Today the Department of Labor (DOL) published proposed rules that expand electronic delivery options for required retirement plan disclosures to plan participants and beneficiaries who have email addresses, handheld smart devices or laptops. These new proposed rules provide retirement plan administrators with much-needed alternatives for disseminating required plan disclosures, though welfare plan administrators will still be stuck with the old electronic disclosure rules.
Expanded Way to Deliver Required Retirement Plan Disclosures
The proposed new rules set forth a “notice and access” structure under which retirement plan administrators may furnish the disclosures required under Title I of Employee Retirement Income Security Act (ERISA) by making the information available online and providing timely notice to participants and beneficiaries that the documents are available on the internet. The proposed rules would allow for default electronic delivery except in the case of a participant or beneficiary who has affirmatively elected to opt out. This contrasts with the existing safe harbor regulations that allow electronic delivery only to those who have “opted-in,” either by affirmative consent or by satisfying the DOL’s “wired at work” requirements (discussed below).
The DOL specifically noted that this proposed alternative method would not change the current electronic delivery safe harbor. Therefore, those who wish to continue to rely on the existing safe harbor would be able to do so without being affected by the new rules, when finalized.
Expanded Scope of Covered Individuals
Under the existing safe harbor regulations, plan administrators may send electronic documents to only two types of individuals: participants who have the ability to effectively access electronic documents wherever they work (the “wired at work” participants) or participants, beneficiaries or other persons who have affirmatively consented to receive electronic disclosures.
In comparison, the new proposed rules would expand the universe of individuals who can receive the documents electronically to include all participants, beneficiaries and other individuals who provide the employer, plan sponsor or administrator with an electronic address, such as an email address or internet-connected mobile-computing-device (e.g., smartphone) number. Alternatively, if an employer assigns an electronic address to an employee for this purpose, the employee would be treated as if he or she provided the electronic address. Thus, the proposed rules would allow plan administrators to deliver electronic disclosures to a much wider range of participants and beneficiaries, that is, almost anyone with an email address, handheld smart device or laptop.
Documents to Which the Proposed Rules Apply
These proposed regulations apply to any document that the retirement plan administrator is required to furnish to participants and beneficiaries under Title I of ERISA, such as summary plan descriptions, summaries of material modifications, pension benefit statements, summary annual reports, fee disclosures, annual funding notices, ERISA 404(c) disclosures (i.e., investment information for participant-directed accounts), qualified default investment alternatives notices and blackout notices.
The proposed rules would not apply to documents that are required to be furnished upon a participant’s request (e.g., the retirement plan document, the trust agreement, or the plan’s latest annual report). Notably, the proposed rules also would not apply to any disclosures applicable to employee welfare benefit plans. Furthermore, they would not apply to documents required by Internal Revenue Service regulations, such as 401(k) safe harbor notices and rollover notices.
Notices Required in Order to Use the Expanded Electronic Disclosure
To use the newly proposed safe harbor, plan administrators would be required to first give participants a notification on paper stating that some or all covered documents will be delivered electronically in the future. The initial paper notice must also inform the participants of their rights to opt out and to receive paper copies of the required documents.
Plan administrators would also be required to send participants a notice of internet availability for each covered document, subject to a special rule that permits the combination of some notices. The notice of internet availability would be required to be furnished to the participants at the time the document is made available on the website. In addition, the proposed rules would also require that certain information be set forth in the notice of internet availability, including a prominent subject line, a brief description of the covered document, the website address and a statement of the right to request a paper copy.
Administrators can only begin taking advantage of this new safe harbor following the publication of the final rules. Comments on the proposed rules are due by November 22, but the DOL has not given any indication regarding when these rules will be finalized.