DOL Issues Proposed Regulations Addressing Electronic Delivery of Certain Participant Disclosures:

On October 23, 2019, the DOL published eagerly-awaited guidance. The guidance, in the form of a proposed regulation, deals with an area that for many years has imposed significant administrative burdens on plan sponsors and administrators: distributing a wide array of disclosures to retirement plan participants for plans that are subject to ERISA. In connection with an August 31, 2018 Executive Order issued by President Trump, the DOL notes that it has “decided to publish a proposed regulation on electronic disclosure that it believes will reduce the costs and burdens imposed on employers and other plan fiduciaries, while at the same time creating the opportunity for disclosures that are more useful to participants and beneficiaries.”

The proposed regulation provides a new safe harbor for the use of electronic media by retirement  plans to furnish ERISA-required disclosures to plan participants and certain beneficiaries. Here is a summary of the proposed regulation, which cannot be relied on until it is finalized:

  • It only applies to someone who is a “covered individual.” That is, a participant, beneficiary, or other individual entitled to “covered documents” and who provides the plan sponsor or administrator with an electronic address (e.g., email address or smartphone number). If an employer assigns an electronic address to an individual for this purpose, the individual is treated as if he or she provided the electronic address.
  • It only applies to “covered documents,” such as Summary Plan Descriptions and investment-related disclosures.
  • The plan sponsor or administrator must furnish to each covered individual a notice of internet availability for each covered document. The notice must satisfy specific content requirements (e.g., a “prominent statement,” that reads, ‘‘Disclosure About Your Retirement Plan.”). Also, the notice must generally be furnished at the time the covered document is made available on the website. If an administrator furnishes a combined notice of internet availability for more than one covered document, however, the combined notice of internet availability must be furnished each plan year. The notice must be written in a manner calculated to be understood by the average plan participant.
  • The plan administrator must ensure the existence of a website through which all covered individuals are able to access covered documents. Also, the administrator must take several measures with respect to the website. For example, the administrator must ensure that any covered document is available on the website no later than the date on which the covered document must be furnished under ERISA. As another example, the administrator must take measures “reasonably calculated to ensure” that the website protects the confidentiality of covered individuals’ personal information. 
  • Upon request from a covered individual, the administrator must promptly furnish to such individual, free of charge, a paper copy of a covered document. In addition, covered individuals must have the right to opt out of electronic delivery and receive only paper versions of some or all covered documents.
  • The administrator must furnish to each individual (prior to the administrator’s reliance on this safe harbor with respect to that individual) a paper notification that some or all covered documents will be furnished electronically, a statement of the right to obtain a paper version of a covered document free of charge, and of the right to opt out of receiving covered documents electronically, and an explanation of how to exercise these rights.
  • When a participant’s employment with the employer ends, the administrator must take measures reasonably calculated to ensure continued accuracy of the individual’s electronic address or obtain a new electronic address that enables receipt of covered documents.

Note that the proposed regulations safe harbor method for electronic disclosures is in addition to the DOL’s current regulation that provides a safe harbor method for electronic disclosures. Under the existing safe harbor, plan sponsors must satisfy several detailed requirements in order to furnish ERISA-required disclosures properly. Also, the existing requirements are more complicated with respect to employees who do not regularly utilize the plan sponsor’s email system as part of their job duties.

Overall, if finalized, the proposed regulation will be advantageous for plan sponsors and administrators who want to make certain retirement plan disclosures accessible on a website, rather than sending numerous paper documents via the mail and thus incurring printing and postage costs.

The DOL also notes that it “needs further information from stakeholders before proposing any substantive regulatory additions, deletions, or changes to ERISA’s disclosures themselves, as opposed to delivery of such disclosures. Therefore, this document includes…a Request for Information comprising a series of questions to elicit views from all interested parties on additional ways to enhance the usefulness and effectiveness of ERISA disclosures.”

Here is a link to the proposed regulation: