E-Delivery of Notices: The DOL making your life easier
ON MAY 27, 2020, THE DOL ISSUED THE “DEFAULT ELECTRONIC DISCLOSURE BY EMPLOYEE PENSION BENEFIT PLANS UNDER ERISA” FINAL RULE [1].
This final rule makes it easier for employers to send required retirement plan notices to plan participants by providing a safe harbor to employers who comply with certain requirements. As a reminder, employers were previously allowed to do so under the 2002 safe harbor[2] but only if plan participants had regular access to a work email address and had opted-in to electronic notices (as well as meeting other requirements).
As such, many employers may already be in the habit of utilizing email either themselves, or through a TPA or recordkeeper, to send some of the required notices/disclosures.
This final rule doesn’t change the 2002 safe harbor or the ability of employers to use paper altogether. However, if an employer is seeking to create efficiencies, benefit the environment, and save money, the final rule from 2020 (“2020 safe harbor”) might be the right opportunity. While helpful, there are steps employers need to take to comply and use this new safe harbor.
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What does “safe harbor” mean anyway? Isn’t that a type of plan?
THE TERM “SAFE HARBOR” MEANS THAT IF CERTAIN REQUIREMENTS ARE MET, THEN THE EMPLOYER GETS PROTECTION FROM LIABILITY. HERE, IF CERTAIN CRITERIA ARE MET, ELECTRONIC DISTRIBUTION OF SOME NOTICES ARE LEGALLY PERMITTED.
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2020 Safe Harbor: How it works
WHAT:
Employers can send disclosures that are required by the DOL under Title 1 of ERISA. That includes the summary plan description and the annual fee disclosure notice, for example, but excludes those documents that are available only by request such as the plan document.
WHO:
Employers can send the documents for which the 2020 safe harbor applies to participants, beneficiaries, or anyone else entitled to receive the document(s) so long as the individual has an email address or a smartphone that can receive text messages. The email address may be either a personal email address or an email address assigned by the employer so long as the employer-assigned email is used for some purpose besides receipt of retirement plan-related disclosures.
How: Before an employer can benefit from the 2020 safe harbor, the employer must send a PAPER notice to all employees initially and to each new employee on a go-forward basis setting forth information required by the 2020 safe harbor, including the right to opt out of electronic disclosure. Once every 14 months thereafter, employers may provide a notice of internet availability that notifies employees of what documents are being provided via a website, where they are being provided, and the right to opt out; alternatively, these documents may be emailed directly rather than being provided via a website.
WHEN:
The 2020 safe harbor applies July 27, 2020, but employers may start to use the 2020 safe harbor any time.
What about the IRS?
Don’t forget that the IRS has a different standard for delivery of notices[3]. While similar to the 2020 safe harbor standard from the DOL, the two rules are not the same. Examples of disclosures that are required by the IRS under their rules include but are not limited to safe harbor plan notices and EACA notices.
Take Action
Employers may consider the following action items related to the 2020 safe harbor:
Review the arrangement with your service provider(s) to determine what notices you are responsible for and what your service provider is doing on your behalf.
Inventory your participant population and determine whether you have email addresses that can follow an employee after termination from employment. FYI, employers may also use the 2020 safe harbor to distribute electronically to terminated employees!
Schedule a call with ZUNA to review all of the details of the 2020 safe harbor. The devil is in the details on this new safe harbor.
[1] Final Rule, Default Electronic Disclosure by Employee Pension Benefit Plans Under ERISA, available at: https://www.federalregister.gov/documents/2020/05/27/2020-10951/default-electronic-disclosure-by-employee-pension-benefit-plans-under-erisa.
[2] See 2520.104b-1, at paragraph (c).
[3] See 26 CFR 1.401(a)–21.