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DOL proposes new electronic participant communications safe harbor

On October 22, 2019, the Department of Labor released a proposed amendment to current disclosure rules that would provide a new “notice and access” safe harbor for the use of electronic communications to satisfy required participant disclosures in retirement plans.

The proposal would dramatically liberalize DOL’s electronic communication rules, which (with certain exceptions) currently require that the individual receiving the electronic communication either has access to the employer/sponsor electronic information system as an integral part of her duties (aka is “wired at work”) or has affirmatively consented to electronic receipt.

Under the new rule, all required communications may be posted to a website, provided the affected individual receives a notice at his “electronic address” directing him to the website and has the right to request a paper copy or opt out of the electronic communications program.

In what follows, we review the proposal in detail.

Which participants are covered?

Plan administrators may use new safe harbor electronic communications for any participant, beneficiary, or other individual entitled to a plan communication, provided that individual has provided the administrator with an “electronic address,” e.g., an email address or smartphone number. The individual may be provided with an electronic address (e.g., an employer-assigned email address) for this purpose.

What communications are covered?

The safe harbor generally covers any document that is required to be provided under ERISA by an ERISA retirement plan to a participant or beneficiary other than documents that are required to be provided “on request” (for instance, where a participant requests a copy of the plan document). ERISA welfare plans are not covered by the proposal.

The administrator must send a “notice of internet availability”

Generally, for each document that is being provided online, the administrator must send a separate, electronic notice of internet availability. This notice must be sent at the time the document is posted online and must generally include:

The title: “Disclosure About Your Retirement Plan.”

A statement that: “Important information about your retirement plan is available at the website address below. Please review this information.”

A brief description of the online document.

The web address for the document.

A statement of the right to get a paper version and a statement of the right to opt out of electronic communications and how to do so.

The administrator’s or a designated representative’s phone number.

The notice may generally not contain any content other than the items on the above list.

Annual combined notice

The administrator may send a combined notice with respect to the following documents: summary plan description; summary of material modifications; summary annual report; annual funding notice; investment related disclosure under DOL’s fee disclosure regulation; qualified default investment alternative (QDIA) notice; and a pension benefit statement. Event-specific documents, e.g., a qualified domestic relations order (QDRO) determination, are not covered by this rule.

Generally, a combined notice of internet availability must be provided annually.

Website standards

Generally, the ERISA-required document must be posted to the website by the date it is required to be provided under ERISA and must remain there until superseded by a subsequent version of the same communication. It must be provided in a “widely-available format or formats that are suitable to be both read online and printed” and that can be permanently retained. And it must be electronically searchable.

The administrator must also “take measures reasonably calculated to ensure that the website protects the confidentiality of personal information.”

Right to paper copies or to opt out

The individual must have the right to request a paper copy of any document and the right to “globally” opt out of receiving communications electronically.

In addition, the electronic communication system “must be designed to alert the administrator of a covered individual’s invalid or inoperable electronic address.”

Initial notification

When an administrator implements the safe harbor electronic communications program with respect to any individual, it must provide an initial paper notice that some or all covered documents will be provided electronically and that the individual has the right to request paper or opt out of electronic delivery.

Special rule for terminating employees

When an employee who is getting safe harbor electronic communications terminates, the administrator must “take measures reasonably calculated to ensure the continued accuracy of the covered individual’s electronic address or number … or to obtain a new electronic address that enables receipt of covered documents.” 

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The proposal also includes a Request for Information raising questions and requesting comments on possible additional “changes to ERISA’s general disclosure framework.”

Comments are due 30 days from publication in the Federal Register.

The proposal represents a significant improvement over current rules. If adopted, it will permit many sponsors to upgrade, and in some cases transform, the way they communicate with their participants.

We will continue to follow this issue.

What to Read Next

Current Regulatory Outlook — September 2019

In this current outlook we review IRS’s recent extension of closed group relief for another year and the “statement of interest” filed by DOJ in the California Secure Choice litigation, and we note DOL’s transmission of its electronic communication proposal to OMB. IRS extends relief for closed plans one year On August 26, 2019, IRS… Read More