On May 27, 2020, the Department of Labor (“DOL” or “Department”) published a final rule providing an alternative safe harbor for furnishing ERISA pension plan disclosures electronically on a website or via email.  We previously blogged about the proposed rule here.  This post provides an overview of the final rule and highlights some key changes from the proposed rule.

As we previously noted, electronic disclosure has been permitted since 2002 under a safe harbor that allows plan administrators to electronically disclose ERISA documents to individuals who are “wired at work” or individuals who have affirmatively consented to electronic delivery.  This new safe harbor is an alternative to the 2002 safe harbor.  Plan administrators of pension plans may rely on either the new safe harbor, the 2002 safe harbor, both, or neither.  Significantly, however, the new safe harbor is limited to pension plans.  The 2002 safe harbor remains available for welfare plans.

Safe Harbor

The final rule allows employers to provide ERISA pension plan disclosures electronically either (1) by posting the notice to a website (or mobile app) and then notifying participants (e.g., via text or email) that the disclosure has been posted, or (2) emailing participants the notice in the body of the email or as an attachment.  The employer must first provide a paper notice informing participants that they will receive notices electronically and giving them the chance to opt out of electronic disclosures.  The requirements of the electronic disclosure rule are described in more detail in the Appendix below.

Effective Date / Non-Enforcement Policy

Plan administrators may begin relying on the safe harbor immediately, even though the safe harbor does not become effective until July 27, 2020. The Department will not take any enforcement action against a plan administrator that relies on this safe harbor before July 27, 2020.  The Department has adopted this non-enforcement policy so that plans can take immediate steps to rely on the safe harbor, especially in light of the disclosure-related problems caused by the COVID-19 national emergency.

Phases Out Prior Interpretive Guidance

Plans will no longer be able to rely on three pieces of sub-regulatory guidance to provide pension benefit statements, QDIA notices, and participant-level fee disclosures electronically.  Plans will have until December 27, 2021, 18 months after the July 27, 2020 effective date of the new safe harbor, to phase out reliance on the following three rules:

  1. Rule allowing quarterly pension benefit statements, required by ERISA § 105, to be provided through a secure website (FAB 2006-03);
  2. Rule allowing plan administrators to provide QDIA notices electronically under either the Department’s 2002 safe harbor or the Treasury Department’s rule at 26 CFR § 1.401(a)-21(c) (FAB 2008-03); and
  3. Interim enforcement policy allowing plan administrators to furnish participant-level fee disclosures, required by 29 CFR § 2550.404a-5, through electronic media (including through a continuous access website), if participants voluntarily provided an email address and other conditions are satisfied (TR 2011-03R (84 FR 56894, at 56900, footnote 60)). Participant-level fee disclosures are disclosures of certain plan-related and investment-related information, including fees and expenses, to participants and beneficiaries in participant-directed individual account plans, g., 401(k) plans.

For what disclosures can pension plans use the safe harbor?

Plan administrators can rely on the safe harbor to distribute any document or information that the administrator is required to furnish to participants and beneficiaries under Title I of ERISA for ERISA pension plans.

  • Only pension plans. The safe harbor is available only for ERISA pension plan disclosures.  Like the proposed regulations, the final regulations do not make the safe harbor available for ERISA welfare plans.  The DOL will continue to study the future application of this safe harbor to welfare plan documents.
  • Information and not just documents. The final rule was revised to make clear that it is available for information and not just documents. This change was to account for information required to be disclosed by the DOL’s participant-level fee disclosure regulation.
  • Not available for information that must be furnished only upon request. The final rule revises the proposed rule to clarify that the safe harbor’s exclusion from covered documents is limited to documents that are available only upon request. In other words, the safe harbor applies to documents that plan administrators must furnish but that are also, for various reasons, requested by participants.  However, it does not apply to documents that are available only upon request, such as plan documents, trust instruments, and Forms 5500.
  • Not exclusive. Plan administrators can rely on the safe harbor for some documents or information, but need not rely on the safe harbor for all covered documents.

What is an electronic address?

  • An “electronic address” includes an email address or a smartphone number. It should be interpreted broadly to encompass new and changing technology.
  • An electronic address must be able to accept text (rather than audio) messaging so that the participant can receive and inspect a written NOIA or an email.
  • For smartphone numbers, plan administrators will need to take steps to confirm that it is a smartphone number and not a landline, by either confirming with participants or through other reasonable means, such as using mobile phone carriers’ validator services.

Additional Considerations for Plan Administrators

  • Covered documents must be maintained on the website for at least a year and the NOIAs must contain a sufficiently specific website address or hyperlink to provide ready access to the covered document. Plan administrators should consider how to comply with these requirements in the event of changes to internet website addresses or changes in plan service providers.
  • The Department declined to include rules in the final regulations addressing changes in plan administrators or recordkeepers. However, the Department appears to take the position that unless the plan administrator has reason to believe that the recordkeeper had been negligent or incompetent in keeping records, a recordkeeper should be able to transfer its lists of electronic addresses and opt-out elections to successor recordkeepers and it would not be necessary to send a new paper initial notice.
  • Covered documents are exempt from the consumer consent requirements of the Electronic Signatures in Global and National Commerce Act (E-Sign Act). The safe harbor provides an alternative method of complying with the requirement that covered documents be furnished in writing.
  • The new safe harbor rule does not:
    • Alter the substance or timing of any ERISA disclosures.
    • Alter ERISA obligations with respect to the maintenance of plan records.
    • Address whether a participant read, understood, or had actual knowledge of the contents of the covered documents or impose an affirmative obligation on the plan administrator to monitor whether participants visit the specified website or login at the website. Although, there might be other reasons that a plan administrator should consider tracking this information.

Next Steps

  • Make any necessary alternative communication plans for notices currently being provided under the guidance being phased out. See discussion of phase out above.

Consider requesting electronic addresses (emails and mobile phone numbers) for participants, including as part of onboarding new employees, open enrollment, when an employee retires, when complying with a QDRO, and when an employee dies.

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Photo of Christen Sewell Christen Sewell

Christen Sewell focuses on all aspects of employee benefits and executive compensation, including compliance with the Internal Revenue Code and ERISA.  Her practice covers tax-qualified retirement plans, health and welfare plans, equity compensation and nonqualified deferred compensation plans, among other areas.

Photo of Kendra L. Roberson Kendra L. Roberson

Kendra Roberson has experience advising clients on a broad spectrum of employee benefits matters including tax-qualified retirement plans, employee stock ownership plans, executive compensation arrangements, stock option and other equity-based compensation plans, cafeteria plans, VEBAs, self-insured medical plans, and other health and welfare…

Kendra Roberson has experience advising clients on a broad spectrum of employee benefits matters including tax-qualified retirement plans, employee stock ownership plans, executive compensation arrangements, stock option and other equity-based compensation plans, cafeteria plans, VEBAs, self-insured medical plans, and other health and welfare plans.  Her experience includes plan design and drafting, regulatory compliance, ERISA litigation, and handling employee benefits matters and plans in corporate transactions.  In addition, Ms. Roberson has extensive experience advising employers and state governments on compliance with the Patient Protection and Affordable Care Act (“PPACA”).