A new electronic delivery option has emerged for retirement plan sponsors seeking a more efficient way to provide required plan information disclosures to participants and beneficiaries. This innovative approach allows retirement plan administrators to notify participants electronically that certain disclosures are available on a designated website. Additionally, administrators can now directly deliver these disclosures via email. Importantly, participants and beneficiaries retain the right to opt out of electronic delivery and request paper copies of disclosures at no cost. However, it is essential to note that this new option is not currently approved for health and welfare plan disclosures.
Background. The existing rules for electronic delivery of documents date back to 2002, and many employers have found them challenging to implement.
The 2002 regulations permitted electronic delivery only for employees who are “wired at work” (i.e., those who can access electronic disclosures at their job sites) or those who provide affirmative consent to receive documents electronically. The consent process has been cumbersome, requiring advance disclosure of all documents and identification of necessary hardware and software requirements. Furthermore, any changes in hardware or software necessitate an update to the consent.
The new rule from the Department of Labor simplifies the consent process for electronic disclosures, making it easier and less costly for plan administrators to distribute required retirement plan disclosures. This change is particularly beneficial given the logistical and economic challenges posed by the COVID-19 pandemic.
Covered Individuals. The new electronic delivery rule applies to any participant, beneficiary, or individual entitled to receive retirement plan disclosures under ERISA. To utilize this option, individuals need only provide the plan administrator with an “electronic address,” such as an email address or mobile phone number capable of receiving text messages.
Moreover, electronic addresses assigned by the plan sponsor for employment-related purposes are acceptable, as are addresses collected for plan enrollment.
Covered Documents. The new rule allows plan administrators to deliver any retirement plan disclosures required under Title I of ERISA, excluding those that must be furnished only upon request. Covered documents include summary plan descriptions, annual benefit notices, summary annual reports, blackout notices, adverse benefit claim determinations, and more. However, health or welfare plan disclosures are not included in this rule, although an expansion may be considered in the future.
Initial Notification. Before implementing the new rule, plan administrators must send a paper notice to covered individuals, informing them that some or all covered documents will be provided electronically. This notice must outline the rights of individuals to obtain paper versions of any covered document free of charge and to opt out of electronic delivery. It should also specify the electronic address used for sending disclosures, allowing recipients to correct any inaccuracies.
Unlike the 2002 rules, the new regulations do not require recipients to sign consent forms or specify hardware and software requirements.
Website Posting. Under the new rule, plan administrators can meet disclosure requirements by posting covered documents on a website and notifying recipients about their availability. This begins with issuing an electronic Notice of Internet Availability (NOIA) at the time the required disclosure becomes available online. The NOIA must identify the document and provide a brief description if necessary.
Additionally, the NOIA must:
- Clearly state “Disclosure About Your Retirement Plan” and include a statement urging recipients to review the information.
- Provide the internet address or hyperlink to access the document and any additional instructions needed.
- Inform recipients of their rights to obtain a paper copy free of charge and to opt out of electronic delivery.
- Alert recipients that documents need not be available online indefinitely, encouraging them to save or print copies as needed.
The NOIA should be concise and easy to understand, distributed alone without additional documents. While a separate NOIA is generally required for each disclosure, a combined annual NOIA is allowed for certain disclosures.
Direct Delivery. The new rule also permits direct delivery of required disclosures via email, either in the body or as an attachment. However, text message delivery is not allowed. While a NOIA is not required for email delivery, the email must be clear and include:
- A subject line stating: “Disclosure About Your Retirement Plan.”
- Identification and brief description of the document.
- A statement regarding the right to a paper copy free of charge and the option to opt out of electronic delivery.
- Contact information for assistance.
Former Employees. To use the new electronic delivery rule for former employees, plan administrators must ensure that the electronic address used during employment remains effective or obtain a new address for those individuals.
Effective Date and Transition Rules. The new rule was published in the Federal Register on May 27, 2020, and is legally effective 60 days after publication. However, plan administrators may utilize it sooner without facing enforcement actions from the Labor Department.
