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The U.S. Department of Labor (“DOL”) recently issued proposed regulations that would create an additional safe harbor allowing pension plans to electronically distribute disclosures required under Title I of ERISA through the use of an internet website (the “Proposed Safe Harbor”).  As proposed, the regulation would apply only to retirement plans, but the DOL has advised that it may consider expanding the safe harbor to welfare plans in the future.

Currently, applicable regulations limit the electronic transmission of ERISA plan disclosures to individuals who can effectively access electronic documents on a computer at work or to individuals who affirmatively consent to receive electronic disclosures.  The Proposed Safe Harbor would expand these regulations and allow retirement plans to make required disclosures to participants and beneficiaries available online, provided certain notice requirements and other safeguards are met.  Under the Proposed Safe Harbor, individuals may opt out of electronic delivery if they prefer to receive a paper copy.

The Proposed Safe Harbor applies to:

  • Covered Documents. Any document that a plan administrator of a defined benefit or defined contribution plan is required to provide to participants and beneficiaries under the reporting and disclosure rules of ERISA, including summary plan descriptions, summaries of material modifications, pension benefit statements, summary annual reports, fee disclosures, annual funding notices, etc. The provisions of the Proposed Safe Harbor would not apply to a document when it is required to be furnished upon request.
  • Covered Individuals. Any individual entitled to receive covered documents who provides the plan administrator with an electronic address, including an email address or mobile device number. The plan administrator also is permitted to send disclosures electronically to any participant who is assigned an electronic address by his or her employer. Because most contributing employers to multiemployer plans do not report participant email addresses or mobile phone numbers on remittance reports, the usefulness of the Proposed Safe Harbor for such plans may be limited to cases where participants affirmatively provide an electronic address to the plan administrator.

In order to comply with the Proposed Safe Harbor, a plan must:

  • Provide an Initial Paper Notice of Internet Availability. The notice must be sent to participants and beneficiaries informing them that some or all of the future retirement plan disclosures will be furnished electronically to an electronic address.  The notice must also inform the individual of his or her right to request to receive paper copies or to opt out of electronic delivery entirely. 
  • Comply with Website Standards. The required disclosure must be available on the designated website no later than the date it must be furnished under ERISA, and it must remain on the website until it is superseded by a subsequent version. 
  • Distribute a Notice of Internet Availability. This notice must be sent to the individual’s electronic address and generally must be furnished when each new disclosure is made available on the designated website.  It must be sent separately from other documents or disclosures and must be written in a manner calculated to be understood by the average participant.  The notice must include, among other things, a prominent statement that important retirement plan information is available on the designated website, a brief description of the document, the website address where the document is located, and instructions for requesting a free paper copy or electing out of electronic notice.

The electronic system furnishing the notice must be designed to alert the administrator of an invalid or inoperable address.  If alerted of an invalid or inoperable address, the administrator must either cure the problem (such as by sending the notice to a secondary email address) or treat the individual as if he or she made an election to receive paper copies instead.

  • Comply with the Special Rule for Employees who Separate from Employment. The Proposed Safe Harbor provides that if a plan participant leaves employment with the sponsoring employer, the plan administrator must ensure the continued accuracy of the electronic address, or obtain a new address that enables receipt following the separation from employment.  This requirement could be difficult for multiemployer plans to administer because it requires cooperation from participants and contributing employers in order to maintain a valid electronic address for each terminated employee.  The DOL has requested comments on whether the Proposed Safe Harbor should be modified to accommodate the unique circumstances faced by multiemployer plans, so this concern may be addressed in the final regulation.

Please contact Slevin & Hart for more information about how this proposed regulation may affect your plan.

This publication is intended to provide general information only, and is not intended to provide legal advice.  It may not be quoted or referred to in any other publication or proceeding without the prior written consent of the firm. The distribution of our publications is not intended to create, and receipt of them does not constitute, an attorney-client relationship.

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