Recent guidance provides additional flexibility in furnishing required participant disclosures electronically. Beginning in 2012, ERISA requires certain plan and investment information to be provided to participants who are permitted to direct the investment of their plan accounts, and this recent guidance provides additional ways that such disclosures may be made available electronically.
In October 2010, the Employee Benefits Security Administration of the U.S. Department of Labor (“EBSA”) finalized regulations (the “Participant Disclosure Regulations”) requiring disclosure of certain plan-related information (“Plan Information”) and investment-related information (“Investment Information”) to participants and beneficiaries who have the right to direct the investment of their plan accounts. See March 2011 Benefits Insights. These Participant Disclosure Regulations require disclosures to made as early as May 31, 2012 for calendar year plans.
ERISA regulations generally permit electronic disclosure in certain limited circumstances (the “Safe Harbor”) to (1) participants for whom access of electronic documents is an integral part of their duties (i.e. the participants regularly have to access email in their jobs) and (2) participants and other persons who affirmatively consent to receiving electronic disclosures. However, these electronic disclosure requirements are generally perceived by plan sponsors to be less flexible than Internal Revenue Service electronic disclosure requirements and inadequate for the modern workforce.
Under the Participant Disclosure Regulations, certain Plan Information, including fee and expense information, but not Investment Information, may be included in the quarterly pension benefit statement required by ERISA, which may be provided electronically under interim guidance provided in 2006.
In 2006, the EBSA issued a Field Assistance Bulletin (the “FAB”) to provide guidance regarding the manner of furnishing pension benefit statements. The FAB notes that pension benefit statements may be furnished electronically in accordance with the ERISA Safe Harbor and also allows such statements to be provided electronically in accordance with the Internal Revenue Code electronic disclosure regulations. In a nod to the modern workplace, the FAB permits pension benefit statements to be delivered through “continuous access Web sites,” provided that participants and beneficiaries have been furnished a notification that:
- explains the availability of the required pension benefit statement information and how such information can be accessed by the participants and beneficiaries;
- apprises participants and beneficiaries of their right to request and obtain, free of charge, a paper version of the pension benefit statement information;
- is written in a manner calculated to be understood by the average plan participant;
- is furnished in any manner that a pension benefit statement could be furnished under the FAB; and
- is furnished both in advance of the date on which a plan is required to furnish the first pension benefit statement and annually thereafter.
The Recent Guidance:
After the release of the Participant Disclosure Regulations, there was some question as to whether the Plan Information could be disclosed electronically in the same manner as the pension benefit statement. In response to those questions, the EBSA in Technical Release 2011-03 (the “Release”) expressly permits Plan Information that is included in a pension benefit statement to be furnished in the same manner as permitted under the FAB. For example, if the pension benefit statement information is furnished through a secure continuous access Web site in accordance with the FAB, then the Plan Information included as part of the pension benefit statement may also be furnished through a secure continuous access Web site.
On the other hand, prior to the Release Investment Information could not be included in the pension benefit statement and could not be furnished electronically except in accordance with the ERISA Safe Harbor.
The Release provides some additional relief for providing Investment Information electronically. The EBSA sets up a somewhat complicated, alternative electronic disclosure method for Investment Information, subject to the following conditions:
- Request for E-mail Address. The plan administrator must request that participants and beneficiaries voluntarily provide an email address and that request must be accompanied by an “Initial Notice” describing the consequences of electronic disclosure. In order to satisfy the “voluntary” requirement, employment or participation in the plan may not be conditioned on the provision of an email address. In addition, the mere establishment or assignment of an e-mail address by an employer or plan sponsor for a participant or beneficiary will not be treated as a voluntary provision of an e-mail address.
However, if a participant is required to provide an e-mail address electronically in order to access a secure continuous access Web site housing the required plan disclosure, that provision will be considered voluntary, provided the Initial Notice is provided in accordance with these rules.
- Initial Notice. The Initial Notice must be clear and conspicuous, provided contemporaneously and in the same medium as the request for the e-mail address and contain the following information:
- a statement that providing the e-mail address is entirely voluntary, and that as the result of providing the e-mail address, the required disclosures will be made electronically;
- the identification or a brief description of the information that will be furnished electronically and how it can be accessed;
- a statement that the participant or beneficiary has the right to request and obtain, free of charge, a paper copy of any of the information provided electronically and an explanation of how to exercise that right;
- a statement that the participant or beneficiary has the right, at any time, to opt out of receiving the information electronically and an explanation of how to exercise that right; and
- an explanation of the procedure for updating the participant’s or beneficiary’s e-mail address.
