DOL Establishes Final E-Delivery Rule for Plan Administrators
On May 21, 2020, the United States Department of Labor (DOL) announced a final rule for electronic delivery of ERISA-required plan disclosures. The regulation provides two safe harbors for plan sponsors and administrators that would like to adopt e-delivery as a default method for distributing ERISA required-communications.
- Website or App Posting, also known as ‘Notice and Access,’ gives plan sponsors and administrators the option to post covered documents on websites or mobile applications. Whenever required disclosures are posted, plan sponsors must let covered individuals – plan participants, beneficiaries and others – know by providing a Notice of Internet Availability (NOIA). The DOL did not provide a model NOIA. However, the specific requirements for the notices are explained in the published Final Regulation.
- Direct E-mail Delivery allows ERISA-required communications to be sent directly and electronically to e-mail addresses provided by participants, beneficiaries, and any other covered individuals.
Before adopting a voluntary safe harbor, plan administrators that want to rely on electronic delivery as a default must provide covered individuals with a paper notice explaining the new e-delivery method and describing how participants may opt out. Even if a participant does not opt out, they have the right to request paper copies of specific documents at no charge.
The Electronic Disclosure Rule could help reduce qualified plan costs.
Every year, qualified retirement plans must provide specific ERISA-required disclosures, including summary plan descriptions, interested party notices and QDIA notices, to plan participants, beneficiaries and other covered individuals. The number of disclosures typically depends on the type of plan and its features.
The cost of disclosures is considerable. It includes the cost of materials, printing and mailing, as well as the administrative expenses associated with maintaining an accurate database of current plan participant addresses (a list that often includes former employees).
Over the next decade, the electronic delivery rule is expected to help qualified plan sponsors save about $3.2 billion in net costs.
Cybersecurity will be a concern for plan fiduciaries.
There are several practical matters to consider before implementing either new safe harbor, such as coordinating with vendors and modifying service agreements to address issues related to the delivery of retirement plan disclosures.
As plan fiduciaries consider e-delivery safe harbors, data protection should be top of mind.
Retirement plans have been targeted by hackers in recent years, and while the DOL has not taken a formal position or issued comprehensive guidance on fiduciary standards for retirement plan cybersecurity, the 2002 electronic disclosure rule states,
…with respect to disclosures that relate to individuals and their accounts and benefits, the administrator must take appropriate and necessary measures to ensure that the system for furnishing such information protects the confidentiality of the information, such as by incorporating into the system measures designed to preclude unauthorized receipt of, or access to, the information by individuals other than the individual for whom the information is intended.
Fortunately, there is plenty of time for safeguards to be put in place. EBSA Disaster Relief Notice 2020-01 provides retirement plans with “good faith” relief until the COVID-19 emergency ends. As a result, plan disclosures currently can be provided via e-mail, text message and website. It’s unlikely that many plan sponsors will begin to adopt alternative e-delivery methods until good faith relief ends.
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The material in this blog is presented for general informational purposes only. The information presented is not investment, legal, tax or compliance advice. Millennium Trust Company performs the duties of a directed custodian, and as such does not offer or sell investments or provide investment, legal or tax advice.