November 6, 2019
DOL Proposes New Safe Harbor for Electronic Disclosure by Pension Plans
On October 23, 2019, the Department of Labor (DOL) published a proposed rule that creates a new voluntary alternative “safe harbor” method of disclosure for sponsors of pension plans that wish to provide required disclosures electronically. The proposed rule would allow plans that satisfy certain criteria to provide disclosures electronically as a default, with an “opt out” available for participants who wish to continue receiving paper disclosures. The proposed rule does not cover health and welfare plan disclosures, which the DOL says it will address in future guidance.
This new alternative safe harbor would be in addition to the existing 2002 safe harbor, which requires a participant to “opt in” to electronic notices. Plan sponsors may not adopt the new alternative until the DOL adopts a final regulation.
Comments on the proposed rule must be submitted by November 22, 2019, 30 days after the date of the proposal. That comment deadline is shorter than the usual 60 days. That fact and the fact that the DOL left other issues about electronic filing for future guidance, appear to indicate the DOL’s strong interest in completing this regulatory process quickly.
These are the highlights of the proposed rule:
- Collection of Electronic Address — To use the new alternative safe harbor, the plan must obtain an electronic address (employer-provided email, personal email or smartphone number) for the participant or beneficiary. The plan also must have a system to identify invalid or inoperable electronic address, such as when an individual leaves employment. If the plan cannot promptly correct such addresses, the individual is deemed to have opted out of electronic delivery until the plan obtains a valid electronic address.
- Initial Notice of Default Electronic Delivery —Before relying on this safe harbor, a plan must provide to each affected individual a one-time, initial notice (on paper) that some or all documents will be provided electronically and that the individual has the right to receive a paper version of any document free of charge. The notice must also describe the individual’s right to opt out of electronic delivery, and how to do so.
- Notice of Internet Availability of Each Document —After the initial notice of default electronic delivery, the plan must notify the individual at the provided electronic address each time a required notice or disclosure is made available and must give the website where the document is posted. The notice must be provided, separate from any other notices or disclosures, at the same time the document is made available on the website. The notice must include certain information, be clear and concise and adhere to formatting standards.
- Consolidation of Certain Notices of Internet Availability —There is a special rule for consolidating certain notices of internet availability (e.g., summary plan description and summary of material modifications). The plan may provide a combined notice of internet availability for some or all of these documents, and additional rules apply including the requirement that the combined notice must be furnished at least once each plan year.
- Standards for the Website — The website where documents are made available must meet certain standards, including that the website must reasonably protect the confidentiality of any personally identifiable information. Each document posted must also meet certain requirements (e.g., timely posting, suitable for reading online or as printed and searchable electronically).
- Severance from Employment—At the time an employee leaves covered service, the plan must obtain a new electronic address or ensure the continued accuracy of the current electronic address to continue using the proposed safe harbor.
- Comments Sought — As noted above, comments are due November 22, 2019. The DOL is seeking comments on this proposed new alternative “notice-and-access” safe harbor as well as comments on a number of questions posted, including ways to measure the effectiveness of a disclosure, whether ERISA requires disclosure of obsolete information, and whether there is redundant or inconsistent information disclosed to participants under the current rules.
Health and welfare plans may continue to use the DOL’s 2002 safe harbor for electronic disclosure of required health plan notices. The DOL notes that it shares jurisdiction on many health plan required notices with the Treasury and Health and Human Services Departments, so guidance will take more time to develop. However, plan sponsors may wish to take the opportunity to submit comments now if they have concerns or recommendations concerning electronic health and welfare plan disclosures.
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