The U.S. Department of Labor has proposed a new “safe harbor” rule to allow retirement plan disclosures to be posted online (assuming certain notice requirements are satisfied) to reduce printing and mailing expenses for plan sponsors and to make the disclosures more readily accessible and useful for plan participants.
The proposed regulation, which is (at least partly) in response to President Trump’s Executive Order 13487 (“Strengthening Retirement Security in America”), does not replace or modify any of the existing rules for electronic disclosures. The new safe harbor essentially allows plan administrators to post any document that the administrator is required to furnish under Title I of ERISA on the plan administrator’s website, so long as the administrator furnishes a “notice of internet availability” with respect to the posted document and complies with certain additional requirements.
The proposed rule currently applies only to pension benefit plans (i.e., it does not cover health and welfare plans), but it applies to all “covered documents” that are sent to “covered individuals” (which include participants, beneficiaries and other individuals entitled to covered documents who provide an electronic address). Examples of covered documents include, but are not limited to, Summary Plan Descriptions, Summary Annual Reports, participant fee disclosures, QDIA notices and blackout notices.
Under the proposed safe harbor, a plan administrator must provide a “notice of internet availability” for each covered document it intends to post on its website. However, there are special rules that permit some notices to be consolidated. The administrator must furnish the notice at the time the covered document is made available on the website. Thus, if a particular notice must be provided 30 days prior to the beginning of a plan year, the administrator could furnish the notice of internet availability and post the covered notice on its website as late as the 30th day before the first day of the plan year.
The notice of internet availability must include the following contents:
- A prominent statement about the subject matter of the notice, such as a subject line that reads, “Important Disclosure About Your Retirement Plan”;
- A statement that important information about the recipient’s retirement plan is available at the website identified in the notice;
- A brief description of the covered document;
- A statement of the recipient’s right to request and obtain a paper version of the covered document, free of charge, and an explanation of how to exercise that right;
- A statement of the recipient’s right to opt out of receiving covered documents electronically, and an explanation of how to exercise that right; and
- The telephone number of the plan administrator or other designated plan representative.
The website address must either (i) lead the recipient directly to the covered document, or (ii) lead the recipient to a login page that provides, immediately after logging in, a prominent link to the document.
The proposed rule has several requirements that are designed to protect participants who prefer paper, or who lack access to the internet, including:
- Plan administrators may not “default” a participant into electronic delivery unless the participant has an electronic address;
- Plan administrators may not “default” a participant into electronic delivery without first notifying the participant by paper that some or all documents will be furnished electronically to the participant’s electronic address, that the participant has the right to request and receive paper copies, and that the participant has the right to opt out of electronic delivery altogether; and
- Each notice of internet availability must remind the participant of his/her right to request and receive paper, and the right to opt out of electronic delivery altogether.
Unfortunately, employers may not rely on the proposed rule unless and until it is published in final form. However, once finalized, the regulation should be warmly welcomed by plan sponsors of ERISA-covered retirement plans. If you have any questions about the current (or proposed) rules for electronic disclosure of ERISA-required documents, please do not hesitate to contact any of the attorneys in Spencer Fane’s Employee Benefits Practice Group.