Employers are required by law to provide certain disclosures to participants in qualified retirement plans. Recently, the Department of Labor (DOL) published a new safe harbor method that allows these documents to be posted on a website for the participants, beneficiaries, and other covered individuals to access. The new safe harbor is in addition to previous guidance that allows these disclosures to be provided electronically. However, it is important for plan sponsors to review their procedures and make sure they comply with the requirements set forth by the DOL and the Internal Revenue Service (IRS).
The procedures allow electronic delivery of a variety of required disclosures including, but not limited to:
- Summary Plan Description
- Summary of Material Modification
- Summary Annual Report
- Notice of Special Enrollment Rights
- Summary of Benefits
- Plan and Expense Notices for Participant Directed Plans
- Investment Information
- Blackout Notices
- Participant Notices such as Safe harbor, Automatic Enrollment, and Default Investment
The previous guidance allows employers to provide these documents via email to participants with the Wired at Work method or to participants, beneficiaries, and other covered individuals with an Affirmative Consent method. The new DOL safe harbor allows employers to post the documents on a website for download. The following is a summary of each method:
- Providing information to participants still actively employed by the Wired at Work method: ERISA disclosures may be delivered electronically to participants that are currently employed.Participants can access the documents in electronic form at any location where the employee is expected to perform duties and are expected to have access to the employer’s computer system as part of performing their work duties.Providing employees with access to a computer in a common area (for example, a computer kiosk) is not a permissible means to electronically furnish ERISA-required documents.
- Providing information to other employed participants, terminated participants, and beneficiaries under the Affirmative Consent method: Currently employed participants without access to their employer’s computer system at work as described above, terminated participants, and beneficiaries must voluntarily provide the employer with an email address for receiving disclosures. The email address must be provided in response to a request accompanied by an Initial Notice and followed up with an Annual Notice. The Initial Notice must contain certain information specified by the DOL and IRS guidelines and request the individual’s email and consent. The Annual Notice must commence the year after the year the individual provided an email address in accordance with the Initial Notice, and annually thereafter. The Annual Notice must contain the same information provided in the Initial Notice. The Annual Notice must first be furnished on paper and thereafter may be furnished electronically by sending it to the email address provided.It must be documented that the individual interacted electronically with the plan after the date the Annual Notice before the preceding year was furnished. Examples of electronic interaction include, but are not limited to:
- The participant or beneficiary updating, resubmitting, or confirming his or her email address to the plan
- The participant or beneficiary sending an electronic message to the plan
- Logging onto a secure continuous access website housing plan information
- The receipt and opening of an electronic message sent by the plan to the participant or beneficiary
- Providing information with the new DOL Alternative Safe Harbor Rule: This new safe harbor does not replace the prior rules discussed above but provides another way for an employer to comply with the disclosure requirements, which is to provide a website from which the disclosure can be downloaded. This safe harbor also applies to any participant, beneficiary, or individual entitled to an ERISA disclosure who provides an electronic address. The new safe harbor requires that before an individual receives covered documents via electronic delivery, they must be provided an Initial Notice that explains that electronic delivery will be the default method of delivery. The individual has the right to require and obtain a paper version of the covered document(s) free of charge. The individual also has the right to opt-out of electronic delivery. After the Initial Notice, the individual must receive a Notice of Internet Availability (NOIA). The NOIA must also repeat the information provided in the Initial Notice. In addition, the NOIA, the website used for the disclosure, and the document being disclosed must all meet certain requirements established by the new safe harbor.
Regardless of what method a plan sponsor uses to issue required disclosures, it is important and necessary to review the implemented process to ensure compliance with the DOL and IRS requirements. The employer must have procedures in place to ensure compliance and must take immediate action to correct any delays or delivery failures.
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Meet the Author
Aldrich Retirement Solutions LP
Theresa Winkler has more than 30 years of experience in ERISA and retirement plan law. Her expertise includes document drafting, research, and compliance review for 401(k), as well as profit sharing, money purchase, and defined benefit plans including cash balance pension plans. Prior to joining Aldrich in 2016, Theresa served as an ERISA/Employee Benefits Paralegal…