The U.S. Department of Labor (DOL) recently issued a request for information (RFI) concerning the use of electronic media to furnish information to participants and beneficiaries of ERISA-covered employee benefit plans. The RFI indicates that the DOL is considering updating its existing standards regarding electronic delivery, which have been unchanged since 2002.
The RFI follows an announcement by the DOL last year that it would reconsider its electronic delivery standards in light of new requirements concerning disclosure of investment and expense information to participants in individual account retirement plans which take effect for calendar year plans in 2012 (for a discussion of those disclosure requirements see our prior WorkCite.
Electronic delivery continues to be a topic of great interest for plan sponsors and administrators since the DOL rules were first issued. Many employers have embraced the use of electronic delivery processes for a broad range of employment-related communications, and continuing technological advances will likely lead to more extensive use of such processes. Some of the advantages of electronic delivery are that it is typically more cost effective and less burdensome to administer than paper-based systems, allows for more timely communication, and is environmentally friendly.
Current Disclosure Standards
Sponsors and administrators of ERISA employee benefit plans are subject to an array of participant disclosure and notice requirements. Electronic systems can be used to provide such disclosures and notices, so long as they are reasonably calculated to ensure actual receipt of the information being communicated. The 2002 regulations establish a “safe harbor” that a plan sponsor or plan administrator may follow to comply with this delivery requirement.
The safe harbor is available only if the method of electronic delivery meets the following standards:
- The plan sponsor or administrator takes appropriate and necessary measures reasonably calculated to ensure that the system for furnishing documents results in actual receipt of transmitted information, and protects the confidentiality of personal information relating to the individual’s accounts and benefits.
- The electronically delivered documents are prepared and furnished in a manner that is consistent with the style, format and content requirements applicable to the particular document.
- The recipient is notified, in electronic or non-electronic form, at the time a document is furnished electronically, explaining the significance of the document and the right to request and obtain a paper version of the document.
- Upon request, the recipient of the electronic notification is provided with a paper version of the electronically furnished documents.
The safe harbor can be used for electronic communications to plan participants who have regular work-based information system access. For participants who do not have such access (such as former employees and retirees), and for plan beneficiaries and other persons, electronic delivery is only available if the recipient provides affirmative consent to receive electronic communications.
The affirmative consent condition requires plans to ensure that the individual has consented, in electronic or non-electronic form, to receiving documents through electronic media and has not withdrawn such consent. Prior to consenting, the individual must be provided, in electronic or non-electronic form, a clear and conspicuous statement indicating five things:
- The types of documents to which consent would apply.
- That the individual can withdraw consent at any time.
- 3.The procedures for withdrawing consent and for updating the individual’s address for receipt of electronically furnished documents or other information.
- 4.The right to request and obtain a paper version of an electronically furnished document, including whether it will be furnished free of charge.
- 5.Any hardware or software requirements for accessing and retaining the documents.
If the hardware or software requirements for the electronic delivery system change at any time, the plan administrator may need to provide additional disclosures.
Examples of the types of disclosures and notifications that can be delivered electronically include summary plan descriptions, summaries of material modifications, notices required in connection with qualified default investment alternatives, the notices and communications required under the new fee disclosure requirements (as noted above), participant benefit statements, annual funding notices for defined benefit plans, notices of “blackout periods” under individual account plans, and any other ERISA plan-related document.
The consent requirements can create barriers to use of electronic delivery for all participants and beneficiaries. For example, the special procedures required to obtain consent from participants and other persons who do not have regular access to an employer’s computer system are frequently a disincentive to use electronic communications for such persons. Consequently, it is common for plans to provide communications on an electronic basis to participants who are active employees and to rely on paper-based systems for retirees, other former employees and beneficiaries, thus resulting in the use of duplicative communication delivery systems.
The RFI requests information relating to various topics associated with electronic communication. The first topic addresses issues of access and usage, such as what percentage of employees have access to the Internet at work or home and how the percentage varies based upon demographic groups (age, socioeconomic, race, national origin, etc.), as well as what methods plan administrators currently use for furnishing information electronically.
Another topic covers general questions, such as whether to revise the current safe harbor and, if so, how it should be done. The RFI also poses a number of technical questions that relate to issues such as opt-out rights, potential delivery problems posed by spam filters, and the affirmative consent requirement. Responses to the RFI must be submitted to the DOL by June 6, 2011.