In proposed regulations released last week, the Department of Labor (DOL) finally put forward a revision of its long-outdated regulations on the electronic delivery of certain participant disclosures required under ERISA (including such important materials as summary plan descriptions, summaries of material modifications, and pension benefit statements). Recognizing what it calls a “nearly universal access to the internet” by workers in the United States, the DOL is taking some much needed (albeit small) steps to coordinate plan administrators’ disclosure obligations under ERISA with the use of electronic communication technologies that have taken a firm hold among many segments of the American public.
The regulations are in proposed form and plan administrators should not rely on the proposed safe harbor for electronic distribution that is described in the DOL release. If finalized, however, the proposed regulations would offer a limited new opportunity for electronic distribution that could bring some relief to plan administrators who want greater ease and cost-efficiency with respect to the numerous participant disclosures that are required under ERISA. Here are the most important points to note:
- The new safe harbor for electronic distribution would apply only to “pension benefit plans” and not to “welfare benefit plans” subject to ERISA. In other words, for example, the new safe harbor would not apply to summary plan descriptions for, among other benefit arrangements, group health plans. Instead, the DOL has limited the new safe harbor for the time being to retirement plans such as 401(k) plans, profit sharing plans and defined benefit pension plans.
- The new safe harbor would apply 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, with respect to whom (ii) an electronic address (including an email address or smartphone number) has been provided for purposes of receiving notice of the availability of a covered document on the internet.
- The new safe harbor would use a “notice and access” approach, according to 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. 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. Covered individuals would in all cases still have the right to request a hard copy of any disclosure provided electronically.
- For purposes of the notice of internet availability, plan administrators would use electronic addresses that are provided by covered individuals. In a potentially significant new development, the proposed regulations provide that an employer may assign an electronic address to an individual for purposes of providing the notice of internet availability. However, in the preamble to the proposed regulations, the DOL observes that there may be special considerations attendant to the use of such assigned addresses, including whether there is “a heightened need to ensure covered individuals’ awareness of the electronic address and the notice and access method of delivery.” In other words, there may be some skepticism among regulators that the assignment of an electronic address to an employee is sufficient to constitute the use of “measures reasonably calculated to result in actual receipt,” in the terminology of the relevant ERISA standard for required disclosures. Plan sponsors will need greater clarity on this particular aspect of the new safe harbor before moving forward.