Affect of the New Rule on Electronic Disclosures
On October 23, 2019, the Department of Labor (DOL) published a proposed rule that would ease retirement plan administration by allowing broader use of electronic disclosure. The proposal would allow plan administrators who meet certain conditions to provide participants and beneficiaries with a notice that certain disclosures will be made available on a website. Individuals who prefer to receive these disclosures on paper will be able to request paper copies and to opt-out of electronic delivery entirely.
Currently, plan sponsors can rely on a 2002 safe harbor for electronic delivery of documents and other information required under ERISA. However, the 2002 safe harbor is limited; notice can be provided electronically only to participants and beneficiaries who either:
(1) have work-related computer access or
(2) provide affirmative consent to receive documents electronically (in addition to meeting certain other requirements).
Those outside of the two above categories must receive a hard copy. With the expansion of accessibility to the internet, this rule is considered outdated by many and the proposed change will help ease the burden of distributing notices and obtaining consent before sending electronically.
Affect of the New Rule
The proposed rule would add a new safe harbor that would exist in addition to the 2002 safe harbor. If the rule is finalized as proposed, plan sponsors could choose between the two safe harbors, or use both. The new safe harbor provides for plan sponsors to use the electronic communication as the default communication method and participants would opt out compared to the 2002 safe harbor which requires participants to affirmatively receive documents electronically.
The notice relates to any retirement plan document required pursuant to Title 1 of ERISA (i.e Summary Plan Description, Summary of Material Modifications, blackout notices, etc), other than documents that must be provided upon request. The DOL is currently considering expanding the safe harbor to Welfare plan notices as well.
Plan sponsors may not rely on the proposed rule until it is finalized. Therefore, no changes should be made to current processes to distribute notices to participants.
The full proposed regulation can be viewed here. If you have any questions, please contact your Sikich benefits advisor.