January 19, 2021

Volume XI, Number 19

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January 18, 2021

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Guide to DOL’s New “Notice and Access” Proposal for Electronic Delivery

On October 23, 2019, the Department of Labor published a new proposed regulation that paves the way for “notice and access” electronic delivery of certain disclosures for retirement plans.  The proposal is welcome news for plan sponsors and administrators who have been frustrated by the existing “opt-in” regime for electronic disclosure.  But the proposal is limited in scope—it covers only notices related to retirement plans, leaving health and welfare plans for another day—and it imposes significant obligations for sponsors and administrators who wish to have safe harbor protection under the proposed regulation.

DOL has requested comments on the proposal and additional issues related to required disclosures.  Comments are due by November 22, 2019.  The following are important points about the proposal:

  • Limited scope: the proposal covers only retirement (“pension”) plans, not health or other welfare plans. The safe harbor does not apply to health or other welfare benefit plan disclosures.  DOL indicated in the preamble that it is considering whether to expand the proposed safe harbor to include welfare plans.

  • Opt-out regime: the proposal includes a safe harbor for plan sponsors and administrators to furnish notices on a website, unless participants affirmatively request paper disclosure. To take advantage of the safe harbor, two notices will be required.  First, the proposal requires that an initial paper notice be sent to each person intended to be covered by the safe harbor; the paper notice must explain the documents that will be furnished electronically, the right to request paper copies free of charge, and how to opt out of electronic delivery (either for certain documents or globally).  After the initial paper notice is furnished, participants would have to be notified electronically each time a document is posted on the website (unless the document falls under the “consolidated” notice rule, explained below).  The proposal requires that the electronic notice include a website address directing participants to the posted document.

  • Consolidated notice: exception to requirement to send a separate electronic notice for each document posted online. Although the safe harbor generally requires a separate electronic notice be sent each time a document is posted, the proposed regulation permits one “consolidated” notice covering all of the following documents: summary plan description (SPD), summary of material modifications (SMM), summary annual report (SAR), annual funding notice, section 404a-5 investment-related disclosure, notice about default investment alternatives (QDIA notice), and pension benefit statement. The consolidated electronic notice must be furnished annually.

  • Retention required: documents posted on the website must remain posted until they are updated, changed, or become obsolete. Documents posted under the proposed safe harbor would have to be maintained on the website until superseded. In addition, documents posted on the website would have to be searchable electronically.

  • Existing safe harbor not affected: the proposal is to have a new safe harbor that is in addition to (not a replacement for) the existing safe harbor for participants who opt in and employees who have computers at their desks. There is a general obligation to furnish ERISA-required documents by a method “reasonably calculated to ensure actual receipt.”  An existing DOL safe harbor provides that this obligation may be satisfied by electronic delivery only if the participant has work-related computer access (such as a computer at their desk) or the participant affirmatively consents to receive notices electronically; that safe harbor has detailed requirements for the consent to be valid.  The proposed regulation offers an additional safe harbor for delivery of ERISA-required notices, but it does not replace or supersede the existing DOL safe harbor.

  • Comments requested: DOL requests comments on the proposal and an assortment of questions about disclosure more generally. In addition to its general request for comments in response to the proposed regulation, DOL asked for feedback on 21 separate topics related to disclosure, such as:

    • Whether any ERISA-required disclosures have become obsolete (due to the passage of time or technology);

    • Whether more personalized disclosures would enhance participant engagement;

    • Whether cybersecurity risk assessments and security measures related to plan disclosures should be incorporated into the regulation; and

    • Whether and to what extent plans should share the “substantial” cost savings from electronic distribution of documents with participants.

Employers who have struggled with seemingly endless disclosure obligations that are not widely read should welcome the opportunity to submit comments.


The proposed regulation will become effective 60 days after the final rule is published in the Federal Register, with no option to rely on the proposed regulation before it is finalized.

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© 2020 Proskauer Rose LLP. National Law Review, Volume IX, Number 303
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About this Author

Seth Safra, Proskauer Law Firm, Employee Benefits, Executive Compensation and ERISA Litigation Attorney
Partner

Seth Safra is a partner in the Employee Benefits & Executive Compensation Group, where he counsels clients on all aspects of employee benefits and executive compensation.

Seth advises clients on ERISA and other related laws with respect to the design and administration of qualified and non-qualitied retirement plans, including defined contribution (including 401(k) and ESOPs) and cash balance plans. In addition, Seth counsels clients on their health & welfare plans, including advising on issues related to health care reform.

...
202-416-5840
Jennifer Rigterink, Proskauer Law Firm, New Orleans, Labor and Employment Law Attorney
Associate

Jennifer Rigterink is an associate in the Labor Department and a member of the Employee Benefits & Executive Compensation Group.

In the employee benefits area, Jennifer’s practice focuses on an array of tax and benefits issues impacting both multiemployer and single-employer benefit plans and plan fiduciaries. She assists clients on matters pertaining to plan administration, design and qualification, as well as regulatory, legislative and legal compliance.

Prior to joining Proskauer, Jennifer clerked for Judge...

504-310-2030
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