Default Electronic Disclosure by Employee Pension Benefit Plans Under ERISA, 29 CFR Part 2520, 84 Fed. Reg. 56894 (Oct. 23, 2019)
The DOL has issued proposed regulations that would provide an additional safe harbor for electronic distribution of ERISA-required disclosures for pension plans, including 401(k) plans. For covered items, the regulations would allow electronic disclosure via Internet posting for plan participants and beneficiaries with valid electronic addresses unless they affirmatively opt out. The ERISA plan administrator would generally be responsible for ensuring compliance with the safe harbor’s requirements, even if certain tasks are outsourced. Here are highlights:
Covered Individuals. The safe harbor could be used for disclosures to any participant, beneficiary, or other individual entitled to receive covered documents who has provided the employer, plan sponsor, or administrator (or appropriate designee) with an electronic address such as an email address or a smartphone number. An employee with a work-related electronic address assigned by an employer is treated as having provided the electronic address.
Covered Documents. The safe harbor would apply to any pension plan-related document required to be furnished under ERISA Title I—such as SPDs and SMMS, SARs, pension benefit statements, and blackout notices—but not documents that must be furnished upon request.
Notice of Internet Availability. A notice would have to be furnished to covered individuals (via each individual’s electronic address) regarding the Internet availability of each covered document. The notice of Internet availability would have to include a statement about the importance of the available document, a brief description of the document, the web address where the document is available, statements regarding the right to request paper versions and the right to opt out of electronic delivery (and explanations of how to do so), and a contact phone number. A combined notice could be used to notify recipients of the availability of specified documents: the SPD, SMM, SAR, annual funding notice, investment-related disclosures, QDIA notices, and pension benefit statements. However, the combined approach is not permitted for other disclosures, such as blackout notices. In general, the notice must be furnished no later than the deadline for making the underlying ERISA disclosure; special timing guidelines are provided for combined notices. The preamble notes that notices of Internet availability should be clear and concise, cautions against the use of technical and legal terminology, and specifies a readability standard.
Technical Standards. The plan administrator would be required to ensure that each document is available on a website accessible by covered individuals. Password protection is permitted, and any individual’s personal information must be protected. The document must be available at the designated web address no later than the ERISA deadline for making the disclosure and must remain posted until superseded. The regulations also address formatting requirements (e.g., the online document must be suitable for searching, printing, and saving electronically) and technical issues (e.g., regarding confirming validity of email addresses).
Paper Copies, Opt-Out, and Initial Notice. Covered individuals would have to be permitted to request any document in paper form (without charge) and would have the right to opt out of electronic delivery and receive only paper versions of some or all covered documents. Before using this safe harbor, the plan administrator would have to provide a paper notification of the use of this method, with information about the right to request paper versions and to opt out.
This “notice and access” safe harbor is proposed to take effect with the first calendar year beginning after the regulations are finalized. It would not initially be available for welfare plan disclosures, but a paragraph is reserved to potentially cover them in the future. The existing safe harbor for ERISA disclosures, which has been in effect since 2002 (see our Checkpoint article), continues to be available to both pension and welfare plans.
EBIA Comment: This safe harbor is consistent with a 2018 Executive Order (see our Checkpoint article), but updated electronic disclosure rules have been a long time coming (see, for example, our Checkpoint article about a 2011 request for information). The DOL anticipates that this method would improve the effectiveness of retirement plan disclosures while reducing costs and administrative burdens for plans. Comments are sought on various practical elements of the proposed safe harbor, as well as on the underlying ERISA disclosure requirements (such as whether existing disclosures are too voluminous). For more information, see EBIA’s 401(k) Plans manual at Section XXVIII.G (“Electronic Delivery of SPDs and Other ERISA-Required Documents”).
Contributing Editors: EBIA Staff.