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One of the challenges facing employers sponsoring retirement plans, such as 401(k) plans, is how to effectively and efficiently communicate and distribute all the information and disclosures required under the Employee Retirement Income Security Act of 1974 (ERISA) to their employees. ERISA was enacted and its original regulations written in a time when paper communication was the norm. Today’s workplace and today’s workforce has become more and more dependent and reliant on receiving information electronically. The Department of Labor (DOL) has recognized that fact and over time has been slowly modifying the “old” rules to permit more electronic communication. 

Recently, the DOL has issued proposed regulations, which will provide employers with a more efficient “safe harbor” method to provide ERISA-required information and disclosures electronically.

As currently drafted, these new proposed rules are available only to retirement plans. Health and welfare plans are not yet covered. We would anticipate that they ultimately will be covered.

The proposed safe harbor will only apply to “covered individuals.” A covered individual is a participant, beneficiary, or other individual entitled to ERISA documents and disclosures, who has provided the employer an electronic address. An electronic address would include an email address or an internet-connected mobile device such as a smartphone. 

If the employer has issued an employee an email address or a smartphone, the employee is treated as having provided the employer with an electronic address. Unlike the current rules, no specific consent is required. 

The employer may then use the electronic address to provide ERISA-required information such as summary plan descriptions, benefit statements, summaries of material modification, summary annual reports, and blackout notices. An employee can still request a written copy and a written copy will need to be provided. 

If the employee terminated employment, the plan administrator must take reasonable measures to ensure that the address is still valid or to obtain a new address in order to rely on this electronic safe harbor. 

When providing such ERISA information, there are, of course, certain notices that must be provided. 

Initially, the plan administrator, (typically, the employer) must furnish a “notice of internet availability.” This is to be provided at the time the document (or documents) are first made available online. Thereafter, the notice should be provided annually. 

This notice would inform individuals that:

  • Various documents will be furnished electronically.
  • Electronic disclosure will be the default method of providing the documents.
  • The individual has the right to request and receive paper copies, free of charge.
  • The individual can opt-out of electronic delivery, with an explanation of how to exercise these rights. 

The notice must also contain specific information:

  • A prominent title or statement that reads, “Disclosure About Your Retirement.” 
  • A statement that reads, “Important information about your retirement plan is available at the website address below. Please review this information.” 
  • The internet address where the document or information is available (the address must be specific enough to lead the individual to the document or information).
  • A statement informing the individual that he or she has the right to a paper copy free of charge and how to obtain it.
  • A statement explaining that the individual can opt-out of electronic delivery and an explanation of how to do so.
  • A telephone number to contact the Employer or other representative of the plan.

The notice, as with other ERISA notices, must be provided in a manner calculated to be understood by the average plan participant. It may include pictures, logos, and other designs provided they are not misleading. 

The document or information must remain on the website until superseded by a subsequent version.

The document or information must be presented in a format that is suitable to be read on-line and be printed clearly on paper. It also needs to be retained in an electronic format such as a PDF.

The document or information must be searchable electronically by number, letter or words. 

The website must protect the confidentiality of any personal information related to the individual.

The existing electronic disclosure regulations are still operative. Technically, these proposed regulations need to be finalized before they become an alternative method of complying with the disclosure requirements. Accordingly, employers may not rely on them currently. Nevertheless, this new safe harbor appears to provide employers with a common-sense method of providing Employees with the required information regarding their retirement plans in an efficient manner.

 

 

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