Finally! New Electronic Disclosure Safe Harbor for Retirement Plans

After nearly 18 years, the Department of Labor (“DOL”) issued a new, voluntary safe harbor for retirement plan administrators who want to furnish Employee Retirement Income Security Act (“ERISA”) required notices and disclosures (except for documents furnished on request) electronically to covered individuals. This new safe harbor does not supersede the safe harbor issued in 2002, which remains valid, although it does supersede the continuous access website previously permitted under DOL FAB 2006-03. The new safe harbor only applies to retirement plan disclosures; health and welfare plans must still comply with the preexisting electronic disclosure rules.

The new safe harbor provides plan administrators with more flexible methods for distributing ERISA-required disclosures, including summary plan descriptions, summaries of material modifications, benefit statements, and summary annual reports. The new safe harbor relies on a “notice and access” approach and permits electronic delivery via a website posting or by email. It also specifically allows for use of mobile apps or a smartphone number. As noted below, the DOL has indicated that retirement plan administrators may begin using the new disclosure methods immediately.

Initial Notice Requirement

Before a plan can use the new safe harbor, covered individuals must be furnished an initial paper notice informing them of the new electronic delivery method. The initial notice of electronic delivery must include the electronic address that will be used, any instructions for accessing the documents, a cautionary statement that documents are not required to be available on the website for more than a year, a statement that the covered individual has the right to opt out of electronic delivery and instead receive only paper copies of covered documents, and instructions on how the covered individual can exercise such right.

Covered Individuals

Any participant, beneficiary, or other individual entitled to disclosures who provides the employer, plan sponsor, or plan administrator with a valid email address or smartphone number, or who is assigned an email address for work purposes (i.e., not just for purposes of the safe harbor), is eligible for electronic delivery. In both cases, the individual must also be provided with the initial paper notice described above.

Electronic Distribution Requirements

Required disclosures may be provided electronically by emailing in the body of the email or as an attachment, or by notifying the participant that the disclosure is available on a website. Such email or notice must be provided by the distribution date for the disclosure otherwise required under ERISA. The final rule includes technical standards for electronic delivery and for the formatting and accessibility of the documents.

As noted above, if the disclosure is posted on a website, the plan administrator must electronically deliver a “notice of internet availability” with a link or website address for the disclosure when posted, and an annual notice thereafter subject to similar content requirements as the initial notice. Posted documents must be accessible for at least one year, even if replaced by a new version. Prior versions can be labeled as such or placed in an archive section.

The system used to furnish disclosures must alert the plan administrator of an invalid or inoperable address, and the administrator must attempt to cure the problem or treat the individual as opting out of electronic delivery. If the plan uses an employer-assigned email, at termination, the plan administrator must take steps to confirm the person’s email address.

Administrative Steps

To rely on the new safe harbor, plan administrators will need procedures in place that address providing paper versions of documents, opting out of electronic disclosure, resolving invalid or inoperable addresses, checking employer-provided email addresses at termination, and resolving any unavailability issues as soon as practicable.

Effective Date

The final rule does not technically go into effect until July 26, 2020 (60 days following publication in the Federal Register). However, the DOL in the preamble to the final rule provided a non-enforcement policy to allow immediate reliance on the new safe harbor.