is studying the issue. Under the proposed rule, the plan administrator is not required to provide covered the documents under the safe harbor, and can still use a different method of furnishing some covered documents, if desired.

Covered individuals must receive notice that information is available online and must be directed on how to access the documents. The proposed rule defines covered individuals as a participant, beneficiary or other individual entitled to covered documents who either has a company-provided email address or who, as a condition of employment, provides the employer or plan sponsor with an email address or smartphone number.

Under the proposed rule, such covered document must be available on the website no later than the date on which ERISA requires that such document be furnished, and the plan administrator must furnish a notice, including certain details and information as described below, to participants at the time the covered document is made available on the website (which should correspond to the deadlines under ERISA). Separate notices of internet availability must be sent for each covered document unless a combined notice of internet availability is furnished. A combined notice of internet availability for more than one covered document may satisfy the notice requirement if the combined notice is furnished each plan year, and if a combined notice is provided in the prior plan year, the current plan year notice must be sent no more than 14 months following the date the prior year’s notice was provided.

The notice of internet availability must include a prominent statement that reads “Disclosure About Your Retirement Plan;” a statement that important information about the retirement plan is contained at the website listed; a brief description of the covered document; the website where the covered document is available; a statement of the right to request and receive a paper version of the covered document, free of charge; a statement of how to opt out of receiving covered documents electronically; and a telephone number to contact the plan administrator. Administrators must also have a system in place where they are notified of a covered individual’s invalid or inoperable email address.

The proposed safe harbor includes minimum standards regarding the availability of covered documents on a website. The plan administrator must ensure that the website is accessible to covered individuals and either the administrator or a plan service or investment provider must maintain the website. In addition, the documents must be formatted in a way that is suitable to read online and print on paper and the participants should be able to perform word or number searches in the electronic version of the documents. Covered documents must remain on the website until they are superseded by a subsequent version.

While the proposed safe harbor is intended to provide for ease of administration, it is not without new challenges, like how to keep track of and update participants’ email addresses when they terminate employment. The proposed rule provides that when a participant is terminated from employment, the plan administrator “must take measures reasonably calculated to ensure the continued accuracy” of the participant’s email address or obtain a new email address that allows the former employee to continue receiving required disclosures following severance from employment. The DOL seeks comments on whether this requirement will be effective in ensuring a seamless transition when a participant severs employment.

Next Steps

The proposed effective date is 60 days after the final rule is published. However, since the new safe harbor is voluntary, the applicability date will be the first day of the first calendar year following publication of the final rule. The DOL is requesting comments on several aspects of the proposed safe harbor rule, which are due by November 22, 2019. King & Spalding would be happy to assist you with any questions you have about the proposed safe harbor regulation.