The U.S. Department of Labor (DOL) announced a final rule on May 21, 2020 that will allow plan sponsors to post retirement plan disclosures online or email them to participants. This updates the proposed rule DOL issued on October 22, 2019 that outlined expanded options for retirement plan sponsors for delivering required disclosures to participants through electronic media.1
This final rule provides a voluntary safe harbor for retirement plan administrators to provide certain required documents to participants electronically, either by posting on a website under the “notice-and-access” framework or via email. As in the proposed rule, this new safe harbor applies only to retirement plans and not to welfare plans. The final rule will become effective on July 26, 2020, but plan administrators can start using this new rule effective immediately.
A plan administrator can rely on the new electronic delivery safe harbor for the following individuals:
- any participant, beneficiary and other person who affirmatively provides the employer, plan sponsor or administrator with an electronic address, such as a personal email address or internet-connected mobile-computing device (e.g., smartphone) number;
- any employee to whom an employer assigns an electronic address as long as the address is assigned for an employment-related purpose other than to comply with the new safe harbor.
The final rule applies to any document that retirement plan administrators are required to furnish to participants and beneficiaries under Title I of the Employee Retirement Income Security Act of 1974 (ERISA), such as summary plan descriptions, summaries of material modifications, pension benefit statements, summary annual reports, fee disclosures, annual funding notices, ERISA 404(c) disclosures (i.e., investment information for participant-directed accounts), qualified default investment alternatives notices and blackout notices.
The rule does not apply to documents that are required to be furnished only on request (e.g., the retirement plan document, the trust agreement or the plan’s latest annual report) or that are within the jurisdiction of the Internal Revenue Service (IRS), such as 401(k) plan safe harbor notices, ERISA 204(h) notices (required when pension plans are amended to reduce future benefit accruals), special tax notices relating to plan distributions and notices to interested parties required in connection with IRS determination letter filings.
Initial Paper Notification and the Right to Opt Out
Prior to using the electronic delivery options permitted under the final rule, a plan administrator must give each participant an initial notification on paper stating that covered documents will be furnished electronically. The initial notice must include a statement of the right to get a paper version of a covered document, free of charge, a statement of the right to opt out and an explanation of how to exercise these rights. In addition, the notice must be written in a manner calculated for the average plan participant to understand.
To provide the required document on a website, a plan administrator must include in an email to each covered individual a Notice of Internet Availability (NOIA) for each covered document (also known as the “notice-and-access method”).
- Generally, a NOIA must be furnished at the time the covered document is made available on the website. A combined NOIA can be used for more than one document, such as summary plan descriptions and annual disclosures, as long as participant action is not required by a specific date. If a combined NOIA was furnished in the prior plan year, then the next plan year’s combined NOIA must be furnished no more than 14 months later.
- The NOIA must contain a prominent subject line, a brief description of the covered document, the website address and a statement of the right to request a paper copy or to opt out of electronic disclosures altogether.
- The system must be designed to alert the plan administrator to a covered individual’s invalid or inoperable electronic address so that the plan administrator can take reasonable measures to resolve such issues.
- The plan administrator must take reasonable steps to ensure that the covered document is available on the website (or other electronic information repository such as a mobile application) no later than the date on which such document must be furnished under ERISA and that the document remains available on the website for at least one year or, if later, until the date it is superseded by a subsequent version. The document must be presented in a manner calculated for the average plan participant to understand, in widely available formats that are suitable for online reading, printing, search and recordkeeping. The administrator should also take steps to ensure the protection of confidential personal information.
Direct Delivery via Email
The final rule allows for the direct delivery of required disclosures to individuals via email, with the documents either in the body of the email or as an attachment. The actual email with disclosures attached has to include a specific subject line, identification or brief description of the documents and mandatory statement of rights to paper documents or to opt out. As in the case of the emailed notices regarding website posting, the plan administrator needs to follow up on emails that bounce.
1 For a summary of the proposed rule, see our Sidley Update, DOL Enters the Modern Age by Proposing to Expand Options for Electronic Delivery of Retirement Plan (But Not Welfare Plan) Disclosures (Oct. 23, 2019), available at https://www.sidley.com/en/insights/newsupdates/2019/10/dol-enters-the-modern-age-by-expanding-options-for-electronic-delivery-of-retirement-plan.
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