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ML BeneBits

The US Department of Labor (DOL) announced publication of a final rule expanding the electronic disclosure options available for retirement plan communications on May 21. The final rule creates a new safe harbor that permits retirement plan administrators to satisfy certain ERISA disclosure requirements by providing individuals with electronic notice and access to documents on a website or by sending an email or other electronic communication with the documents as an attachment or in the body of the communication.

The DOL describes the new safe harbor rule as “fundamentally similar to the proposed rule,” which we previously summarized. However, there are a number of important changes to the proposed rule that will be welcomed by the plan sponsor community. A more in-depth review and analysis of the new safe harbor rule is forthcoming, but in the meantime, we wanted to highlight a few key aspects:

  • 2002 Electronic Disclosure Safe Harbor Remains Unchanged. The new safe harbor leaves in place the existing 2002 safe harbor (i.e., the “wired at work” safe harbor). This means that plans do not need to alter their current communication strategies solely in response to the new safe harbor.
  • Retirement Plans Only. The new safe harbor continues to apply only to retirement plans. The DOL stated that extension of the safe harbor to welfare plans “warrants careful consideration and analysis” and it is continuing to explore the possibility of whether, and under what circumstances, welfare plans will be included.
  • Direct Delivery by Email Is Allowed. The new safe harbor allows a plan to provide the disclosure/document as an attachment to an email or in the body of the email (in addition to an internet website). This is an important change that addresses a deficiency in the proposed safe harbor rule, which only allowed the use of internet websites for the publication of the disclosures and documents.
  • Elimination of the “Readability” Test. The new safe harbor rule eliminates the proposed rule’s detailed requirements on the readability of the “notice of internet availability” (i.e., the notice sent to individuals of the availability of the disclosures on the internet website). The final rule requires that the notice of internet availability simply must be written in a manner calculated to be understood by the average plan participant. This is the same standard that applies to the readability of summary plan descriptions.
  • Opportunity to Request Paper Documents or Opt Out. In order to protect participants, the new safe harbor mandates that plan administrators provide paper copies of documents upon request and an opportunity for participants to globally opt out of the electronic disclosures. Plan administrators can offer the opt-out opportunity on a document-by-document basis, but they are only required to offer a global opt-out option.

While plan recordkeepers and vendors may largely end up bearing responsibility for implementing the new safe harbor rule, plan administrators will continue to have overall responsibility for monitoring recordkeepers and vendors to ensure the applicable substantive and procedural requirements are satisfied, consistent with their fiduciary duties.

The final rule is effective 60 days following its publication in the Federal Register. This means that if publication occurs as expected on May 27, the effective date will be July 27, 2020. This is a change from the proposed rule, which had a longer delayed effective date. In establishing this earlier effective date, the DOL noted that plan sponsors struggling with the demands of an increasingly remote workforce may benefit more immediately from the ability to rely on the safe harbor.