Final Regulations on Electronic Disclosures by ERISA Plans: How Plans May Reduce Costs Using the New DOL Safe Harbor

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Employee benefit plans increasingly look to electronic participant communications as a reliable and cost-effective way to satisfy disclosure requirements under the Employee Retirement Income Security Act (ERISA). Last October, the Department of Labor (DOL) issued proposed regulations on a new safe harbor for the electronic delivery of certain participant disclosures required under ERISA via electronic notice and website posting. The DOL has now finalized the electronic disclosure regulations on the new safe harbor – including a new safe harbor option for email delivery – that plan administrators may begin using immediately. Plans that satisfy an electronic delivery safe harbor will be deemed to have satisfied the requirement under ERISA to use delivery methods that are reasonably calculated to ensure actual receipt of information by participants, beneficiaries, and other individuals.

The final regulations supplement – but do not replace – existing guidance on the electronic disclosure of certain participant communications under ERISA employee benefit plans. The existing DOL guidance on electronic disclosure from 2002 limits such delivery of documents either to certain classes of employees with employment-related computer system access or else to employees who have completed a process affirmatively electing to receive documents electronically.  By contrast, the new regulations are potentially broader in scope and more flexible, incorporating the safe harbor elements from the proposed regulations for website posting and adding a new safe harbor option for the direct delivery of electronic materials, including as an attachment to email. As email delivery is already a widely used means of communication for employers and employees, this new safe harbor option should be welcome news.

The final regulations provide the following important guidelines with respect to the two new safe harbor options for electronic disclosures:

  • The new safe harbor for electronic distribution applies only to “pension benefit plans” and not to “welfare benefit plans” subject to ERISA. In other words, for example, unlike the DOL 2002 regulations on electronic disclosure, the new safe harbor does not apply to summary plan descriptions for, among other benefit arrangements, group health plans. Instead, the DOL has limited the new safe harbor to retirement plans such as 401(k) plans, profit sharing plans and defined benefit pension plans.
  • The new safe harbor applies to the disclosure of “covered documents” to “covered individuals.” For this purpose, “covered documents” include summary plan descriptions, summaries of material modifications, and pension benefit statements, but not any document that must be furnished upon request. A “covered individual” is (i) a plan participant, beneficiary, or any other individual entitled to covered documents (ii) who has provided or with respect to whom the employer has provided an electronic address (including an email address or smartphone number) for employment-related purposes, including (but not limited to) receiving notice of the availability of a covered document on the internet or for receiving a covered document via email.
  • The first new safe harbor option – website posting – uses a “notice and access” approach, under which a participant or other covered individual must receive a timely “notice of internet availability” advising the individual of the posting of a disclosure on a website that is made available to the individual. Both the notice of internet availability and the website where disclosures may be accessed are subject to specific rules regarding timing, content, and format. Employers are also required to maintain procedures to ensure that posted covered documents remain available on the website until superseded but for at least one year.
  • The second new safe harbor option – email delivery – provides for furnishing a covered document directly to covered individuals as an attachment to or in the body of an email message. Instead of requiring that the employer provide a notice of internet availability, the final regulations provide that email delivery must be made in a message with a subject line that reads “Disclosure About Your Retirement Plan,” along with statements briefly describing the document, the covered individual’s right to obtain a paper copy of the covered document and the right to opt out of electronic delivery. Like website posting, direct electronic delivery is subject to other specific rules regarding timing, content and format.  
  • Distribution may default to electronic methods unless the covered individual affirmatively opts out, provided the plan administrator first furnishes to covered individuals a notification on paper that advises the recipient of, among other things, the plan administrator’s intent to provide covered documents electronically. In any case, covered individuals still have the right to request a hard copy of any disclosure provided electronically. In addition, plan administrators must have procedures in place to check for invalid email addresses and to ensure continued delivery of covered documents to covered individuals following such individuals’ termination of employment.

The final regulations are scheduled to be published in the Federal Register on May 27. While the final regulations are effective 60 days after publication, plan administrators may immediately take advantage of either of the new safe harbor options to provide covered documents to covered individuals. The DOL will not take any enforcement action against a plan administrator that relies on the new safe harbor before the 60-day period has expired.

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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