DOL finalizes safe harbor default to electronic retirement plan disclosures

On May 21, 2020, the Department of Labor (DOL) announced its final rule (the Rule) allowing employers to post retirement plan disclosures online or deliver them by email, as a default. Decades overdue, this change significantly reduces plan costs and makes the disclosures more readily accessible and useful to workers.

New voluntary safe harbor

The Rule establishes a new voluntary safe harbor for plan sponsors who want to default to electronic media for providing required plan disclosures to covered individuals’ electronic addresses rather than by paper mail. A covered individual is anyone entitled under ERISA to receive covered documents. Electronic address includes either an email address or smartphone number. The new safe harbor permits the following two options for electronic delivery:

  • WEBSITE POSTING: Plans may post documents on a website if appropriate notification of internet availability is furnished to the electronic addresses of covered participants.

  • EMAIL DELIVERY: Alternatively, plans may send documents directly to the electronic addresses of covered individuals, with the documents either in the body of the email or as an attachment to the email.

Protections for plan participants

The new safe harbor includes a variety of protections for covered individuals, including:

  • RIGHT TO PAPER: Covered individuals can request paper copies of specific documents, or opt out of electronic delivery entirely, at any time, free of charge.

  • INITIAL NOTIFICATION: Covered individuals must be furnished an initial notification, on paper, that the way they currently receive retirement plan disclosures (e.g., paper delivery in the U.S. mail) is changing. The notice must inform them 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 given to them before the plan may use the new safe harbor. 

  • NOTIFICATIONS OF INTERNET AVAILABILITY: Covered individuals generally must be furnished a notice of internet availability (NOIA) each time a new covered document is made available on the internet website. To avoid “notice overload,” the Rule permits an annual NOIA to include information about multiple covered documents, instead of multiple NOIAs throughout the year. The NOIA must briefly describe or identify the covered document that is being posted online, include an address or hyperlink to the website, and inform the covered individual of the right to request paper copies or to opt out of electronic delivery altogether. The NOIA must be concise and understandable, and contain only specified information.

  • WEBSITE RETENTION: Covered documents must remain on an internet website until superseded by a subsequent version and always for at least one year.

  • SYSTEM CHECK FOR INVALID ELECTRONIC ADDRESSES: Plan administrators must ensure that the electronic delivery system alerts them if a participant’s electronic address is invalid or inoperable. In that case, the administrator must attempt to promptly cure the problem or treat the participant as opting out of electronic delivery.

  • SYSTEM CHECK AT TERMINATION OF EMPLOYMENT: When someone leaves their job, the plan administrator must take steps to ensure the continued accuracy and operability of the person’s employer-provided electronic address or obtain a new electronic address. 

Steps to implement

Plans may go live with the new safe harbor immediately, even though it is technically not effective until July 20. We strongly recommend that plans wishing to move forward consider the following:

  • Evaluate the current communications strategy and the needs of the workforce, especially in the current COVID-19 environment. Determine what strategy is in the best interest of the plan and its participants taking into consideration effectiveness, ease of use and cost to the plan.

  • Consult your recordkeeping partner or thirdparty administrator to determine their ability to implement the new safe harbor and formulate a timeline that includes each of the safe harbor requirements.

  • Pay special attention to how electronic addresses will be captured and how the new safe harbor system requirements will be carried out. We believe that this may be particularly challenging for high turnover workforces and special consideration will need to be given.

Lockton’s take

The timing for many employers struggling to effectively communicate with a remote workforce during the pandemic could not be better. Realistically, many may still wish to delay implementation until open enrollment later in the year as that is typically a very effective way to capture employee engagement. We cannot stress enough the importance of opening discussions with your plan recordkeeper or TPA to determine how and when their systems can implement these changes. Should you have any questions, please contact your Lockton Retirement Services team.

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