In May, the Department of Labor [DOL] released final regulations pertaining to new “safe harbor” procedures for the electronic delivery of retirement plan disclosures required by the Employee Retirement Income Security Act [ERISA]. These procedures took effect on July 27, 2020, and they reinforce older DOL rules from 2002, especially for those not deemed “Wired at Work.”
If a plan sponsor meets all the proper requirements for either the 2002 or 2020 procedures, most notices and statements can be delivered electronically. Sometimes, this requires participant’s consent, and all participants need to be given the option to receive information physically.
2002 Safe Harbor for E-Disclosure Separates Participants
The safe harbor published in 2002 distinguishes two parties who can receive electronic disclosures, those who are “Wired at Work” and those who “affirmatively consent.” All other participants must receive paper copies of all notices and disclosures.
What Constitutes Wired at Work?
To be classified as “Wired at Work”:
- An employee must have the ability to effectively access electronic documents where the employee is reasonably expected to perform his / her duties, and
- Using the employer’s electronic information system must be an integral part of the employee’s duties.
Employee’s considered “Wired at Work” typically work desk jobs requiring a desktop, laptop, tablet, or other electronic device that has access to an email account. Simply providing employees access to a computer is not sufficient when it is not an integral part of their workday.
An affirmative consent is a participant that consents to receiving their retirement plan disclosures online, as well as having received the following information before consenting:
- the types of documents to which the consent would apply.
- that consent can be withdrawn at any time.
- the procedures for withdrawing consent and for updating addresses for electronic delivery of documents.
- the right to request and obtain a paper version of any electronically delivered document.
- any hardware and software requirements for accessing and retaining the documents.
As long as the plan administrator abides by the necessary requirements to setup electronic disclosures, the method of information distribution is flexible. This includes, but is not limited to, email attachment, written in email body, and posting to the internet. Any notice or document sent through a proper channel will be considered to have been delivered as if it was sent via first-class mail.
2020 Safe Harbor Provides New Baseline for All Participants
The new 2020 safe harbor does not separate employees by “Wired at Work” status and treats all plan participants equally. All participants initially receive a paper copy notice about the electronic disclosure system and their right to opt out of such program. This effectively treats all participants as “wired,” given the widespread availability of smart devices with email capabilities. One important note is that this only applies to retirement plan disclosures.
Once participants provide addresses for electronic disclosures there are two options for distribution. There is the “notice-and-access” option and the “direct email” option.
This option requires posting documents to a website or mobile application and notifying individuals that these documents are available. Such notifications are called “Notice of Internet Availability” [NOIA] and they should be sent to the provided electronic addresses. To prevent excess NOIA’s, administrators can send a consolidated NOIA at least once every plan year.
Direct Email Option
As the name suggests, this method of distribution is simply to provide notices and documents via email. This could either be as an attachment or the body of the email. Administrators must take “measures reasonably calculated” to ensure that electronic addresses provided are accurate and available.
This new safe harbor has significant advantages over the 2002 safe harbor, especially for those who are not “Wired at Work.” The opt-out normally comes at the time of release of the initial paper handout, so there is less of a need to monitor this group constantly for opt-outs. Also, there is no consent needed, just the collection of an electronic address.
Choosing Which Safe Harbor Rules to Use
For new plans, the decision is simple. The 2020 safe harbor rules are the new baseline for retirement plans, and the 2002 safe harbor is for all other disclosures. But for existing plans, the decision is not as simple.
Those plans with most employees “Wired at Work” probably are already operating primarily through e-disclosures with no consent necessary, so the switch is not as beneficial. Plan sponsors of retirement plans for retail or healthcare firms where most employees do not qualify as “Wired at Work” may want to consider utilizing the 2020 safe harbor.
Contact Meld Financial for help with employer retirement plans.
If you have more questions about ERISA rules or other employer retirement plan issues, don’t hesitate to reach out to our team here at Meld Financial. To stay updated on new regulations and other important Employee Benefit information, be sure to visit the Meld University School of Employer Plans. Don’t forget to follow us on LinkedIn, Twitter and Facebook.