- Annual Notice. Starting with the year (which for this purpose means a calendar year, plan year, or any other 12-month period selected by the plan administrator) after the year that the participant or beneficiary voluntarily provided his or her e-mail address and annually thereafter, the plan administrator must furnish an “Annual Notice” to each such participant or beneficiary.
The Annual Notice must contain the information described in paragraphs (b) through (e) for the Initial Notice. In addition, the Annual Notice must be furnished on paper and in accordance with the DOL’s general disclosure regulations unless there is evidence that the participant or beneficiary “interacted electronically” with the plan after the date the Annual Notice for the preceding year (or the Initial Notice) was furnished. Where there is evidence of such electronic interaction, the plan may furnish the Annual Notice electronically by sending it to the e-mail address on file for the participant or beneficiary.
Examples of electronic interaction include: updating, resubmitting, or confirming an e-mail address to the plan; sending an electronic message to the plan; logging onto a secure continuous access Web site housing plan information; or the receipt and opening of an electronic message sent by the plan to the participant or beneficiary.
- Delivery. The plan administrator must take appropriate and necessary measures reasonable calculated to ensure that the electronic delivery system results in actual receipt of transmitted information (such as by using return receipt or notice of undelivered electronic mail features or conducting periodic reviews or surveys to confirm receipt of transmitted information).
- Confidentiality. The plan administrator must take appropriate and necessary measures reasonable calculated to ensure that the electronic delivery system protects the confidentiality of personal information.
- Calculated To Be Understood by Average Participant. The notices furnished must be written in a manner calculated to be understood by the average plan participant.
- Special Transition Rule. In addition, the Release provides a special transition rule for e-mail addresses that are on file on a date no earlier than 90 nor later than 30 days prior to the date initial disclosures are first required under the Disclosure Regulations (which is no earlier than March 2, 2012 and no later than May 31, 2012 for calendar year plans). For this group of participants and beneficiaries (referred to under the Release as the “Transition Group”), the requirements that an email address be provided voluntarily and that an Initial Notice be provided are satisfied if:
- the Initial Notice is sent to the Transition Group containing the information described in paragraphs (b) through (e) for the Initial Notice;
- the Initial Notice is furnished no earlier than 90 nor later than 30 days prior to the date initial disclosures are first required under the Disclosure Regulations (which is no earlier than March 2, 2012 and no later than May 31, 2012 for calendar year plans);
- The Initial Notice is furnished on paper and in accordance with the DOL’s general disclosure regulations, unless there is evidence that the participant or beneficiary “interacted electronically” with the plan (as described above) during the 12-month period preceding the date the Initial Notice is furnished in accordance with this transition rule. Where there is evidence of such electronic interaction, the plan may furnish the Initial Notice electronically by sending it to the e-mail address on file for the participant or beneficiary.
Note that the transition rule is not available for an e-mail address established or assigned by the employer or plan sponsor unless there is evidence that the e-mail address was used by the participant or beneficiary for plan purposes during the 12-month period preceding the date the Initial Notice is furnished in accordance with the transition rule. A participant will be treated as using an e-mail address for plan purposes if the participant or beneficiary (i) sends an electronic message to the plan from the e-mail address, (ii) receives and opens an electronic message sent by the plan to the e-mail address, or (iii) or logs onto a secure continuous access Web site housing plan information, using the e-mail address as the username.
Scope of Release:
The Release establishes a temporary enforcement policy until the EBSA issues further guidance in this area. The EBSA will not take any enforcement actions against a plan administrator who complies with the conditions in the Release. However, the relief in the Release is specifically limited to fulfilling the disclosure requirements for the disclosures required under the Participant Disclosure Regulations. The Release does not address the rights or obligations of other parties, such as participants and beneficiaries. The Release also makes clear that no inferences should be drawn that the guidance provided under either the Release or the FAB will be reflected in changes, if any, to the current electronic disclosure Safe Harbor.
Plan administrators are personally liable for providing the disclosures required under the Participant Disclosure Regulations. Electronic disclosure of the required information is complicated and, if the plan administrator desires to provide such disclosures electronically, care must be taken to fit within the patchwork guidance provided since 2006.