Department of Labor Issues Final Electronic Disclosure Regulations for Retirement Plans

6 min

One of the principal burdens for employers who maintain retirement plans is providing participants and beneficiaries with the notices and documents they are required to receive under the Employee Retirement Income Security Act (ERISA). The Department of Labor eased this burden by issuing new, final electronic disclosure regulations on May 21, 2020. The regulations modernize the way in which employers may provide retirement plan notices to participants and beneficiaries and will likely reduce both administrative burdens and costs for employers. At present, the new regulations apply only to notices required by ERISA, and not to those required by the Internal Revenue Code.

Background

Nearly twenty years ago, the DOL issued the original electronic disclosure regulations. Those rules granted what is now the original safe harbor under which an employer may provide employee benefit plan notices to participants and beneficiaries through electronic means. However, to qualify for the original safe harbor, it is necessary to have affirmative consent of the recipient (opt in), unless the notice is sent to an employer-provided email address regularly used by the employee for employment purposes. As a result of this impediment, many employers have continued to distribute employee benefit plan notices by regular mail to active employees who do not regularly use employer-provided email, and to former employees.

New DOL Regulations

The final regulations lower the bar for employers who want to electronically distribute retirement plan notices and documents to participants, beneficiaries, and other individuals required to receive them.

Rather than requiring employers to obtain affirmative consent before providing electronic notices and documents to qualify for the safe harbor, the new regulations provide a safe harbor under which an employer may provide covered documents electronically by default unless an individual requests such documents in paper or opts out of electronic disclosure altogether. The new "notice and access" safe harbor (opt out) involves the following requirements:

  1. Initial Paper Notice: The employer must provide the individual with an initial paper notice that includes (i) a statement that covered documents will be provided electronically, and the email address or smartphone number to which they will be provided; (ii) instructions for accessing the documents; (iii) the period of time during which the documents must remain on the website; and (iv) a statement that the individual may, free of charge, request such documents in paper and opt out of electronic disclosure.
  2. Subsequent Electronic Notice: When a covered document becomes available, the employer must provide the individual with a "notice of internet availability" that (i) describes the covered document and notifies the individual of the importance of such document; (ii) explains how to access the covered document; (iii) informs the individual of the right, free of charge, to request the covered document in paper or opt out of electronic disclosure; (iv) notifies the individual of the period of time during which the document must remain on the website; and (v) provides contact information for a designated representative of the employer. The notice must be provided to the electronic address specified in the initial paper notice. Additionally, the notice must contain only the information required by the DOL (as well as logos or other pictures selected by the employer) and must be furnished separately from other documents.
  3. Website Requirements: The employer must ensure that the covered documents (i) are available on the website indicated in the notice of internet availability; (ii) remain on the website until the later of (a) one year after the covered document is made available, or (b) the date that the document is superseded by a subsequent version; and (iii) are understandable by the average person and are presented in a widely available, printable, searchable, and savable format; and that (iv) the website protects the confidentiality of the individuals using it.
  4. Procedures for Providing Paper Documents. The employer must establish reasonable procedures for providing individuals with paper documents, in case an individual requests such documents on a periodic basis or opts out of all electronic disclosure.
  5. Procedures for Ensuring Receipt. The employer must distribute the electronic notice of availability through a system designed to alert it if the notice is not received or the recipient's address in invalid or inoperable. Additionally, the employer must take steps to ensure the continued accuracy of an individual's email address or smartphone number after severance from employment.
  6. Combined Notices: The employer may provide a separate notice of availability for each covered document that it posts online, or it may issue one, combined notice of availability for all documents that it posts online annually.
  7. Covered Documents: The employer may use the procedures above to furnish the following documents: (i) summary plan descriptions; (ii) summary annual reports; (iii) annual fee and qualified default investment alternative notices; (iv) annual funding notices; (v) blackout notices; and (vi) other documents required to be provided under ERISA. Importantly, an employer may not rely on the new disclosure procedures for furnishing documents in response to a direct request from a participant, beneficiary, or alternate payee. Also, at present, the new regulations do not apply to notices required by the Internal Revenue Code but not ERISA (such as 401(k) safe harbor notices). (The new regulations contemplate that the IRS may issue guidance under which the regulations would also apply to one or more Internal Revenue Code-based notices.)
Alternative Method of Distribution Under the New Regulations

In addition to the procedures described above, the regulations also provide a safe harbor for an employer to distribute covered documents by email, provided that the employer satisfies certain requirements similar to those above, including the initial paper notice. Employers utilizing the alternative method of distribution may email the document as an attachment to the body of the email. Some employers may find this distribution method preferable because it does not require maintenance of a designated website.

Furthermore, employers should note that the new regulations merely supplement, but do not replace, the DOL's original safe harbor electronic disclosure rules. If an employer so desires, it may continue to rely on the original rules, which are easier to satisfy for active employees who regularly use employer-provided email for employment purposes.

Additional Information

The regulations clarify that the new electronic disclosure safe harbor applies only to retirement plans and do not apply to welfare benefit plans. With time, we hope that the more flexible and modern rules above may be extended to cover welfare benefit plans as well.

If you have any questions about how to implement these rules for your workplace, please contact the authors of this article or any member of the Employee Benefits and Executive Compensation team at Venable LLP.