New Safe Harbor For Electronic Delivery Of Participant Disclosures
On May 21, 2020, the Department of Labor (DOL) adopted the final version of a safe harbor rule (the “Electronic Disclosure Safe Harbor”) that allows retirement plan sponsors to satisfy required participant disclosure requirements by suing website postings or email as a default approach for all participants. This reflects a major relaxation from the main existing DOL rules related to electronic disclosures.
Old Safe Harbor Electronic delivery rules:
Permitted electronic delivery of participant disclosures only for participants who affirmatively consented (opt-in) or who have computers that are integral to their jobs.
New Safe Harbor (the “Electronic Disclosure Safe Harbor”) delivery rules:
Allows retirement plans sponsors to satisfy required disclosure requirements of “Covered Documents” of “Covered Plans” to “Covered Individuals” by using either website postings or email as the default approach for all “Covered Individuals”.
- New rules were finalized on May 21, 2020
- New rules are effective 60 days after the date they were published which is July 26, 2020 (can start using earlier if available with RK)
- These rules apply to DOL notices, IRS notices fall under separate IRS rules
- The Department of Treasury and the IRS will hopefully align the two sets of rules in the near future
Generally applies to all disclosures and information a plan administrator is required to provide to participants and beneficiaries under ERISA, except those required to be provided only upon request (Plan documents, 5500s, etc.)
Most types of employee sponsored retirement plans, such as 401(k), 403(b), profit sharing, pension plans, stock bonus plan and ESOPS.
- Welfare benefit plans such as group health, life & disability plans are not currently considered covered plans
Participants or individuals (such as beneficiaries) who are entitled to receive covered documents who provide their employer, plan sponsor or plan administrator with an email address or smart phone number that can receive a Notice of Internet Availability or covered documents via email.
- Employer-assigned electronic addresses may be treated as provided by the individual, as long as the electronic address is not assigned for the sole purpose of receiving retirement plan disclosures (i.e., it must have a separate employment-related purpose)
A plan administrator must distribute an initial notice on paper to covered individuals, advising them that disclosures will be electronically provided unless they affirmatively opt out. The requirement to provide this notice on paper is absolute, even for individuals who previously provided consent. The initial notice must identify the individual’s electronic address and meet other detailed content requirements.
Two ways to Deliver: “Notice-and-Access” and “Direct Email”
This option requires posting covered documents on electronic media, such as a website or mobile application, and notifying covered individuals that the document is posted by sending them a separate “Notice of Internet Availability” (the “NOIA”) for each posting
- The NOIA must comply with detailed content requirements and retention rules
Covered documents may be sent via “direct email” to covered individuals who have provided email addresses or have employer-assigned email addresses. (This method cannot be used if the only electronic address for an individual is his or her smartphone number.) A covered document may be sent in the body of an email or as an attachment.
- Covered Documents may be sent in the body of an email or as an attachment
- The email message itself is subject to specific content and readability requirements
Additional Requirements for Using New Electronic Delivery Safe Harbor Global
Covered individuals must be permitted to globally opt out of electronic delivery of all covered documents and receive paper copies at no cost.
Using a single consolidated NOIA for certain documents in lieu of sending a separate NOIA each time a document is posted is allowed. A consolidated NOIA is limited to covering the summary plan description and certain annual disclosures (such as an annual funding notice, SAR, and QDIA notice).
Identifying Bounce Backs:
The electronic delivery system must be designed to alert the plan administrator of a covered individual’s invalid or inoperable electronic address (a bounce back). If a bounce back is received, the plan administrator must promptly take reasonable steps to cure the problem, by sending the NOIA or email to a secondary electronic address on file, obtaining a new valid and operable electronic address, or treating the covered individual as having globally opted out of electronic disclosures.
“Reasonable Opt-Out Procedures”:
The regulation requires the plan administrator to maintain “reasonable procedures” permitting covered individuals to opt out of electronic delivery and to request paper copies of any document furnished electronically.
- The hope is that there is further guidance provided that defines “reasonable”