DOL Finalizes Electronic Disclosure Safe Harbor for Retirement Plans

Employee Benefits & Executive Compensation Update

Date: May 26, 2020

ERISA requires a wide range of documents and information to be provided to retirement plan participants. The general rule is that when furnishing the required documents and information to participants, the plan administrator must use measures reasonably calculated to ensure actual receipt and the materials must be sent using a delivery method or methods likely to result in full distribution. On May 21, the Department of Labor released a final rule providing an additional method under which an administrator may satisfy this general rule by electronic delivery. Under this new safe harbor, covered documents may be furnished to covered individuals electronically by default. As described in more detail in this update, under the new rule:

  • An initial paper notice regarding electronic delivery is required before the safe harbor can be used.
  • Covered documents can be provided electronically through a website, mobile application or email.
  • Employee email addresses can be used automatically to facilitate or receive electronic disclosures.
  • Covered individuals are permitted to request a paper copy of a covered document or to simply opt out of electronic disclosure, both free of charge.

At this point, the new safe harbor allows default electronic delivery only for retirement plans – welfare benefit plans are not included. The new rule is expected to go into effect and be applicable on July 26.

Covered Individuals

Any participant, beneficiary or other individual entitled to covered documents who provides the employer, plan sponsor or administrator with an electronic address, such as an email address or smartphone number, for purposes of receiving covered documents is covered under the rule. If an employer assigns an electronic address to an employee for employment-related purposes generally (not limited only to delivery of covered documents), that electronic address is treated as having been provided by the employee and may be used under the rule. In that case, the employee is no longer a covered individual after severance from employment unless the administrator either takes measures reasonably calculated to ensure the continued accuracy and availability of the assigned electronic address or obtains a new electronic address for purposes of receiving covered documents.

Covered Documents

Any document or information that ERISA requires a retirement plan administrator to furnish to participants and beneficiaries, except for any document or information that must be furnished only upon request, is covered under the rule. For example, retirement plan summary plan descriptions, summaries of material modifications, summary annual reports, safe harbor notices, blackout notices and fee disclosures are all covered documents. Documents or information that must be furnished only upon request (for example, multiemployer plan information described in Section 101(k) of ERISA that is not otherwise required to be furnished to covered individuals) can still be furnished electronically under the electronic disclosure safe harbor published in 2002, which remains in effect.

Use of Website or Mobile Application

Notice. If covered documents are made available on a website or through an app, the administrator must furnish a “notice of internet availability” (NOIA) to each covered individual. The general rule is that the NOIA must be furnished at the time a covered document is made available on the website or through the app; however, a more relaxed combined NOIA is permitted for certain covered documents (described in more detail below). The rule is extremely prescriptive regarding the NOIA content.

Required content. The NOIA must include:

  • A prominent statement – for example, as a title, legend or subject line – that reads “Disclosure About Your Retirement Plan.”
  • A statement that reads “Important information about your retirement plan is now available. Please review this information.”
  • An identification of the covered document by name (for example, a statement that reads “your Quarterly Benefit Statement is now available”) and a brief description of the covered document if identification only by name would not reasonably convey the nature of the covered document.
  • The internet website address where the covered document is available (or a hyperlink to the address). The covered document must either be directly available at that address or, if the address requires the individual to log on, available by clicking on a prominent link after the individual logs on.
  • A statement about the right to request and obtain a paper version of the covered document free of charge and an explanation of how to exercise this right.
  • A statement about the right, free of charge, to opt out of electronic delivery and receive only paper versions of covered documents and an explanation of how to exercise this right.
  • A “cautionary statement” that the covered document is not required to be available on the website for more than one year or, if later, after it is superseded by a subsequent version of the covered document.
  • A telephone number to contact the administrator or other designated plan representative.

As with other ERISA-required documents and disclosures, the NOIA must be written in a manner calculated to be understood by the average plan participant.

Permitted content. The NOIA may also include the following, but only if not inaccurate or misleading:

  • A statement about whether action by the covered individual is invited or required in response to the covered document and how to take such action, or that no action is required.
  • Pictures, logos or similar design elements.

The NOIA may not include anything that is not explicitly required or permitted.

