On May 21, 2020, the Department of Labor (DOL) announced a final rule for the electronic delivery of retirement plan documents. The new electronic delivery rules allow plan administrators to provide retirement plan disclosures to participants electronically, which reduces plan costs and makes plan disclosures more readily accessible to plan participants.
In light of the recent economic challenges from the coronavirus, the DOL anticipants the new rule will assist plan administrators in meeting ERISA’s disclosure requirements. The DOL is also expecting the new rule to save $3.2 billion in net costs for retirement plans since printing, mailing, and other costs associated with print disclosures will be eliminated.
The rule was initially proposed on October 23, 2019 in response to Executive Order 13847, Strengthening Retirement Security in America, which asked the DOL and Treasury Department to find new ways to reduce the regulatory burden, improve inefficiencies, and lower administrative costs for retirement plan administrators.
The disclosures requirements were last updated in 2002 and only permitted electronic delivery in a very limited context. Participants had to have the ability to effectively access documents at work or affirmatively consent to the electronic delivery of the notices. These regulations faced criticism for being overly burdensome and ineffective. After nearly two decades, the DOL has issued new guidance that utilizes widely-used technology to effectively and efficiently provide participants with access to plan documents.
The final rule is a voluntary safe harbor for retirement plan administrators. It allows plan disclosures to be furnished to plan participants through either a website posting or email delivery, rather than traditional paper mailings. The safe harbor limits the scope to “covered documents” and “covered individuals.” By following the guidelines, plan administrators satisfy their duty under ERISA to provide plan disclosures to participants.
Plan administrators must first provide an Initial Notice of Internet Availability to participants. This initial notice should be provided before the plan administrator’s reliance upon the Safe Harbor and should explain that:
- Covered documents will be disclosed electronically,
- Participants have the right to obtain a paper copy of any covered document, and
- Participant has the right to opt out of electronic delivery altogether.
Notice of Internet Availability
The Notice of Internet Availability (NOIA), requires the plan administrator to provide notice that the covered documents are available electronically at least annually or each time a new disclosure becomes available. The notice must meet specific requirements:
- Furnished to the electronic address provided by the participant or published to a website maintained by the plan administrator,
- Limited to only the content specified by the regulation, and
- Understood by the average plan participant
The notice must also include certain information, such as a brief description of the document being provided online, internet website address where the document is available, and the right to opt out of electronic delivery and receive paper copies, just to name a few.
A notice is required for each covered document, but multiple covered documents can be included in a single notice. The following documents may be included in the same notice:
- Summary of Material Modifications
- Summary Plan Descriptions
- Summary Annual Reports
- Annual Funding Notices
- Qualified Default Investment Alternative notices
- Pension Benefit Statements
- Investment Related Disclosures, such as performance data, benchmarks, fees, etc.
Any other documents must have their own notice and may not be combined into one notice. The documents must remain on the website for at least one year or until an updated version of the document is furnished.
Access to Covered Documents
The covered documents are required to be posted to a website maintained by the plan administrator. To meet the requirements of “access,” the plan administrator should ensure:
- The covered document is available on time, meaning no later than the date it’s required to be furnished,
- The most updated version must be available,
- The average plan participant can easily understand the notice,
- The covered document is searchable, so participants can find information quickly,
- The document is in a format such that it can be permanently retained, and
- Confidential information is protected.
Who Can Receive Electronic Delivery?
The regulations specify that “covered individuals” may receive plan documents electronically. A covered individual is defined as a participant, beneficiary, or other individual (such as an alternate payee) entitled to covered documents (regardless of employment status) who provides the plan administrator with an email address or smartphone number. If the employer provides the employee with an email address for work, or even for the sole purpose of obtaining the safe harbor, the employee is considered to have provided the email address.
The plan administrator is not required to confirm that the covered individual has the actual ability to access the electronic documents, which is a departure from the 2002 Safe Harbor. The plan administrator is also not required to obtain affirmative consent from the covered employee, another departure.
Per usual, the covered employee may opt out of electronic delivery. In that case, the plan administrator would provide the participant with paper copies of all required disclosures.
Plan administrators have significant flexibility to obtain the electronic addresses. For example, plan administrators could gather the addresses on new-hire documents, plan enrollment documents, retirement plan account online registration, etc.
What If An Email Address is Undeliverable or the Participant Terminated?
If an email address is undeliverable, the plan administrator may use a secondary email address, obtain a new email address from the participant, or provide paper disclosures. Surprisingly, this provision appears to be stricter than the previous regulations. Although plan administrators have always been required to ensure actual receipt of the disclosures, plan administrators were previously permitted to check the viability of the addresses periodically. Now, plan administrators are required to ensure actual receipt of each electronic disclosure for each participant every time a new disclosure becomes available.
If a participant is terminated, the plan administrator may continue to use electronic delivery so long as they have an updated email address for the participant.
Which Notices Can Be Delivered Electronically?
“Covered Documents” may be electronically administered to covered individuals. Covered documents are any document that the plan administrator is required to provide to participants and beneficiaries under ERISA. One exception is requested documents, which cannot be provided electronically. The regulations don’t specify whether optional disclosures are permitted to be electronically delivered – such as investment fund mapping documents.
How Does This Help Plan Administrators?
As mentioned, the new regulations were created in response to the Executive Order 13847 asking the DOL and Treasury Department to ease the administrative burden for plan administrators.
The regulations take advantage of the technological developments that have occurred since the DOL released the previous Safe Harbor in 2002. Electronic delivery provides efficient and fast delivery to participants allowing plan administrators to provide real-time updates to their plans, enjoy cost savings from print and mailing expenses, and have interactive communication with participants. The final rule is a welcomed relief to plan administrators.