Compliance News | May 28, 2020

New ERISA Rules for Retirement Plan Electronic Disclosure

On May 27, 2020, the DOL published a final rule providing a new voluntary safe harbor for electronic disclosures by retirement plans subject to ERISA. The final rule closely follows the proposed rule issued October 23, 2019, but with some key changes.

Most notably, the final rule allows plans that satisfy certain criteria to provide disclosures electronically as a default, with an “opt out” available for participants who wish to continue receiving paper disclosures. This new alternative safe harbor would be in addition to the existing 2002 safe harbor, which requires a participant to “opt in” to electronic notices.

The final rule is effective on July 27, 2020. However, the DOL is adopting a non-enforcement policy that allows plan sponsors to rely on the safe harbor immediately.

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The final rule

Here are the highlights of the final rule:

  • Electronic addresses must be collected.
  • The initial notice of default electronic delivery must be on paper.
  • Notices of Internet Availability (NOIA) are generally required.
  • There is a special rule for consolidating certain NOIAs for disclosures that are not triggered by an event.
  • The website where documents are made available must meet certain standards.
  • There’s an email alternative to posting on a website.
  • When employees leave covered service, the plan sponsor must ensure it can continue to email them.
  • Previously issued safe harbors for specific disclosures can continue to be used for 18 months.

Electronic addresses must be collected

To use the new alternative safe harbor, the plan must obtain an electronic address (employer-provided email, personal email or smartphone number) from the participant or beneficiary. Alternatively, if an electronic address is assigned by an employer to an employee for employment-related purposes that include but are not limited to the delivery of covered documents, the employee is treated as if they provided an electronic address.

The plan also must have a system to identify invalid or inoperable electronic address, such as when an individual leaves employment. If the plan cannot promptly correct such addresses, the individual is deemed to have opted out of electronic delivery until the plan obtains a valid electronic address.

The initial notice of default electronic delivery must be on paper

Before relying on the new safe harbor, a plan must give each affected individual a one-time, initial notice (on paper) that some or all documents will be provided electronically and that the individual has the right to receive a paper version of any document free of charge. The notice must also describe the individual’s right to opt out of electronic delivery, and how to do so.

No initial notice is required if the participant or beneficiary is already receiving disclosures electronically pursuant to the existing safe harbor and the plan administrator is switching to the new safe harbor.

NOIAs are generally required

Unless the plan sponsor uses the consolidation approach discussed below, the plan sponsor must provide a NOIA to the individual at the provided electronic address each time a required notice or disclosure is made available and must give the website where the notice or disclosure is posted.

The NOIA must be provided, separate from any other notices or disclosures, at the same time the document is made available on the website. The NOIA must include certain information, be clear and concise and adhere to formatting standards.

There is a special rule for consolidating certain NOIAs for disclosures that are not triggered by events

The plan sponsor must provide NOIAs every year for documents that are not event triggered (within 14 months of the prior year’s notice) or, if later, when the prior disclosure (e.g., the SPD) is replaced. A blackout notice is an event-triggered notice. An annual funding notice is not event triggered.

The website where documents are made available must meet certain standards

Standards include that the website must reasonably protect the confidentiality of any personally identifiable information. Each document posted must also meet certain requirements (e.g., timely posting, suitable for reading online or as printed and searchable electronically).

There’s an email alternative to posting on a website

A plan sponsor is allowed to provide the disclosure as a PDF attachment to an email (not as a text message to a smart phone number).

If the plan sponsor adopts this approach, it basically provides the NOIA information in the email and no separate NOIA is required. A plan that uses this method does not need to maintain a website.

When employees leave covered service, the plan sponsor must ensure it can continue to email them

When an employee leaves covered service, if the electronic address was assigned by the employer and does not meet the multi-use requirement discussed above, the plan must obtain a new electronic address or ensure the continued accuracy of the current electronic address to continue using the alternative safe harbor.

Previously issued safe harbors for specific disclosures can continue to be used for 18 months

Under transition rules, the DOL provides special safe harbors for issuing benefit statements in Field Assistance Bulletin (FAB) 2006-03 and for qualified default investment alternatives (QDIAs) notices in FAB 2008-03 (Q&A-7). DOL Technical Release 2011-03R set forth an interim enforcement policy regarding the use of electronic media for disclosure of participant disclosures on investments.

The final rule allows these special rules to continue to apply for 18 months, after which they are eliminated so that there is only one set of electronic disclosure rules for retirement plans under ERISA. The final rule also leaves in place the existing general safe harbor to which the safe harbor discussed here is an alternative.

Like the proposed rule, the final rule does not cover health and welfare plan disclosures, which the DOL says it will address in future guidance. Health and welfare plans may continue to use the DOL’s 2002 safe harbor for electronic disclosure of required health plan notices.

The DOL notes that it shares jurisdiction on many health plan required notices with the Treasury and Health and Human Services Departments, so guidance will take more time to develop.

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This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.

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