Website/app standards. The administrator is required to ensure that the website or app exists and that covered individuals can use it to access covered documents. The administrator must also take steps “reasonably calculated” to ensure that:

  • The website or app protects the confidentiality of personal information relating to any covered individual.
  • The covered document is available on the website or app no later than the date on which ERISA requires it to be furnished and it remains on the website or app for at least one year or, if later, the date it is superseded by a subsequent version.
  • The covered document is presented on the website or app
    • in a manner calculated to be understood by the average plan participant;
    • in a format that can be searched electronically by numbers, letters or words; and
    • in a widely available format or formats suitable to be both read online and printed clearly on paper and that allows the covered document to be permanently retained in such a format.

These requirements are satisfied even if documents are temporarily unavailable for a reasonable period due to maintenance or unforeseeable events or circumstances beyond the administrator’s control if the administrator has reasonable procedures in place to ensure that the covered documents are available in the manner required by the rule and takes prompt action to ensure that the covered documents become available in the manner required by the rule as soon as practicable following the earlier of the time at which the administrator knows or reasonably should know that the covered documents are temporarily unavailable in the manner required by this section.

Combined notice of internet availability. A combined NOIA may be provided for a summary plan description, any covered document or information that must be furnished annually (rather than upon the occurrence of a particular event) and does not require action by a covered individual by a particular deadline, and any other document or notice authorized to be included by the Secretary of Labor or, with respect to tax notices, the Secretary of the Treasury. If used, a combined NOIA must be furnished at least once each plan year and, if the combined NOIA was furnished in the prior plan year, no more than 14 months following the date the prior plan year’s NOIA was furnished.

Invalid electronic addresses. The system for furnishing a NOIA must be designed to alert the administrator of a covered individual’s invalid or inoperable electronic address. Upon receiving such an alert, the administrator must either promptly take reasonable steps to cure the problem or treat the covered individual as if he or she made an election to opt out of electronic delivery and furnish a paper copy of the undelivered covered document(s) as soon as is reasonably practicable.

Use of Email

If a covered document is made available through email, it must be included in the body of an email or as an attachment to an email sent to the covered individual’s email address no later than the date it is required to be furnished under ERISA. The rule prescribes specific content for the email and specific standards for the covered document. The rule also requires the administrator to take measures reasonably calculated to protect the confidentiality of personal information relating to the covered individual.

Required content. The email must include:

  • A subject line that reads “Disclosure About Your Retirement Plan.”
  • If the covered document is an attachment, an identification of the covered document by name (for example, a statement that reads “your Quarterly Benefit Statement is now available”) and a brief description of the covered document if identification only by name would not reasonably convey the nature of the covered document.
  • A statement about the right to request and obtain a paper version of the covered document free of charge and an explanation of how to exercise this right.
  • A statement about the right, free of charge, to opt out of electronic delivery and receive only paper versions of covered documents and an explanation of how to exercise this right.
  • A telephone number to contact the administrator or other designated plan representative.

As with other ERISA-required documents and disclosures, the email must be written in a manner calculated to be understood by the average plan participant.

Covered document standards. The covered document attached to the email must be:

  • Written in a manner calculated to be understood by the average plan participant.
  • In a format that can be searched electronically using numbers, letters or words.
  • Presented in a widely available format or formats that are suitable to be both read online and printed clearly on paper and that allows the covered document to be permanently retained in such a format.
Initial Paper Notice Still Required

The new safe harbor may be used with respect to a covered individual only after the administrator has furnished a written notice, on paper, to the covered individual that includes:

  • A statement that covered documents will be furnished electronically to an electronic address and identification of the electronic address that will be used for the individual.
  • Any instructions necessary to access the covered documents.
  • A cautionary statement that the covered document is not required to be available on the website for more than one year or, if later, after it is superseded by a subsequent version of the covered document (required only if covered documents are provided through a website or app).
  • A statement about the right to request and obtain a paper version of a covered document free of charge and an explanation of how to exercise this right.
  • A statement about the right, free of charge, to opt out of electronic delivery and receive only paper versions of covered documents and an explanation of how to exercise this right.

Of course, this initial paper notice must be written in a manner calculated to be understood by the average plan participant.

Ongoing Right to Paper

Upon request, the administrator must promptly furnish a paper copy of a covered document to a covered individual. Only one paper copy of any covered document must be provided free of charge under this section. Covered individuals must also have the ongoing right to opt out of electronic disclosure globally and thereafter receive only paper versions of covered documents free of charge.

FOR MORE INFORMATION

For more information, please contact:

Dominic DeMatties
202.973.2744
Dominic.DeMatties@ThompsonHine.com

Julia Ann Love
216.566.5686
Julia.Love@ThompsonHine.com

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