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In this Current Outlook we review legislation introduced that would ease the rules on electronic disclosure. We also briefly discuss the effect of the Supreme Court’s decision in Obergefell (the same-sex marriage case) on retirement plans and its decision not to review the Fourth Circuit’s decision in Tatum v. R. J. Reynolds Tobacco Company.
In June, Representatives Polis (D-CO), Roe (R-TN), Kelly (R-PA) and Kind (D-WI) introduced the Receiving Electronic Statements To Improve Retiree Earnings Act, a bill that would significantly ease rules on the use of electronic communications to deliver required ERISA disclosures.
Under the bill, any document required or permitted to be furnished to a participant under ERISA could be issued in electronic form provided:
The electronic system used (e.g., e-mail or a website) is “designed to result in effective access to the document.”
The system permits the participant to select the electronic means through which documents are furnished, change her selection or elect at any time to receive documents in paper (at no additional cost).
The system protects the confidentiality of the participant’s personal information.
An annual paper notice is provided describing the participant’s current selection (e.g., to receive notices via email).
The electronic document: “(A) is prepared and furnished in a manner that is consistent with the style, format, and content requirements applicable to the particular document; and (B) includes a notice that apprises the individual of the significance of the document when it is not otherwise reasonably evident as transmitted.”
The Department of Labor’s position on electronic disclosure is viewed by many providers and sponsors as too restrictive. Generally, it provides a ‘safe harbor’ for electronic disclosure in either of two situations:
If the participant has “the ability to effectively access documents furnished in electronic form at any location where the participant is reasonably expected to perform his or her duties as an employee and with respect to whom access to the employer’s or plan sponsor’s electronic information system is an integral part of those duties.”
If the participant has “affirmatively consent[ed] to receiving disclosures through electronic media in the manner prescribed by the regulation.”
To state what to most sponsors is obvious: obtaining an affirmative consent to electronic disclosure can be problematic. Hence the sponsor and practitioner dissatisfaction with this rule. Participant advocate organizations, however, share DOL’s cautious view of electronic disclosure.
Congressman Neal (D-MA) proposed legislation in 2012 (as part of a comprehensive retirement savings bill) to address this issue. However, an electronic disclosure provision was not included in Congressman Neal’s 2013 comprehensive retirement savings bill, in part because of objections from participant advocate organizations.
The introduction of new electronic disclosure legislation, with bipartisan support, is a positive development. Whether it will move forward in a divided Congress, with the possibility of DOL and participant advocate group opposition, remains to be seen.
On June 26, 2015, the Supreme Court held that “[t]he Fourteenth Amendment requires a State to license a marriage between two people of the same sex and to recognize a marriage between two people of the same sex when their marriage was lawfully licensed and performed out-of-State.” Going forward, this decision is likely to make the administration of plans (e.g., with respect to decisions about the payment of survivor benefits and the administration of qualified domestic relations orders) simpler: there is now just one rule for all states.
Whether the decision will create issues with respect to past decisions, e.g., where the state in which the plan is being administered did not (prior to Obergefell) recognize out-of-State same-sex marriages, remains to be seen.
The Supreme Court has decided not to review the Fourth Circuit’s decision in Tatum v. R. J. Reynolds Tobacco Company. Tatum is a ‘reverse stock-drop’ case. The Fourth Circuit’s decision applied the new standards for stock litigation articulated in the Supreme Court’s decision in Fifth Third in a way that some viewed as incorrect – reintroducing issues of a stock’s ‘true value’ (and the fiduciary’s duty to determine that ‘true value’) even though Fifth Third seemed to indicate that the fiduciary should generally defer to the market on the issue of value.
In connection with the petition by defendants for the case to be heard by the Supreme Court, the Court asked the Solicitor General to brief the issue, a move usually understood to indicate an interest at the Court in hearing a case. The Solicitor General, however, recommended against taking the case.
The Court’s decision not to take this case leaves the state of stock-drop case law post-Fifth Third somewhat confused. For a discussion of these issues, see our articles on Fifth Third; Tatum and Harris v. Amgen.
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We will continue to follow these issues.