Legal Update

Oct 30, 2019

Proposed Regulations for Electronic Delivery of Retirement Plan Disclosures: The DOL Modernizes the Disclosure Rules

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On October 22, 2019, the Department of Labor (DOL) issued proposed regulations providing guidance for retirement plan administrators using electronic delivery for required disclosures, including a new safe harbor.

ERISA requires that certain retirement plan information be provided to participants and beneficiaries (e.g., summary plan descriptions, summary of material modifications, blackout notices, etc.). To meet these disclosure requirements, plan administrators must use delivery methods that reasonably ensure participants and beneficiaries will receive the information. Historically, that meant distribution of required notices by hand (e.g., with paychecks) or by first-class mail.

In 2002, the DOL established a safe harbor for providing required disclosures through electronic “media” (e.g., such as by email or posting on an intranet website). In general, the safe harbor is satisfied, if (i) the system for delivering documents results in actual receipt; (ii) the style, format, and content requirements under ERISA are met; and (iii) a notice is provided, including an explanation of the significance of the document and the right to obtain a paper copy upon request. However, the 2002 safe harbor is only available for individuals that have regular access to a computer at work as an integral part of his or her job or otherwise affirmatively consent to the electronic disclosure, which limits considerably a plan administrator’s ability to use this safe harbor.

The DOL’s recently released proposed rule offers a new “notice and access” safe harbor. If the proposed requirements are met, a plan administrator may default a participant or beneficiary into electronic delivery, unless they affirmatively opt out. As a threshold matter, before electronic delivery under the proposed safe harbor is available, an individual must provide the plan administrator with an email address or smartphone number where they can be reached. Notably, though, if an email address or company-issued smartphone is assigned to a participant in connection with employment, the participant is deemed to have provided such address or number to the administrator.

The proposed safe harbor, then, requires plan administrators to email a “notice of internet availability” to individuals for each disclosure at the time the disclosure is made available online. The notice generally must include a (i) statement that the disclosure is available online; (ii) brief description of the required disclosure; (iii) website address where the disclosure is posted; (iv) statement of the right to request a paper copy free of charge and opt out of electronic delivery, and information on how to make those requests; and (v) telephone number to contact the plan administrator or other designated representative. The proposed regulations specifically provide that the procedures for requesting a paper copy and opting out of the electronic disclosure must be “reasonable” and cannot “unduly inhibit or hamper” the processing of a request.

Additionally, the proposed safe harbor sets forth standards for the website where the disclosure will be posted and requires a system for detecting invalid addresses. The proposed rules also require an initial paper notification for administrators transitioning to the new safe harbor and provide guidance on treatment of terminated employees.

Importantly, while the proposed rule may be welcome relief for retirement plan administrators, it will not become effective until 60 days after the final rule is published in the Federal Register and will not apply to plans until the first day of the first calendar year following the publication of such final rule. The new safe harbor also does not currently apply to employee welfare benefit plans. The DOL may consult with the Treasury Department and the Department of Health and Human Services (HHS) in the future on possible new electronic delivery safe harbors for group health plan disclosures.

The DOL has requested comments on the proposed rules, and if the issuance of the DOL’s 2002 regulations are instructive, we can expect additional clarification and possible expansion of the proposal when finalized.