New Retirement Plan Electronic Distribution Options
Plan sponsors and administrators of retirement plans subject to ERISA have several disclosure obligations to ensure plan participants are kept apprised of their benefits. As a means to assist in this disclosure effort and streamline employee benefit communications, the Department of Labor’s Employee Benefits Security Administration (EBSA) issued proposed rules last October to establish a new safe harbor for electronic distribution of certain retirement and pension plan communications (see DOL Disclosures: Relief Coming?, Benefit Beat, 11/4/19). On May 27, 2020, EBSA published final rules, together with a Fact Sheet, that set forth the framework for utilizing a new safe harbor for electronic communications.
As background, the DOL issued a safe harbor methodology for disclosure of required plan communications through the use of electronic media in 2002. In a nutshell, electronic distribution can only be used in two instances. It can be used for employees who have regular employment-based access to the employer’s electronic system. It can also be used for participants and beneficiaries who affirmatively consent to the electronic distribution and meet other requirements. In both instances, individuals have the right to request a paper copy of the document at no cost.
Given the increased availability and use of various electronic means, the DOL establishes an additional safe harbor that allows two optional methods for electronic delivery:
- Website posting whereby plan administrators post documents on a website as long as participants are provided appropriate notification of internet availability; and
- Email delivery whereby plan administrators send documents to covered individuals by email, either as an attachment or including text of the document within the body of the email.
According to this safe harbor, electronic delivery is the default option for all covered individuals. A covered individual is defined as a participant, beneficiary or alternate payee who provides an email address or mobile phone number to the plan sponsor/administrator. This is a much broader group to receive electronic benefit communications than is covered by the 2002 safe harbor described above.
The types of documents that can be provided through the safe harbor include ERISA Title I disclosures such as summary plan descriptions, summary of material modification, and for Form 5500 filers, the summary annual report. Electronic disclosure rules also apply to blackout notices and other communications such as benefit statements. These rules do not apply to documents that are available upon request. While these rules are not binding on plans exempt from ERISA such as public sector government plans, such plans can use these rules as a roadmap for e-delivery of their required plan communications.
Important to note that the new safe harbor methodology is not available to welfare benefit plans subject to ERISA. The DOL indicates it will continue to review its electronic distribution rules to provide additional options for these types of plans. In the interim, plan sponsors of welfare benefit plans can continue to use the 2002 electronic distribution methods.
Following are the requirements for website posting and email delivery methods. In both methods of electronic delivery, the plan sponsor or administrator electing to provide disclosures through these methods must provide an initial explanation of the electronic access to documents to covered individuals prior to initiating the methodology. This notice must be provided in hard copy and include a statement of the right to request no-cost paper version of the documents, as well as how to opt out of electronic delivery.
Required content for both methodologies. Whether utilizing website posting method or email posting, the communication to covered individuals must include:
- An explanation of how the individual can request and obtain a paper version of the document;
- An explanation of how an individual can opt out of electronic delivery and receive only paper versions of documents; and
- Contact phone number for the plan sponsor/administrator.
Specific for website posting, the notice of internet availability of the document must be provided to covered individuals. Such notice must be written in a manner intended to be understood by the average plan participant, and furnished separately from any other document. The notice must contain the following information:
- A prominent statement, either as title or subject line that reads: “Disclosure About Your Retirement Plan”; together with 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, “your Quarterly Benefit Statement is now available”) and a brief description of the document. Special rules apply when combining multiple plan disclosures.
- The internet website address or hyperlink to the where the document is available. The website address or hyperlink must be direct or sufficiently specific to provide ready access to the document.
- A statement that the 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.
- If the document requires action by the participant, a statement as what action is required and how to effectuate it.
Timing of notice of internet availability. A notice of internet availability of a document must be provided at the point it is made available on the website. However, depending on the type of disclosure, the rules allow certain documents to be combined which need only be furnished each plan year.
Email delivery. The rules provide an alternative method for disclosure of documents to covered individuals by way of an email delivery method. Notifications can be delivered using the covered individual’s email address or smartphone number provided to the plan sponsor or administrator. Following are required contents for email disclosures:
- The subject line of the email must include this statement, “Disclosure About Your Retirement Plan”; and
- The disclosure document must be clearly identified within the body of the email, and either attached or the document contents are contained within the body of the email message.
Following are some steps for plan administrators who want to take advantage of this safe harbor:
- Make sure your disclosure document or communication complies with the current applicable rules relating to content.
- Make certain the document is readable to ensure that covered individuals understand the contents. Prepare an electronic version of your communication that is consistent with your applicable style and format you currently use for the type of notice, such as use of company logos.
- Determine which covered individuals have adequate access to electronic distribution. Those individual without access must continue to receive printed communications
- Notify covered individuals when information is available electronically. Plan administrators must have procedures in place to ensure continued website access to the document in the event of technical maintenance issues, or unforeseeable events or circumstances beyond its control.
- Distribute documents electronically and verify that your methods ensure delivery. Make certain to establish a procedure to identify an undeliverable document and either follow up with the individual to obtain a valid email or phone number, or default the individual to paper delivery.
- Be prepared to provide paper copies of any electronic document if requested by the individual.
- Ensure the accuracy of the communication and maintain proof of the electronic delivery. Plan administrators should use the individual’s same email address that is used for other employment-based communications. Should documents need to be provided to the employee’s spouse or other beneficiary, the spouse or beneficiary must affirmatively provide the appropriate email address or mobile phone number to the plan administrator. Further, plan administrators who use internet-connected mobile computing device numbers, rather than email addresses for disclosures, should take steps to confirm whether the phone number provided is a landline number or mobile number to ensure delivery.
Effective and Applicability Date
While these regulations take effect and become applicable on July 26, 2020, the DOL indicates that plan sponsors or administrators can commence utilizing this electronic delivery processes immediately.
The information contained in this article is provided as general guidance and may be affected by changes in law or regulation. This article is not intended to replace or substitute for accounting or other professional advice. Please consult a CBIZ professional. This information is provided as-is with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.