New DOL Electronic Disclosure Safe Harbor Offers Relief for Retirement Plans
The Department of Labor has issued final regulations that will enable employers to electronically provide required information and documents to more plan participants. Although employers have been able to electronically provide some documents and information to some participants under existing rules, use of electronic delivery was limited because of an affirmative consent requirement that applied to many participants. In contrast, the new rules provide a “safe harbor” for plans to default to electronic disclosure, if participants are allowed to opt out, and the plan meets certain notice and access requirements.
The availability of this new safe harbor is expected to save approximately $3.2 billion in costs for ERISA retirement plans. The regulations are in response to the President’s August 31, 2019 Executive Order, which directed the DOL and the Treasury Department to review ways to make retirement plan disclosures required under ERISA and the Internal Revenue Code more understandable and useful to participants, including exploring the potential for broader use of electronic delivery as a way to improve effectiveness and reduce costs. The DOL worked with Treasury throughout the regulatory process, and Treasury and the IRS intend to issue additional guidance regarding the electronic delivery of participant notices required under the Internal Revenue Code.
These new rules are applicable to retirement plans only, and not to welfare benefit plans. Below are Q&As that address some of the key features of the new safe harbor.
What kinds of electronic addresses may be used?
The regulations make it easier for plans to facilitate electronic disclosure by allowing a plan to use an electronic address (e.g., email or smartphone number) already used by the employer for general employment-related purposes. To ensure email will be accessed regularly enough to be effective, the email address must either be (i) assigned by the employer (but not by the plan administrator or recordkeeper or otherwise specifically assigned for plan use) or (ii) provided by the plan participant, beneficiary, or anyone else entitled to documents. An employer cannot assign an electronic address to anyone except participants. When a participant terminates employment, the plan must have reasonable procedures in place to obtain a new electronic address from the departing employee, if the email address in use is one assigned by the employer.
Who is covered under the safe harbor?
To be covered by the new safe harbor, a participant must receive an initial paper notice that electronic delivery will be used. The notice must identify the electronic address that will be used, describe how to access documents, and caution the participant that documents may only be available for a limited period of time. The notice must also describe the participant’s rights to opt out of electronic delivery and to request a paper copy of any document free of charge and how to exercise those rights. This notice requirement applies to both new and existing employees, some who may already receive electronic disclosures under an existing safe harbor. Although it may be possible to fall within the existing regulatory safe harbor based on required regular work-related email access or affirmative consent for some participants while using the new safe harbor for other participants, the requirements for document delivery would differ for the two groups of participants, making plan administration complex.
How must documents and information be delivered?
Documents and information may be provided electronically in two ways: (i) they may be attached in electronic form to an email, or (ii) they may be made available on a website.
If a document is available on the internet, participants must receive a “notice of internet availability” or “NOIA.” The NOIA must include a link to the document or a website address specific to the document. If the link/website requires the participant to login first, the document link must be prominently displayed following login. The regulations include requirements for how long a document or information must be maintained on the website. Whether the documents are on a website or in an attachment to an email, the plan administrator must take steps reasonably calculated to protect the confidentiality of personal information of participants and beneficiaries.
Are there content restrictions or requirements for an email of NOIA?
Yes. Both the NOIA and an email that delivers a document or information in an attachment must also include information on the participant’s rights similar to the initial notice and a telephone number of the plan administrator or representative. The rules also require specific statements to be included in the NOIA or email. The content of the NOIA must otherwise be limited to a brief, simple description of the documents or information. Whether attached to the email or included on a website, the documents or information must be in a format that is easily readable on-line, easily printed, and searchable.
Can an NOIA or email cover multiple plans or multiple documents/disclosures?
No. Emails or NOIAs may not include information about more than one plan and generally may not include more than one document/information disclosure. However, summary plan descriptions, annual disclosures, and any other documents/disclosures designated by the Secretary of Labor or the Secretary of Treasury may be included in a single annual NOIA (“Annual NOIA”).
When must documents and information be delivered?
Documents and information must be available on a website or delivered to participants at the same time as they are otherwise required to be furnished to participants under ERISA. The safe harbor does not change these requirements.
If the document or information is provided in an electronic attachment to an email, the email would need to be sent by the date it is required to be furnished to the participant under ERISA.
Although documents and information that are made available on a website must be available and an NOIA generally provided by the date required under ERISA, the Annual NOIA must only be provided annually and no later than 14 months after the most recent NOIA.
When will the safe harbor be available?
Although the rules are not effective until sixty days after they are published in the Federal Register, in response to comments and due to the difficulties of plan administration associated with the COVID-19 pandemic, the DOL will not take action against a plan administrator that relies on them before the effective date.
Will the existing safe harbors still be available?
The existing safe harbor for electronic delivery (based on either affirmative consent or required regular work-related access to email) remains available. Other existing safe harbors based on DOL interpretations in Field Advisory Bulletin 2006-03 (covering pension benefit statements) and 2008-03 (addressing QDIA notices) and in Technical Release 2011-03R (fee disclosures) may only be relied on for a period of eighteen months following the effective date of the new regulations.