In 2012, plan fi duciaries must provide 401(k) (and other defi ned contribution) plan participants more detailed information regarding plan investments and the fees that affect their accounts. For calendar year plans, the basic fee and investment related information (“Investment Information”) needs to be distributed by May 31, 2012, and additional plan-related information (“Plan Information”) by August 14, 2012.
Plan sponsors and service providers asked the U.S. Department of Labor (“DOL”) to permit this information to be distributed electronically. The DOL received extensive comments on this issue, which it continues to review. In the meantime, the DOL has issued interim advice on how this can be accomplished pending the issuance of further guidance.
In Technical Release 2011-03 (September 13, 2011), the DOL allowed electronic disclosure with regard to Investment Information and Plan Information to the extent described below.
- What is Included in Investment Information and Plan Information?
The following are the respective features of this information:
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- Existing Electronic Disclosure Rules
The DOL electronic delivery regulation (Reg. 2520.104b-1(c)) (“Electronic Delivery Regulation”) permits disclosure electronically of ERISA-related information in two circumstances:
- Workplace e-mail delivery: The participant has regular access to the employer’s electronic information system as part of his or her job duties (generally applicable to offi ce employees and other employees with regular access to company email).
- Written Consent: The participant has in writing consented to such disclosure (generally applicable to former employees, benefi ciaries, alternate payees and employees who do not have regular access to company e-mail).
The Electronic Delivery Regulation requires the method of delivery to use “measures reasonably calculated to ensure actual receipt of the material,” which can be demonstrated by using such methods as return-receipt or notice of undeliverable electronic mail features, or conducting periodic reviews or surveys to confi rm receipt of the transmitted information.
The DOL expanded on the Electronic Delivery Regulation in Field Assistance Bulletin 2006-03, which permits distribution of benefi t statements electronically if the statements are made available through a secure website and participants are notifi ed annually about how to access their statements and about their opportunity to request paper copies of those statements.
In its latest release, the DOL stated that both Investment Information and Plan Information may be delivered using the procedures under the Electronic Delivery Regulation, but that only Plan Information may be delivered using the secure website approach under Field Assistance Bulletin 2006-03.
- Special Alternative for the Disclosure of “Investment Information”
Technical Release 2011-03 includes a method for electronic delivery of Investment Information that is an alternative to the procedures under the Electronic Delivery Regulation. In order to use this alternative, the following conditions must be satisfi ed:
- Initial Notice. An initial notice is given to participants and benefi ciaries explaining the voluntary electronic disclosure process (e.g., the types of information, how to access it, get paper copies, opt-out, etc.).
- Voluntary Provision of E-mail Address. In response to the Initial Notice, the participant or benefi ciary voluntarily provides an e-mail address.
- Annual Notice. The information in the Initial Notice is distributed annually in paper form until the plan has evidence the participant has interacted electronically with regard to the information (e.g., the participant’s updating, resubmitting or confi rming his or her e-mail address with the plan).
- Delivery. Reasonable steps (e.g., undelivered electronic mail features, etc.) are taken to assure that the information is actually delivered.
- Confi dentiality. Reasonable and adequate steps are taken to maintain confi dentiality.
- Calculated to Be Understood. The information must be in a form that is calculated to be understandable to the average plan participant.
A special-transition rule permits a plan sponsor to satisfy the “Initial Notice” and “Voluntary Provision of E-Mail Address” requirements for e-mail addresses on fi le with the employer on the 2012 disclosure date (i.e., May 31, 2012) if a special “Transition Group Initial Notice” is furnished to such individuals either (i) by paper or (ii) electronically. If furnished electronically, the employer must have evidence that the individual had an “electronic interaction” (e.g., sent an e-mail message to the plan, made an electronic investment change, etc.) with the plan in the 12 months preceding the Transition Group Initial Notice.
This guidance is less than what many plan sponsors and service providers had requested (such as expanded secure website disclosure or a participant opt-out approach) and may be of limited assistance. The DOL continues to review this matter, and we hope it will expand the means of providing electronic information.