What employers should know about the DOL final rule for electronic disclosure by retirement plans under ERISA

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A version of this article originally appeared in the July-August 2020 edition of Employee Benefit Plan Review.

Employers have long requested relief regarding the electronic delivery of required disclosures under the Employee Retirement Income Security Act of 1974, as amended (ERISA). In recent years, Congress through legislation[1] and the President through Executive Order 13847[2] have supported expanded use of electronic disclosure for retirement plans.

In 2002, the DOL published a safe harbor[3] under ERISA that permits electronic disclosure if an employee has the ability to effectively access such disclosure at a location where the employee is reasonably expected to perform his or her employment duties and electronic access to information is an integral part of his or her employment. Alternatively, electronic disclosure is permitted if an employer obtains an employee’s consent in accordance with rules set forth in the safe harbor. The 2002 safe harbor is of limited use for employers with limited technology or a significant number of employees whose circumstances of employment do not include electronic access.

On May 27, 2020, the Department of Labor (DOL) issued a final rule that makes it easier for employers to provide required disclosures to retirement plan participants and beneficiaries.[4] The final rule provides two additional safe harbors for the production of retirement plan disclosures via electronic media; the “Notice and Access” safe harbor and the “Direct Delivery Via Email” safe harbor.

The following are key points that employers should know about the new safe harbors.

Safe harbors do not extend to welfare plans

The new safe harbors do not apply to welfare benefit plans. Although the DOL believes that Executive Order 13847 does not limit its authority to address required disclosures for welfare benefit plans, the DOL cites two reasons for limiting the new safe harbor to retirement plans. First, disclosures for welfare plans, such as group health plans, includes additional considerations, such as pre-service claims review and access to emergency health care. Second, the DOL must work with the Department of the Treasury and the Department of Health and Human Services in determining rules governing group health plan disclosures. The preamble to the final rules indicates that the DOL plans to continue reviewing whether to extend the new safe harbors to welfare benefit plans.

Safe harbors apply to covered individuals

The safe harbors apply to a “covered individual” which is defined as a participant, beneficiary or other individual who is (i) entitled to “covered documents” and (ii) provides the employer or plan administrator with an electronic address, such as an email address, or internet-connected mobile device, at which he or she may receive covered documents electronically under one of the new safe harbors. If an electronic address is assigned to an employee for employment-related purposes, the employee is deemed to have provided the electronic address.[5]

Safe harbors apply to covered documents

The safe harbors apply to the disclosure of “covered documents.”  This term is defined as any document or information a plan administrator is required to provide to participants and beneficiaries under Title I of ERISA. The term does not include a document or information that must be furnished only upon request by a participant or beneficiary.[6]

Covered individuals can elect how to receive covered documents

Under both safe harbors, a covered individual can request the plan administrator to provide, free of charge, a paper copy of a covered document. However, only one paper copy of a particular covered document need be provided without charge.[7]

In addition, covered individuals have the right, free of charge, to globally opt out of electronic delivery of covered documents and to receive only paper copies. The preamble to the final rule notes that a plan administrator can, but is not required to, offer the opt-out on a document-by-document basis.[8]

Initial notice of default electronic delivery of covered documents

Prior to relying on one of the new safe harbors, a plan administrator must provide to each covered individual a written notice, on paper, stating that covered documents will be provided electronically. The notice must include the electronic address that will be used for the individual and instructions necessary to access covered documents. In the case of the Notice and Access safe harbor, the written notice must include a cautionary statement that a covered document is not required to be available on the website for longer than one year after posting or, if later, the date a subsequent version of the covered document is posted.[9]

The initial notice must include a statement of the right to request a paper version of covered documents, free of charge, and how to do so. The initial notice must also include a statement of the right, free of charge, to opt out of electronic delivery and receive only paper copies of covered documents and how to do so.[10]

Notice and access safe harbor

The first safe harbor, referred to as the “Notice and Access” safe harbor, permits a plan administrator to post required disclosures on a website and provide a notice to covered individuals that includes a web address or hyperlink to the applicable document.

Notice of internet availability (NOIA)

To satisfy the Notice and Access safe harbor, a plan administrator must provide a notice of internet availability (NOIA). The NOIA must be provided at the time a covered document is posted on the website specified by the plan administrator.

1. Content

The NOIA must include the following information:

  • A prominent statement, such as a title, legend or subject line, that reads “Disclosure About Your Retirement Plan.”
  • A statement that reads: “Important information about your retirement plan is now available. Please review this information.”
  • Identification of the covered document by name, e.g., “your quarterly benefit statement is now available,” and a brief description of the covered document if identification by name does not reasonably convey the nature of the covered document.
  • The website address or a hyperlink to such address where the covered document is available. The website address or hyperlink is sufficient if it leads a covered individual directly to the covered document or, alternatively, to a login page that, upon login, provides a prominent link to the covered document.
  • A statement of the right to request a paper version of the covered document, free of charge, and how to make such request.
  • A statement of the right, free of charge, to globally opt out of electronic delivery of covered documents and receive only paper copies.
  • A statement that the covered document is not required to be available on the website for more than one year or, after it is superseded by a subsequent version of the document, if later.
  • A telephone number to contact the plan administrator or other designated plan representative.[11]

