New Retirement Plan Disclosure Option

The U.S. Department of Labor (the “DOL”), pursuant to a presidential executive order, has recently released a proposed rule to allow employers to use electronic media to provide participants and beneficiaries with information regarding their employee pension benefit plans (the “Proposed Rule”) (note, the Proposed Rule does not apply to employee welfare benefit plans as described by section 3(1) of ERISA). The Proposed Rule, if enacted, is expected to save employers an estimated $2.4 billion over the next 10 years by reducing material, printing, and mailing costs.

A. Overview. Plan administrators of retirement plans covered under ERISA must disclose certain information to participants and other beneficiaries. Current regulations provide plan administrators with certain options to make required disclosures, but such options have become outdated with recent advancements. The Proposed Rule provides a new safe harbor: Notice and access. Notice and access allows plan administrators to provide electronic Notice to an individual that a document is available to be viewed and that individual may access the document via a website.

B. Covered Documents and Covered Individuals. Under the Proposed Rule, “covered documents” may be sent to “covered individuals,” provided that the plan administrator satisfies all requirements of the Notice and access safe harbor. A covered document is any document that a plan administrator is required to provide under ERISA. It includes a summary plan description, a summary of material modification, a pension benefit statements, and a summary annual report. A covered individual is a participant, beneficiary, or other individual who (1) is entitled to receive a covered document; and (2) has provided the plan administrator, employer, or plan sponsor with an electronic address. If the employer assigns email addresses to employees, the employee is treated as if he or she provided such email as her electronic address.

C. Notice and Access. The Notice provided by the plan administrator must meet certain content requirements, which generally includes: (i) a prominent statement such as a title, legend or subject line that reads, “Disclosure About Your Retirement Plan;” (ii) a brief description of the covered document; (iii) the web address where the document is posted; (iv) a statement of a right to request a paper version; (v) an opt-out statement; and (vi) the plan administrator’s contact information. The Notice must be sent to an electronic address, contain only the specified content, and be written in a manner calculated to be understood by the average plan participant.

With regard to Access, the website to which the covered document is posted must be accessible by a covered individual. It is the plan administrator’s responsibility to establish and maintain the website, although a third-party vendor may contract to assume some of those responsibilities. The website must be secure and protect the individual’s personal information (no guidance has been issued on these topics yet). The covered document must become available on the website no later than the date on which it is required to be furnished pursuant to relevant law. It must remain accessible until it is superseded by a subsequent version. Additionally, the covered document must be drafted in a widely-available format that can be downloaded or printed by the user, such as a pdf, and must be searchable. During the comment period, the DOL sought best practice protocols and requirements to keep websites secure; however, it has not released any additional information to date.

D. Right to Paper Copies or to Opt Out. The Proposed Rule includes two safeguards for individuals who wish to receive paper copies by hand or in the mail. First, the plan administrator must furnish paper copies to any covered individual that requests them. The paper copies must be free of charge and furnished as soon as reasonably practicable after the request. Second, the plan administrator must allow covered individuals the ability to opt out of electronic delivery and receive only paper copies. Covered individuals may opt out at any time and are to receive paper copies until they opt back in to electronic delivery.

E. The Initial Notification of Electronic Delivery. The plan administrator is required to furnish to each covered individual an initial notification on paper that some or all documents will be electronically delivered. This initial Notice should also include the aforementioned right to receive paper copies or to opt out, as well as the procedures for exercising those rights.

F. Comment Period. The comment period for this Proposed Rule ended on November 22, 2019. The DOL is currently reviewing all relevant matters presented by the public and will respond to all comments received.

Please contact Mindi Johnson at (616) 726-2252 with any questions related to the Proposed Rule and this new disclosure option. We would also be happy to assist your plan with drafting the necessary Notices or materials to implement this option.