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ML BeneBits

EXAMINING A RANGE OF EMPLOYEE BENEFITS
AND EXECUTIVE COMPENSATION ISSUES

The US Department of Labor (the Department) on October 22 announced the publication of a proposed rule intended to serve as a supplement to the Department’s existing electronic disclosure regulations. The proposed rule leaves the existing electronic disclosure regulations (and options) in place but adds a new “notice and access” rule (29 CFR § 2520.104b-31) that would permit retirement plans (but not welfare plans) to satisfy certain ERISA disclosure requirements by posting those documents to a website established for that purpose and providing notice to participants that the documents are available on the website.   

The Department’s existing electronic disclosure regulations date from 2002, and as a result, they have long been perceived as out of date, difficult to use, and in need of a refresh. The announcement of the proposed website option is, therefore, a welcome development that is intended to make the electronic disclosure of ERISA documents easier and more in line with current technologies.

Under the proposed rule, a retirement plan administrator can post disclosure documents to a designated website rather than sending those documents by paper mailings. This delivery method can be used for mailings to participants, beneficiaries, and other individuals entitled to receive the relevant disclosures. To use the new rule, plan administrators will have to satisfy certain procedural and substantive requirements. Plan administrators will need to first notify participants by paper mailings that their retirement documents will be furnished electronically. Plan administrators will also need to send out an electronic “notice of internet availability.” This notice must be provided each time a document is posted to the website (though notices for certain disclosures may be able to be combined into a once yearly mailing), and must describe the nature of the documents being posted on the website; provide the website address; and provide instructions for a participant to obtain a free paper copy or to elect to receive future disclosures by mail. As these requirements indicate, the website delivery approach can only be used for participants who have an electronic address (e.g., an email) on file with the plan and who do not affirmatively opt out of this delivery method.

In addition, under the proposed rule, plan administrators must “take measures reasonably calculated” to ensure the following certain participant protections:

  • Keeping documents online until they are superseded by subsequent versions
  • Presenting documents in an easily understandable format
  • Ensuring documents are suitable for reading online and printing
  • Making documents electronically searchable

The proposed rule also requires plan administrators to establish a system to detect and track inoperable email addresses and to maintain the records of former employees’ email addresses and phone numbers and update them if needed.

The proposed rule and new website delivery option are a welcome change and will provide another alternative for plans to furnish ERISA disclosure documents electronically. However, as noted above, in order to take advantage of this delivery option, plan administrators will have to satisfy a number of procedural and substantive requirements that will require careful implementation.

The Department has invited public comment on the proposed rule through November 22. Plans and service providers with an interest in the proposed rule may want to consider providing comments on the proposal. Please contact us if you need assistance with submitting comments or have questions regarding the proposed rule.