2. Method of providing NOIA

The NOIA must be sent to the electronic address provided to the plan administrator by the covered individual (or assigned to the covered individual by the employer) and must contain only the information described above. A plan administrator may add design elements, such as pictures and logos, provided that such information is not inaccurate or misleading. The NOIA must be provided separately to covered individuals except in the case of a combined NOIA. As is required with all disclosures under ERISA, the NOIA must be written in a manner that is understandable to the average plan participant.[12]

3. Combined NOIA

A combined NOIA is permitted for certain required disclosures if the combined NOIA is furnished each plan year and no more than 14 months following the date of the prior year’s combined NOIA. The combined NOIA may cover one or all of the following documents:

  • A summary plan description;
  • A covered document or other information that must be provided annually (rather than upon the occurrence of a particular event) and does not require action by a covered individual by a specified deadline;
  • Any other covered document as authorized in writing by the DOL; and
  • Any applicable notice required by the Internal Revenue Code as authorized in writing by the Secretary of the Treasury.[13]

4. Invalid electronic addresses

The Plan administrator’s system must be designed to alert the plan administrator if a covered individual’s electronic address is invalid or inoperable. Once alerted, the plan administrator must take reasonable steps to correct the problem. If electronic delivery is not possible, the plan administrator must treat the covered individual as if he or she opted out of electronic delivery.[14]

Standards for internet website

The plan administrator must take reasonable steps to ensure that a covered document is available on the website no later than the deadline under ERISA and that such document remains available until the later of one year after the date it was posted, or the date a subsequent version of the covered document is posted. A covered document must be available in a widely available format that can be read online or printed clearly on paper and can be searched electronically. The format must also allow the covered document to be permanently retained in an electronic format. The plan administrator should also take reasonable steps to ensure that the website protects confidential information. For purposes of the safe harbor, the term “website” includes other forms of electronic-based media, such as a mobile application.[15]

Direct delivery via email safe harbor

The Direct Delivery Via Email safe harbor permits plan administrator to send covered documents directly to covered individuals in the body of an email or as an attachment to an email. The email must include a subject line that reads: “Disclosure About Your Retirement Plan” and be sent to an electronic address provided by the covered individual (or assigned to the covered individual by the employer for employment-related purposes). The email must be sent no later than the deadline for providing such document under ERISA.[16]

Email attachments

If the covered document is provided as an attachment to an email, the email must identify the covered document (or provide a brief description if the document title does not convey the nature of the document), state that the covered individual has the right to a paper copy, state that the covered individual has the right to opt out of electronic delivery of covered documents, and provide the phone number of the plan administrator or a designated plan representative.[17]

Standards for emails

Many of same standards that apply to covered documents provided on a website (e.g, readable, format is widely available, searchable, printable, document can be permanently retained, and confidential information is protected) apply to emails under this safe harbor. Similarly, if the plan administrator is alerted that an electronic address for a covered individual is invalid or inoperable, it must take steps to correct the problem or treat the covered individual as if he or she opted out of electronic delivery of covered documents.[18]

Effective date and non-enforcement policy

The new safe harbors are effective 60 days after publication, i.e., on July 26, 2020. However, the preamble to the final rule provides that the DOL will not take any enforcement action against plan administrators that rely on the safe harbors before that date.

Conclusion

The new safe harbors provide immediate and welcome relief to employers and plan administrators and will reduce the costs and administrative burdens currently associated with required disclosures for retirement plans subject to ERISA. The Internal Revenue Service has not yet stated whether it will accept these procedures for disclosures required under the Internal Revenue Code. Employers should review their current procedures and consult their legal advisors and third party administrators to discuss possible adoption of one of the new safe harbors.

[1] For example, the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 amends ERISA to require that the terms of a pooled employer plan provide that certain disclosure and information may be provided electronically.

[2] Executive Order 13847 (August 31, 2018) instructs the DOL to review whether action could be taken to make disclosures under ERISA more understandable and useful for participants while reducing the costs and burdens on employers. Specifically, the Executive Order directs that the review include “an exploration of the potential for broader use of electronic delivery as a way to improve the effectiveness of disclosures and to reduce their associates costs and burdens.”

[3] 29 CFR §2520.104b-1(c)

[4] https://www.govinfo.gov/content/pkg/FR-2020-05-27/pdf/2020-10951.pdf

[5] 29 CFR §2520.104b-31(b)

[6] 29 CFR §2520.104b-31(c)

[7] 29 CFR §2520.104b-31(f)

[8] Id.

[9] 29 CFR §2520.104b-31(g)

[10] Id.

[11] 29 CFR §2520.104b-31(d)(3)

[12] 29 CFR §2520.104b-31(d)(4)

[13] 29 CFR §2520.104b-31(i)

[14] 29 CFR §2520.104b-31(f)(4); 29 CFR §2520.104b-31(k)(4)(ii)

[15] 29 CFR §2520.104b-31(e)

[16] 29 CFR §2520.104b-31(k)

[17] 29 CFR §2520.104b-31(k)(2)(iii)

[18] 29 CFR §2520.104b-31(k(3) and (4)

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