The U.S. Department of Labor (DOL) has issued final regulations regarding electronic delivery of retirement plan documents required by the Employee Retirement Income Security Act (ERISA). The new rules only apply to retirement plans, so unfortunately our health and welfare plan friends just have to wait.
The new regulations supplement existing rules and permit plan administrators to: (1) post retirement plan documents on a website; or (2) send retirement plan documents directly by email. However, paper has its last hurrah because first a paper notice must be sent to participants.
Although the new rules are not effective until July 27, 2020 (60 days after publication in the Federal Register), the DOL confirmed it will not take any enforcement action against plan administrators relying on the new rules before that date.
Background: Delivering ERISA Documents
ERISA requires plan administrators to deliver plan-related information using methods reasonably calculated to ensure actual receipt. Hand delivery (from a six foot distance, of course) or first-class mail automatically pass this test under current rules, but electronic delivery (e-delivery) generally does not.
Instead, the DOL’s approach to e-delivery has been to offer two safe harbors. The first safe harbor requires an employee’s actual consent to e-delivery, and the second requires an employee to be “wired at work,” meaning the employee uses a computer as an integral part of his or her job duties and can access the electronic plan documents at any location the employee is expected to work. Plan administrators could also adopt an approach outside the safe harbor protection, provided employees actually receive the documents.
The existing e-delivery safe harbor rules remain alive and well and are the older siblings to the new rule. So if the existing safe harbor works for you, there is nothing to change. However, if you are fed up with answering the “do they use a computer to do their jobs” question or monitoring whether employees have formally consented to e-delivery, this new safe harbor might be just the good news you have been waiting for. Plan administrators who currently rely on the existing safe harbor rules but want to switch to the new rule must satisfy the requirements described below.
The DOL has previously issued ad hoc guidance regarding e-delivery of certain documents (e.g., furnishing pension benefit statements by providing continuous access through a website under FAB 2006-03, or providing QDIA notices electronically by relying on IRS or DOL rules under FAB 2008-03). These one-off rules will be superseded 18 months after the effective date with the new and existing safe harbors becoming the exclusive e-delivery standard.
Which plans can use the new rules?
Only retirement plans, e.g., 401(k), defined benefit pension, 403(b), cash balance, and money purchase plans.
The new rules do not apply to group health plans, disability plans or other ERISA welfare benefit plans. The DOL will continue exploring whether to extend the rules to these plans in the future.
Who does the new rule apply to and for which email addresses?
The new safe harbor applies to participants, beneficiaries, and other individuals entitled to covered documents under ERISA if they provide the employer or plan administrator with an electronic address. This includes an email address or smartphone number capable of receiving a written notice of internet availability and is intended to be broad enough to encompass new and changing technology. If an employer uses a phone number, it must confirm that the number can receive written messages.
There are different ways to meet this requirement:
- The employer provides a work email address (but forget about providing a work email solely for the purpose of furnishing notices; the DOL confirmed that work email must be assigned for employment-related purposes other than delivery of covered documents).
- The employee provides a personal electronic address as part of the job application process or on other HR documents.
- The plan administrator requests and obtains an electronic address in plan enrollment paperwork or to establish a plan participant’s online access to plan documents and account information.
Spouses or other beneficiaries entitled to ERISA disclosures must affirmatively provide the employer or administrator (or appropriate designee) with an electronic address. Plan administrators may rely on email addresses they have already collected from participants, beneficiaries, or employers in the context of the employment relationship but must comply with all the safeguards.
What documents are covered?
Any documents or information required by Title I of ERISA, except for any document or information that must be furnished only upon the participant’s (or beneficiary’s) request. The new rule would cover documents like SPDs, SMMs, annual funding notices, fee disclosures, blackout notices, and claim denials. If a participant (or beneficiary) requests a document that is already required to be provided (e.g., the participant misplaces his SPD and requests a new one), it can be delivered using these new rules (or the existing rules).
We hope to see guidance from the IRS confirming which tax code requirements (e.g., for delivery of safe harbor notices) are met by complying with the new e-delivery safe harbor.
How does the safe harbor work for documents posted on a website?
The plan administrator must furnish to each covered individual an electronic notice of internet availability (NOIA) for each covered document when it is made available on the website. Administrators can use a combined NOIA for more than one covered document, in which case the NOIA must be furnished each plan year and no more than 14 months following the previous year’s notice.
What qualifies as a "website?"
This covers a traditional internet website or other internet or electronic-based information repository such as a mobile application, to which covered individuals have been provided reasonable access.
Are there any prerequisites before we can post to a website?
Yes, before a plan can post to a website, the administrator must:
- Provide paper notification, written to be understood by the average plan participant, that covered documents will be sent to an electronic address.
- Identify the electronic address and provide any instructions necessary to access the covered documents.
- Provide a cautionary statement that the covered document is not required to be available on the website for more than one year or until superseded.
- Provide a statement of the right to request and obtain a paper version of a covered document free of charge, and an explanation of how to exercise this right.
- Provide a statement of the right, free of charge, to opt out of electronic delivery and receive only paper versions of covered documents, and an explanation of how to exercise this right.
This initial notification is not required to be provided alone and could be part of a new-hire packet.
What are the requirements for a NOIA?
