Email Option Added to Final Electronic Disclosure Rule for Retirement Plans

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Key Points

  • ERISA retirement plan sponsors may email certain required disclosures to participants under a final Department of Labor rule.
  • The final rule also keeps the “notice and access” safe harbor discussed in our prior alert.
  • Employers should collect valid email addresses from plan participants, including terminating employees still covered by the plan.

The U.S. Department of Labor (DOL) finalized a new rule that allows ERISA retirement plan sponsors to provide certain required disclosures to participants and beneficiaries electronically. The final rule adds an option to email covered disclosures directly to recipients, but otherwise is substantially the same as the proposed rule, explained in our prior alert.

Two Options for Electronic Disclosure

Plan sponsors now have two options for providing certain required disclosures electronically – posting on a website, or emailing to recipients. If posting to a website, plan sponsors must then email or text recipients to notify them that the disclosure was posted, and how to access it. The final rule retained most of the requirements for this “notice and access” method from the proposed rule, although a few changes are noted below.

The final rule added the option to email covered disclosures directly to participants. The email must identify the disclosure being sent, and provide notice of the right to obtain a paper copy, free of charge, and to opt out of electronic delivery altogether.

Initial Notice about Electronic Disclosure Required for Both Methods

To use either option, plan sponsors first must send a one-time paper notice to explain that disclosures will be provided electronically going forward, and that recipients may opt out of electronic delivery. The notice also must include the right to request paper copies, and identify the email address that will be used either for direct disclosure or to provide notice of the website posting to the recipient.

Changes from Proposed Rule

The final rule differs from the proposed rule in a few important ways:

  • While a notice or email about electronic disclosures must be written in a manner calculated to be understood by the average plan participant, they need not result in a Flesch Reading Ease test score of at least 60, or meet other language and grammar standards listed in the proposed rule.
  • Plan sponsors can use an email address they provide to the recipient, but that email address must be provided for another business purpose, not solely for the purpose of using the safe harbor.
  • Disclosures posted on a website need only be made available for one year, or, if later, when they are superseded. Notice to participants about the posting must warn them that the disclosure is not required to be available for more than one year.
  • Although a notice about posting several covered disclosures can be combined into one annual notice, this does not apply to quarterly benefit statements; instead, a separate notice must be provided each quarter for quarterly benefit statements.

The final rule takes effect on July 26, 2020, but the DOL will not take any enforcement action against plan sponsors that rely on the safe harbor before the effective date.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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