On May 27, 2020, the U.S. Department of Labor (DOL) published its final rule establishing new voluntary fiduciary safe harbors for providing retirement plan participants with retirement plan information electronically, online or by e-mail (Final Rule). While the Final Rule tracks the proposed regulations released last October in many respects, a few changes were made after the DOL received comments from plan sponsors, fiduciaries, and retirement plan service providers. The new safe harbors available under the Final Rule are available immediately, but only for retirement plans subject to the Employee Retirement Income Security Act of 1974 (ERISA). The DOL noted that the immediate availability of these new safe harbors supports the government’s broader efforts to lessen the logistical burdens posed by the COVID-19 crisis. Notably, however, the new safe harbors are not available for health and welfare plans, although the DOL did indicate that it will continue to consider offering similar relief for such plans in the future.
Previously, the 2002 safe harbor for electronic disclosures to retirement plan participants was available only if participants made an affirmative election to receive disclosures electronically. In recognition of technological advances since 2002, the Final Rule permits employers to provide copies of summary plan descriptions, summary annual reports, fee disclosures, notices, and other participant communications either by posting them to a website or by directly sending them by e-mail, unless a participant opts out of receiving them electronically. Employers may still use the 2002 safe harbor, as these new safe harbor options are in addition to, and not intended to replace, the earlier safe harbor.
Posting Disclosures to a Website
Under the Final Rule, retirement plan disclosures required under ERISA can be provided to participants and beneficiaries by posting them to a website or mobile app if participants provide their employer with an e-mail address or smartphone number (electronic address) or one is provided to them by their employer.
In order to satisfy the new safe harbor under the Final Rule, employers must meet the following requirements:
- Employers must provide participants (even those currently receiving electronic disclosures under the 2002 safe harbor) with an initial paper notice explaining that electronic disclosures will be implemented and they have the right to opt out.
- The disclosures posted to the website must be in a format that is widely accessible, suitable for reading online or in print, and is electronically searchable.
- Each time a disclosure is posted online, a “Notice of Internet Availability” must be provided to the electronic address provided by the participant that sets forth certain information regarding the nature and location of the disclosure. Generally, these notices must be provided separately from other notices or communications to the participants, although the Final Rule does permit consolidation of multiple notices in certain circumstances.
- Disclosures must still be posted by the deadline required under ERISA and must remain available on the website either for one year or until they are superseded by a later document, whichever comes later.
- Paper copies of the disclosures must be made available to participants upon request and employers must permit participants to opt out of electronic delivery.
- Upon termination of an employee who is receiving documents electronically at an electronic address assigned by the employer, the Final Rule requires the employer to either take reasonable steps to ensure continued accuracy of the given address or get a new electronic address for the participant.
- The Final Rule also requires employers to have a system in place to alert them of any invalid or inoperable electronic addresses for participants or beneficiaries. If the employer is notified that an electronic address is invalid or inoperable, that participant is considered to have opted out of electronic disclosures.
Providing Disclosures by E-mail
The Final Rule added another safe harbor to the proposed regulations from October for e-mail delivery of the same required participant notices and disclosures. Under this new e-mail delivery safe harbor, employers may provide the disclosures either as attachments to, or within the body of, e-mails sent to the participants. The requirements for employers providing these notices electronically are largely the same as the requirements set forth above for posting to a website. There is no need, however, to provide any notice of internet availability for e-mail delivery. Instead, employers providing documents by e-mail must include statements in the e-mail describing the document, explaining the participant’s right to get a paper copy of the document, as well as the participant’s right to opt out of electronic delivery.
Other Notable Differences from Proposed Regulations
Aside from the addition of the direct e-mail safe harbor, the Final Rule contains several other noteworthy provisions that differ from those in the proposed regulations released in October:
- Under the Final Rule, only the employer can assign electronic addresses to employees (the plan’s service providers may not), and the electronic address assigned to an employee must have some other employment-related purpose, such as the employee’s general work address. In other words, the electronic address cannot be solely provided for compliance with one of these new safe harbors.
- Employers cannot assign electronic addresses for non-employee spouses or other beneficiaries, so the new safe harbors only apply if such individuals have provided an electronic address.
- Employers are not required to meet the specific readability requirements enumerated in the proposed regulations (short sentences, active voice, Flesch Reading Ease test score of at least 60, etc.). However, the DOL stated that it will continue to review and analyze readability of these documents. ERISA still requires disclosures to be written in a manner calculated to be understood by the average plan participant.
- Employers are not required under the Final Rule to take additional steps to verify electronic contact information following an employee’s termination if the employee was using an electronic address that was not assigned by the employer.
If you have any questions about the Final Rule or any other electronic disclosure rules, please do not hesitate to contact any members of the MMM Employee Benefits and Executive Compensation team.
