The U.S. Department of Labor (DOL) announced a final rule in May 2020 addressing a new safe harbor method of electronic disclosure available for employee benefit plan sponsors. The rule allows plan sponsors who satisfy specific conditions to provide participants and beneficiaries with a notice that certain disclosures will be made available on a website or furnished to them via email. The final rule, effective July 27, 2020 is only applicable to qualified retirement plans, but not to welfare benefit plans.
Covered individuals must be provided an initial paper notification that the method in which they currently receive retirement plan disclosures (e.g., paper delivery in the U.S. mail) will change. The notice must inform individuals of the new electronic delivery method, the electronic address that will be used, and the right to opt out if they prefer paper disclosures, among other things. The notice must be provided before the plan may use the new safe harbor method of delivery. Covered individuals can request paper copies of specific documents, or globally opt out of electronic delivery entirely at any time, free of charge.
The regulations provide that all participants, alternate payees and beneficiaries are considered “covered individuals” and are eligible for electronic delivery, provided the plan sponsor has a valid email address or mobile telephone number for each individual.
Notifications of Internet Availability
Covered individuals generally must be provided a notice of internet availability (NOIA) each time a new covered document is made available for review on the internet website. The NOIA may be sent via email or text message and must include, among other things, a hyperlink to the covered document and statement of the right to receive a paper version.
All documents that a plan sponsor is required to provide to retirement plan participants under Title I of the Employee Retirement Income Security Act of 1974 may be distributed via the NOIA. Covered documents must remain on an internet website for at least one year.
Pros and Cons
The DOL regulations enhance the ability of plan sponsors to furnish retirement plan disclosures electronically and can reduce administrative expenses. For some employees, electronic disclosures will be more readily accessible and useful. However, plan sponsors should consider the administrative responsibilities required to rely on the new safe harbor, such as procedures to administer opt-out requests, resolving invalid email addresses and mobile phone numbers, and maintenance of contact information for terminated participants, alternate payees and beneficiaries.
If you have questions or would like help implementing the new safe harbor rules, please contact Connie Lee at firstname.lastname@example.org or 844.4WINDES (844.494.6337).