On May 27, 2020, the U.S. Department of Labor [DOL] published final regulations updating electronic distribution of communications requirements for employee benefit plans covered by the Employee Retirement Income Security Act [ERISA]. This update offers employers a new, voluntary regulatory safe harbor, which permits the use of electronic media, such as email delivery or web posting, to furnish covered documents to covered individuals. The DOL predicts that mitigating most of the costs associated with sending large volumes of paper through the mail has the potential to save $3.2 billion for retirement plans covered by ERISA.
Electronic Delivery of Covered Documents to Covered Individuals
These new electronic delivery regulations apply only to covered documents sent to covered individuals. In this context, a covered individual is both a participant, beneficiary, or other individual entitled to covered documents and someone who provides their employer / plan sponsor with an electronic address, such as an email or a smartphone number.
The covered documents list contains most of the documents that are required to be furnished to plan participants and beneficiaries. This list includes summary plan descriptions, summaries of material modifications, and pension benefit summaries. The exceptions are those documents that are only furnished upon request. In addition, paper copies are still required to be provided when they are requested, but the requirement to deliver documents to all participants can otherwise be met with electronic delivery when possible.
New safe harbor for electronic notifications includes website posting and email delivery.
Plan administrators may use two options for electronic delivery, website posting and email delivery. Covered documents can be posted to a website if “appropriate notification of internet availability is furnished to the electronic addresses of covered individuals.” It is also required that covered documents must remain available on the website for the entirety of their useful life. Once the document has been superseded by an updated version, the older document may be removed – unless it has been posted for less than one year. The look of the website, its content, and the timing of the notification of internet availability are subject to specific rules.
The other option for electronic delivery to covered individuals is via email. Furnishing covered documents via email can either be as an attachment or in the body of the email message. The subject, body, and timing of the emails are also subject to specific rules. The email must include an option to opt out of electronic delivery as well as a statement describing the covered individual’s right to a paper copy of the document. A system check for invalid email addresses and maintaining operability of terminated employee’s email addresses are a few protections for plan participants.
Further Protections under Electronic Delivery
Along with the protections stated above, plan participant’s right to covered documents have further protections. Plans that change to electronic delivery must notify every covered individual, on paper, that their method for plan disclosure distribution is changing. That initial notification must also include the option to opt out of the new electronic delivery and remain with paper disclosures. Anyone on the electronic delivery plan also has a right to paper copies of any covered document, free of charge.
The notification of internet availability [NOIA] of covered documents must be sent to covered individuals each time a new document is made available. A consolidated NOIA is an option to avoid “notice overload” when many documents are added at once. An NOIA must be furnished to covered individuals within 14 months of document posting, so yearly NOIA’s are a popular choice. In addition to including a link to the online document, NOIA’s must also state the right to a paper copy of the new document, while also maintaining brevity and understandability.
New electronic disclosure rules can be utilized immediately.
The official effective date for the new safe harbor rules is set to be July 27th, 2020, 60 days after publishing. However, the DOL will not take any enforcement action against a plan administrator that takes advantage of the new safe harbor before the effective date. These new rules may be a great way to modernize plan participant communications and have the potential to cut costs for employee benefit plans under ERISA.
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.