Remember that pesky fee disclosure thing that won't go away? Well, just in case you missed it, the DOL issued Technical Release 2011-03 that gives us an "interim" policy regarding the use of "electronic media" that can be used to satisfy the disclosure requirements.
Generally, the new Participant Fee Disclosure Rule requires employers to disclose more information about fees and costs allocated to participants in defined contribution retirement plans (like 401(k)s). Under the final rule, plans generally have until at least May 31, 2012, to start providing this enhanced information on plan fees and expenses. 2011-03 is a limited technical release that allows for electronic disclosure and distribution of the information required under the final rule. As with most policies, this could be changed after further review. But if you are preparing to deliver fee information by electronic means, this technical release helps set the standard for your communications.
The interim policy provides a "safe harbor" for electronic disclosure. It states that the DOL will not take enforcement action based "solely on a plan administrator’s use of electronic technologies to make the required fee disclosures if the administrator complies with the conditions in the technical release." For example, plan administrators may furnish fee disclosure information electronically—including via e-mail or a through a website, with proper notice of online availability—if participants who receive this information meet the following requirements:
- As to active participants, it applies if they have the ability to access documents furnished in electronic form from any location where the participant is reasonably expected to perform his or her duties as an employee and with respect to whom access to the employer’s electronic information system is an integral part of those duties (most likely a work terminal)
- For participants who don't meet the requirements of option 1, like retirees, former employees or active employees who don't have regular computer access through their normal job functions, they can receive the information electronically if they "affirmatively consent" to receiving disclosures through electronic media in the manner prescribed by the regulation. Note that the form of the affirmative consent remains undefined.
For defined benefit plans, the policy provides that fee disclosures included in a pension benefit statement may be furnished in the same manner that other information included in the same pension benefit statement is furnished. So if the pension benefit statement information is furnished through a secure continuous access website, then fee disclosures included as part of the pension benefit statement can be furnished electronically in the same manner. Fee disclosures furnished outside of the pension benefit statement may be electronically disclosed to participants and beneficiaries who voluntarily provide an e-mail address for the purpose of receiving disclosures if the plan administrator:
- Provides participants and beneficiaries with initial and annual notices that meet specified requirements
- Takes appropriate measures to confirm that individuals are actually receiving the electronic transmissions
- Takes appropriate measures to protect the confidentiality of personal information in the electronic delivery system
- Meets other specified requirements (yet to be fully defined)
The point of this technical release, then, is really to give plan sponsors some guidance on how they can either implement or continue to use electronic notices to comply with the new fee disclosure rules. What this means is that if you , as a plan sponsor, intend to distribute fee disclosures electronically, you have to design your disclosure process to satisfy these safe harbor rules. I have long advised that if you intend to distribute plan notices and documents electronically, rules of this type should be followed, so the change should not be drastic. The good news is that at least now we know we can use electronic medium as a means for relaying these disclosures to participants.