Each NOIA must be succinct and understandable, sent to the individual’s email address (as discussed above), and must:
- Be written so that it can be understood by the average plan participant. Thankfully, the requirement in the proposed rule for a Flesch reading score has been dropped (see our previous advisory for the DOL’s own Flesch score on the proposed rule).
- Include the following statements: “Disclosure About Your Retirement Plan” and “Important information about your retirement plan is now available. Please review this information.”
- Identify the covered document by name and briefly describe the covered document if not obvious from the name.
- Reference the internet website address or a hyperlink to such address where the covered document is available. This could be a direct link to the document or to a login page that immediately links to the document.
- Include 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.
- Include a statement of the right, free of charge, to opt out of electronic delivery and receive only paper versions of covered documents, and an explanation of how to exercise this right.
- Include a statement that the covered document is not required to be available on the website for more than one year or, if later, after it is superseded by a subsequent version of the covered document.
- Include administrator/other plan representative’s telephone number.
Pictures and logos are permitted, but the design must not be inaccurate or misleading. The NOIA may also may contain an optional statement as to whether action is invited or required in response to the covered document and how to take such action, or that no action is required, but the statement cannot be inaccurate or misleading.
Are there technical compliance requirements for the website?
Plan administrators must ensure that the document-hosting website actually exists and is maintained. Temporary interruptions due to internet connectivity problems, routine maintenance, or network disturbances would generally be excused.
In addition, the administrator must take measures reasonably calculated to ensure that the website protects the confidentiality of personal information. The guidance acknowledges that an administrator may delegate some responsibilities; and as is the case with many other aspects of plan administration, the administrator’s fiduciary duties under ERISA require the administrator to prudently select and monitor those to whom responsibilities are delegated.
The system for furnishing a NOIA must include a process for the plan administrator to receive alerts regarding an invalid electronic address, and upon receiving notice of an undeliverable message the administrator must promptly take reasonable steps to cure the problem (e.g., send to a secondary email address, get a new email address, or just send a paper copy).
If the problem is not promptly resolved, the administrator should treat the individual with the bad electronic address as having opted out of e-delivery and instead requested a paper copy until a workable e-delivery address is secured. On the other hand, the administrator has no obligation to monitor the website to verify whether covered individuals have in fact reviewed the conveyed notices and other documents.
Can a plan administrator combine NOIAs?
Yes, but only for SPDs, documents furnished annually that do not require action by a deadline (e.g., summary annual reports, annual funding, QDIA notices, etc.), and other documents the DOL or Treasury might specify in writing.
For how long must the website retain posted documents?
Documents must remain posted to the website until superseded but no less than one year from the date of posting. However, some documents, such as SPDs, must remain on the site for much longer if they are not frequently updated. Documents are not required to be available indefinitely, but plan administrators could choose to post them for longer or maintain an archive.
Administrators should not confuse these website posting rules with ERISA’s general recordkeeping rules and should maintain ERISA documents for the applicable time requirement.
Can't we simply email or text the document as an attachment?
Yes, instead of (or in addition to) posting on a website, administrators can email the document if they first provide the initial paper notification of default electronic delivery (per the rules above), but they cannot send the document directly by text (administrators who want to text must use the website posting rules).
To email the document directly, no NOIA is required but the email must:
- Include the covered document in the body of the email or as an attachment.
- Be written to be understood by the average plan participant.
- Include a subject line that reads: “Disclosure About Your Retirement Plan.”
- Identify or briefly describe the covered document.
- Include a statement of the right to a paper copy of the covered document and the right to opt out of electronic delivery, and a telephone number.
Plan administrators can attach multiple documents to an email, using the existing rules for paper documents permitted to be delivered together. In addition, administrators must take measures reasonably calculated to protect personal information and comply with the requirements described above regarding paper documents or the right to opt out.
Can plan administrators use both the website posting and email safe harbors?
Yes, but ensure that the rules for both emails and website posting are met. Many plan sponsors already use a combination.
Are there specific requirements for the documents themselves, and are any ERISA deadlines changed?
ERISA document deadlines are unchanged, and the document in question must be available on the website no later than the applicable ERISA deadline. Administrators using the website route must present the document on the website in a manner calculated to be understood by the average participant, and those emailing it as an attachment must ensure the email can be understood by the average plan participant.
In either case, the document must be written in a manner reasonably calculated to be understood by the average plan participant, presented in a widely-available format that can be read online, printed and saved, searchable by numbers, letters or words, and personal information must be protected.
Can participants still request paper?
Yes, covered individuals can request paper copies of specific documents or globally opt out of electronic delivery entirely, at any time, free of charge. Only one paper copy of any covered document must be provided free of charge.
Plans must accommodate these individuals with “minimal friction” and cannot have procedurally cumbersome or complex processes for exercising these rights. Broadly speaking, if a participant opts out or requests a paper copy, plan administrators should honor that request promptly. It is up to administrators how to manage any opt-outs, e.g., document by document, or classifications of documents.
Can plan administrators use this safe harbor for terminated employees?
Yes, but only if the email address remains valid, which obviously will not be the case if administrators do not have an employee-provided personal email on file. Therefore, plans may end up following the common practice of emailing materials to current employees and mailing paper copies to terminated participants, beneficiaries, and alternate payees.
Plan sponsors should work with ERISA counsel to ensure e-delivery requirements are met.