In 2002, the Department of Labor (DOL) first provided guidance and rules for plan sponsors looking to electronically deliver participant notices and disclosures required by ERISA instead of providing paper copies.
Under the DOL’s 2002 rules, for a plan administrator to e-deliver documents to participants and beneficiaries, the recipients must first consent to e-delivery or have computer access as an integral part of their job with the plan sponsor. More cumbersome consent requirements apply for employees who do not have access to a computer at work.
Fast-forward 18 years and technology advancements such as texting, smart phones, and affordable laptops; have resulted in most Americans having access to the Internet regardless of whether they have a personal computer at work.
In recognition of these advancements, the DOL has released a new, simplified method for electronically delivering ERISA-mandated notices and disclosures. The new method, referred to as the “Notice and Access” approach, removes the initial consent requirement and the requirement to obtain new consent following hardware or software changes. The DOL now allows plan sponsors to set e-delivery (rather than print) as the plan’s default delivery method — i.e., participants must opt out of e-delivery rather than opt in to receiving plan notices electronically. The DOL estimates these new procedures could reduce printing, mailing, and related plan costs by an estimated $3.2 billion over the next decade.
While these new rules don’t replace the 2002 rules, they do provide an additional safe harbor e-delivery option. Plan sponsors may continue using the 2002 methods if they choose.
ERISA-Mandated Notices and Disclosures
The DOL’s e-delivery guidelines apply to retirement plan (not welfare benefit plan) notices and disclosures that must be provided to participants and beneficiaries under Title I of ERISA, including:
- Summary plan description
- Participant fee disclosures
- Qualified Default Investment Alternative (QDIA) notice
- Benefit statements
- Blackout notice
The “Notice and Access” Approach
Under this new method, plan sponsors can post participant notices on a website or an app, or deliver via email, with proper advance notice. Plan administrators must obtain an email address or smartphone number for individuals who are required to receive plan notices and disclosures if the individual does not have an employer-provided email address. Plans should also develop procedures for maintaining and updating email addresses or phone numbers when participants sever employment or make changes to their contact information.
Initial Paper Notice Required
Before the plan sponsor can use the new e-delivery method, the plan sponsor must provide an initial paper notice to participants and beneficiaries that includes:
- Notice that disclosures will be made electronically
- Mode of electronic delivery and instructions, if needed, to access
- Individual’s email address or phone number that will be used
- Statement that the document may not be available after a certain time
- Recipients’ right to request paper copies
- Recipient’s right to opt out of e-delivery
This notice must also be provided to new employees as they become eligible to participate in the plan. Individuals can always request paper copies or opt out of electronic delivery entirely.
Deliver by Posting, Emailing or Texting
After the initial paper notice has been provided, the plan sponsor has two delivery options:
Option 1: Post plan notices and disclosures to a website or a mobile app. The document must remain posted for at least one year and, for some documents, until they are replaced. The plan sponsor must send a Notice of Internet Availability (NOIA) to participants and beneficiaries by email or text to notify them each time a document is posted. The NOIA must contain certain information, including instructions on how to access the posted documents.
Option 2: Send the notice or disclosure in the body of an email or as an attachment to an email and include applicable information that would otherwise be required for a NOIA (e.g., statement regarding importance of information, identification of the document, phone number to contact the plan administrator).
If Returned as Undeliverable:
Plan sponsors must use an e-delivery system that can identify when an email address or phone number is invalid. In this case, the plan sponsor must either take steps to obtain a new valid email address or phone number, or treat the individual as if they had opted out of e-delivery and send a paper copy of the applicable notice or disclosure.
Notices Required by the Treasury/IRS
The Treasury Department and IRS provided rules in 2006 for e-delivery of participant notices and disclosures that are required by the tax code and regulations. These rules also require affirmative consent or effective ability to access information through a work computer, but with slightly different requirements than the DOL’s 2002 rules. The following IRS-mandated participant notices and disclosures may not be delivered using the DOL’s 2002 or 2020 e-delivery methods:
- 402(f) distribution notice
- 401(k) safe harbor notice
- Tax withholding notice
Contact your Newport representative to learn more about the new regulatory requirements and Newport’s procedures for adopting this new e-delivery method.
You can watch a replay of Newport’s webinar, “DOL Enters 21st Century with New Disclosure Rule” here.