Finally! DOL Issues Final Regulations for the E-Delivery of Retirement Plan Disclosures

After a long process, which stretched on for over a decade, on May 27, 2020, the Department of Labor (“DOL”) published final regulations regarding the electronic delivery of required disclosures under the Employee Retirement Income Security Act (“ERISA”).  The final regulations mostly follow the proposed regulations issued by the DOL on October 22, 2019 and supplement the 2002 antiquated rules that had been in place.  For a summary of the proposed regulations, see our Blog post.

Background

ERISA retirement plan administrators must use delivery methods that are reasonably calculated to ensure actual receipt when providing required disclosures to participants, beneficiaries and other individuals (collectively, “covered individuals”). While required disclosures have historically been furnished by hand or first class mail, rapid improvements and advances in technology in the 21st century have made electronic delivery more appealing.

In an acknowledgement to the pervasiveness of electronic means of communication even at the turn of the century, the DOL issued safe harbor regulations in 2002 regarding the use of electronic media for the delivery of required disclosures. The 2002 safe harbor applies to individuals who have the ability to access electronic documents and whose access is an integral part of their employment duties, or who affirmatively consent to receive documents electronically and provide an address for receipt of such documents.

Following the 2002 regulations, the DOL released additional guidance regarding the electronic disclosure of pension plan notices and communications. The guidance provided a good faith compliance rule if pension plans provide continuous access to benefit statement information through a secure website, and confirmed that plans may consolidate notices about default investment alternatives with other notices required under the Internal Revenue Code.

Since 2002, not only has technology continued to improve but there has been a substantial increase in individuals’ access to and use of electronic media.  Many individuals only consume information received electronically.  Given the difficulties in effectively communicating with participants under the 2002 rules, practitioners and plan administrators have requested updates to the electronic disclosure rules to reflect current communication practices. 

Partly in response, the President issued Executive Order 13847 in August 2018.  The Executive Order directed the Secretary of Labor, in consultation with the Secretary of Treasury, to explore the broader use of electronic delivery with respect to retirement plan documents and information in order to make retirement plans more accessible to employees and to lower the costs and burdens related to such disclosures.

The DOL Final Regulations

The final regulations provide an additional safe harbor method for the electronic disclosure of required documents, known as the “notice and access” safe harbor method, which applies to ERISA-required disclosures for retirement benefit plans, including multiemployer retirement plans.  Notably, the final regulations do not apply to employee welfare benefit plans, including plans providing disability or group health benefits

Who is covered by the additional safe harbor?  Electronic disclosures may be provided to: (i) any participant, beneficiary or other individual who either provides an email address or mobile computing device (e.g., smartphone) number to the plan administrator; or (ii) any employee who is assigned an email address by his or her employer for employment-related purposes, including but not limited to the delivery of required disclosures. The final regulations do not impose any requirements on the type of device a person must have in order to have the new rules apply to them, as long as the device is capable of receiving the written notice of internet availability described below or an email.

What documents are covered?  The additional safe harbor in the final regulations applies to retirement plan documents that the plan administrator is required to furnish (except for documents or information furnished only upon request).  For example, retirement benefit statements, safe harbor notices, summary annual reports, summaries of material modifications and blackout notices may now be provided under this safe harbor method.

What is a “notice of internet availability”?  The final regulations require plan administrators to send a notice of internet availability to covered individuals every time a disclosure is made available on the website (e.g., the employer’s intranet site) (see the timing rules below).  The notice itself is delivered electronically and must be sent to the email address or smartphone number provided to the plan administrator (or assigned by the employer).  A combined notice of internet availability may be used for some of the more common disclosures, such as summary plan descriptions (“SPDs”), summary of material modifications (“SMMs”), summary annual reports and investment-related disclosures that do not require action by the covered individual by a specific deadline.  This combined notice of internet availability does not, however, apply to disclosures that are event-specific, like notices of blackout periods, claims determinations or qualified domestic relations order determinations.  For these required disclosures, a separate notice of internet availability must be provided for each disclosure.

When does the notice of internet availability need to be provided? The notice of internet availability must generally be provided by the due date for the specific disclosure.  There are special timing rules for providing a combined notice, however.  A combined notice of internet availability may be provided each plan year and no more than 14 months following the date the prior plan year’s notice was provided for certain disclosures.  

What does the notice of internet availability need to include?  The notice must include:

• a prominent statement in the title or subject line that reads “Disclosure About Your Retirement Plan”,
• a statement that “Important information about your retirement plan is now available, Please review this information”,
• the identity of the document, as a well as a brief description if the identity would not reasonably convey the nature of the document,
• the website address or hyperlink to the address where the document is posted,
• a statement that the individual has the right to request and obtain the document, free of charge, and how to exercise that right,
• a statement of the right to opt out of electronic delivery, free of charge, and an explanation of how to do so,
• a cautionary statement regarding how long the document will be available electronically; and
• a telephone number for the plan administrator or other designated representative of the plan.

The notice may include a statement as to whether the covered individual needs or is invited to take action in response to the information provided in the document, so long as the statement is not misleading or inaccurate. The DOL has indicated that it may issue a model notice.

What guidelines do plan administrators need to follow in providing web access?  The website address or hyperlink provided in the notice of availability must lead the covered individual directly to the document (or to a login page that leads directly to the document). The linked documents must remain available on the website for at least one year after it is made available or, if later, until superseded by a subsequent version.  The documents themselves must be (i) presented in a manner calculated to be understood by the average plan participant, (ii) searchable electronically, (iii) suitable for reading online or in print, and (iv) able to be permanently retained in an electronic format by the individual.

What if the electronic disclosure is made through email?  If the plan administrator sends documents directly to a covered individual’s email address, rather than posting the documents to a website, the plan administrator is not required to provide the notice of internet availability.  Instead, the email itself must contain certain content that the notice of internet availability would otherwise provide and meet certain requirements that would otherwise apply to the website and the documents as described above.

What other systems must plan administrators have in place?  Plan administrators must carefully manage requests for paper copies of required disclosures or requests to opt out of electronic delivery.  The final regulations also require plan administrators to have a system to alert them of an invalid or inoperable electronic address and to take reasonable steps to cure the problem. If a corrected or secondary address cannot be used, the plan administrator must treat the covered individual as if he or she had elected to opt out of electronic delivery.

Additionally, if an employer assigns an email to employees for purposes of providing electronic disclosures and the employee terminates from employment, the plan administrator must take measures reasonably calculated to ensure the continued availability of such email address or obtain a new email address for receipt of documents following the termination from employment.

In addition to the notice of internet availability, what other notice rules apply under this additional safe harbor method?  Prior to relying on the additional safe harbor method with respect to an individual, the plan administrator must notify the individual on paper that documents will be provided electronically and that the individual has the right to opt out and an explanation of how to exercise that right. The notice must also identify the email address or mobile device number that will be used, any instructions necessary, a cautionary statement regarding the length of time the document will be available online, and a statement regarding the individual’s right to request and obtain documents, free of charge.  This notice must be provided one time to all individuals covered by this new safe harbor method (even if the employee is currently receiving electronic disclosures under the existing safe harbor method), as well as to new employees that will be covered by the new safe harbor method.

When will the final regulations take effect?  The final regulations are effective July 27, 2020.  Contact your Seyfarth Shaw attorney for assistance navigating these new rules.