As mentioned in our blog last week, the Department of Labor has finally released updated regulations on electronic disclosure; for the first time since 2002! These regulations provide a new safe harbor method of electronic distribution. Needless to say, these regulations are very welcomed (given the vast amount of technological changes that have occurred in the past two decades), and should ease the administrative cost and burden of operating an ERISA pension plan.
Employers were restricted in who could be sent plan information through electronic disclosure by the 2002 regulations. Notices could only be provided electronically if either the participant consented to electronic disclosure or the participant’s normal job required access to a work computer. The new regulations expand the list of permitted recipients to all “covered individuals.” A covered individual is any participant, beneficiary or other individual entitled to covered documents who either: (1) provides an email address or mobile number (that can access written communication) to the employer; or (2) has been provided a work email or mobile number assigned because of employment. The expansion of who can receive electronic disclosures is one of the most impactful changes made by the new regulations, and should make electronic distribution more readily available for all employers.
The new safe harbor regulations will satisfy the DOL disclosure requirements for all “covered documents.” Covered documents are defined by the regulations as the documents that are required to be furnished to satisfy the requirements of Title I of ERISA for pension benefit plans. These documents will include the summary plan description (SPD), any summary of material modifications (SMM), Qualified Default Investment Alternative (QDIA) Notices, etc. Notably, welfare benefit plans are excluded. The DOL stated that electronic disclosure for those plans will continue to be examined, and safe harbor regulations applicable to welfare benefit plans may be issued in the future. The rules also don’t apply to notices required by the Code opposed to ERISA, such as a 401(k) safe harbor notice.
Another big change to the new safe harbor regulations is that there are now two acceptable methods of providing electronic disclosures of covered documents. First, disclosures of covered documents can be delivered directly to covered individuals’ email addresses in the body of the email or as a separate attachment. Second, the covered documents can be posted on an employer website, but only if covered individuals have been appropriately notified.
To initiate either method of the new safe harbor electronic disclosures, employers will have to first issue a written notice addressing the new method of delivery. The initial notice must alert participants that they can receive a written copy of a covered document, free of charge, upon request, as well as alert participants that they have a right to opt out of electronic delivery at any time. Additionally, if the disclosure requirements are to be satisfied by posting covered documents to the employer’s website, the employer must furnish a notification of internet availability at the time the covered document is made available on the website (or an annual combined notice can be provided for certain designated documents, including SPDs and covered documents required to be furnished annually).
The final electronic disclosure regulations technically do not go into effect until July, but the DOL has stated that no enforcement action will be taken against employers that rely on the new regulations earlier, so the regulations are essentially currently effective. The regulations are quite detailed, and although not every requirement has been examined in this post, if you have any questions regarding the implementation or administration of the new electronic disclosure regulations, please contact a member of Graydon’s employee benefits team.
