On October 22, 2019, the Department of Labor (“DOL”) released proposed regulations updating the electronic disclosure rules for ERISA notices. Given the significant advances in technology over the last decade, employers have long-awaited a meaningful update to the current, outdated electronic disclosure safe harbor. Although employers may continue to provide paper notices to employees, the DOL anticipates that most employers will migrate to the new, proposed safe harbor for electronic disclosure of ERISA notices. The new safe harbor is expected to create efficiency, increase participant awareness, and result in cost savings for employers. The only downside – the safe harbor does not apply to health and welfare plans.
What disclosures are impacted by the rule?
The new safe harbor can be used for any ERISA notices required to be distributed to pension benefit plan participants, other than those documents only required to be furnished upon request. In other words, pension benefit statements, Safe Harbor Notices, QDIA Notices, fee disclosures, summary annual reports, and other documents required to be furnished solely because of the passage of time may be disclosed electronically under the new safe harbor. However, disclosures such as the plan document, terminal report, trust agreement, and other documents that only need be to be furnished upon request cannot utilize the new safe harbor for disclosure.
Curiously, the safe harbor only applies to pension benefit plans, as defined in ERISA Section 3(2), including defined contribution (e.g., 401(k) plans) and defined benefit (e.g., pension) plans. The safe harbor does not apply to “employee welfare benefit plans,” which means that group health plans, disability plans, and other health and welfare plans must continue to rely on the old electronic disclosure regulations. The DOL expressed concern about the safe harbor as applied to group health plans, given the special considerations relating to issues such as pre-service claims review, access to emergency health care, and more.
Who can receive retirement plan disclosures electronically?
Participants, beneficiaries, or other individuals (“Covered Individuals”) entitled to ERISA notices can receive the notices electronically if: (1) they provide the employer, as a condition of employment or at the beginning of plan participation, with an e-mail address or smartphone telephone number; (2) they are assigned an e-mail address by the employer; or (3) they are given an internet-based mobile computing device by the employer.
Internet-based mobile computing devices include smartphones with data plans, laptops, tablets, or similar devices. The DOL does not want to specifically limit the regulations to any particular devices, as technology changes quickly over time and they want to avoid ending up with outdated regulations.
What are the notice and access requirements?
The “notice and access” safe harbor requires just that: delivery of a specific notice of internet availability and compliance with certain minimum standards concerning the availability of and access to the notices. A notice of internet availability must comply with certain content requirements and must be furnished electronically to the Covered Individuals no later than the time the notice is available on the internet/website. In other words, if a notice is due to participants on January 1st and is uploaded to the company website on such date, the notice of internet availability must be provided to Covered Individuals on January 1st. For an employer that chooses to provide all notices at the same time each year, the notice of availability must only be provided each plan year, and no more than 14 months following the date the prior plan year’s notice was furnished.
The “access” prong of the safe harbor requires that employers comply with the following requirements: (1) the employer must ensure the existence of an internet website at which a covered individual is able to access covered documents; (2) the notices must be available on the applicable, required dates; (3) each notice must remain available on the website until it is superseded by a subsequent version of the notice; (4) the notice must be presented on the website in a manner calculated to be understood by the average plan participant (must be “readable”); (5) the notice must be presented in a widely-available format or formats that are suitable to be both read online and printed clearly on paper, and must be “searchable”; (6) the notice must be presented on the website in a widely-available format or formats that allow the covered document to be permanently retained in an electronic format; and (7) the website must protect the confidentiality of personal information relating to the Covered Individuals.
Can a Covered Individual opt out?
Yes. The safe harbor includes a “global” opt out provision. Covered Individuals may elect to opt out of electronic disclosure and receive all notices in paper. Covered Individuals may also maintain electronic disclosures, but request that the employer furnish them, free of charge, a paper copy of a notice (or all of the notices) as soon as reasonably practicable. For individuals that opt out, the employer must establish and maintain reasonable procedures governing requests or elections for paper copies.
The proposed regulations require employers to send an initial notification of default electronic delivery and the right to opt out to ensure that all participants and beneficiaries accustomed to receiving paper notices are aware of the new method for electronic disclosure and have the opportunity to choose to continue to receive paper copies.
Generally, the proposed regulations will be effective 60 days after publication of a final rule in the Federal Register. The DOL has proposed the new safe harbor apply to employee benefit plans as of the first day of the calendar year following the publication of the final rule. The Department has requested comments with regard to providing an earlier effective date.
For more information on the details of the proposed regulations and implementing the safe harbor going forward, including special rules for severance of employment and other circumstances, please contact Caroline Nelsen at 402-633-9575 or e-mail her at firstname.lastname@example.org.