Background on delivery of benefit statements

ERISA’s general standard for delivery of notices is that a plan must use measures reasonably calculated to ensure actual receipt of the material by plan participants and beneficiaries. ERISA also includes special rules for benefit statement delivery.

Requirement for benefit statements from DC plans

DC plans must provide participants and beneficiaries with a benefit statement at least once each year. If the DC plan’s investments are participant directed, the plan must issue a benefit statement each quarter.

Requirement for benefit statements from DB plans

DB plans must provide participants who accrue a benefit with a benefit statement once every three years.

Alternatively, a DB plan may provide participants with a notice of availability of the benefit statement each year. This alternative method allows the plan to provide the notice of availability in multiple ways, including electronically. SECURE 2.0 does not appear to change the ability to provide this notice of availability electronically.

Benefit statement safe harbors

The DOL adopted safe harbor methods in 2002 and 2020 specifying acceptable ways to issue pension benefit statements.

The 2002 safe harbor allows plans to provide electronic notices to participants who are “wired-at-work.” Essentially, this means that electronic notices can be given to participants who have an employer-provided email and have a job (e.g., a desk job) where they can effectively access electronically furnished notices as an integral part of their jobs. It also allows the plan to provide electronic notices to those who provide “affirmative consent” to receiving the statement electronically.

The 2020 safe harbor provides additional flexibility for providing notices electronically. It allows the plan to provide an electronic notice to anyone for whom it has a valid electronic address, such as an email or smartphone number. Wired-at-work participants are treated no differently than other participants for whom the plan has a valid electronic address. The plan may notify such a participant or beneficiary by an email notifying them that the information is available on a continuous access website with a hyperlink to the website. Alternatively, the plan could send an email with the information in the body of the email or as an attachment to the email.

Prior to using either method, the plan must send an initial paper notice informing them that they will be receiving electronic notices and of their opportunity to opt out and receive paper. A paper statement must be provided for free.

The proposed new rules for benefit statement delivery

Under the DOL’s proposed rule, the 2002 safe harbor would require that participants who first become eligible to participate and beneficiaries who first begin receiving payments after December 31, 2025 receive a one-time initial notice on paper. The notice would inform them of their right to request that all documents required by the DOL under ERISA be provided on paper prior to receiving any disclosures electronically. Because all but wired-at-work participants already must be given an initial paper statement, the new required paper statement would impact only wired-at-work participants.

The DOL states that DC plans with participant direction of investments are only required to provide the first of the four quarterly benefit statements on paper. Participants and beneficiaries can request all statements to be delivered electronically.

In addition, if the plan is disclosing covered documents electronically under the 2020 safe harbor, participants and beneficiaries would have to be allowed to request that benefit statements be sent electronically rather than on paper. The benefit statement would have to include contact information for the plan sponsor, administrator, third-party administrator or recordkeeper. The proposed rule would require that duplicate copies of a paper statement be provided for free.

Next steps

These rules are only proposed. In general, plan sponsors may comply with the statutory requirements by applying good-faith, reasonable interpretations of SECURE 2.0’s paper notice requirement. The proposed rule would be considered such an interpretation, but is not the only one.

During the comment period on the proposed amendments, plan sponsors and participant groups are likely to ask for a number of clarifications. For example, while it appears that SECURE 2.0 and the proposed rule have no impact on DB plans that use the alternative method (electronically notifying participants and beneficiaries each year of the availability of the pension benefit statement), nothing in the proposed rule confirms that reading.