On May 21, 2020, the Department of Labor (“DOL”) released the final electronic disclosure rules, allowing retirement plan sponsors to electronically disclose information required under ERISA, as long as they satisfy certain conditions. Below is a highlight of some of the key provisions of the new rule.
- New Voluntary Safe Harbor. Plan sponsors can choose to distribute covered documents to covered individuals either through publication to a website or via email (company issued or personal).
- Covered Individuals. A covered individual is any person entitled under ERISA to receive a covered document.
- Covered Documents. Any document that is required to be distributed to participants and beneficiaries under ERISA, including but not limited to, summary plan descriptions, summary of material modifications, pension benefit statements, and fee notices. It is important to note that the rules do not apply to documents distributed upon request only.
- Initial Notice and Right to Opt Out. Before using electronic communications, plan sponsors are required to give each covered individual a paper notice stating covered documents will be distributed electronically. The notice must give covered individuals the right to either request paper copies of covered documents or opt out of all or select electronic communications, at any time, free of charge. Note, only one paper copy of any specified covered document must be provided free of charge.
- Notifications of Internet Availability. Prior to posting covered documents to a website, plan sponsors must distribute a Notice of Internet Availability (“NOIA”), which can be done via email. The NOIA must state that a new document has been posted to the company’s website and be distributed to covered individuals, either for each occurrence or annually. NOIAs must be concise, have a clear subject line, be easily understood, allow covered individuals to opt out of or elect paper communications and include a brief description of all documents to be posted on the website. Note, the system must alert the plan sponsor that a covered individual’s electronic address is invalid. If an electronic communication is undeliverable due to an incorrect email address or phone number, the covered documents should be sent by traditional methods.
- Participant Protections. Covered documents must be published to a website or distributed via email no later than the date on which the document is to be distributed under ERISA. Plan sponsors are also required to continually check the validity of email addresses and keep documents on the website until superseded by a subsequent version, but in no event should the period be less than one year. Special measures must be taken to ensure terminated participants continue to receive required documents.
Finally, plan sponsors are not required to adopt these rules, as the 2002 electronic disclosure rules are still valid, the new rules simply add another option for plan sponsors. The final rules are effective July 26, 2020, but plan sponsors may operate under the final rules immediately. These welcomed changes should reduce administrative burdens for plan sponsors and service providers, as well as help with the far-reaching effects of COVID-19.
If you have any questions or wish to begin sending electronic disclosures, please contact your Nyhart consultant for more information.