Pension & Benefits News EBSA proposes new voluntary safe harbor for electronic retirement plan disclosures
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Wednesday, November 13, 2019

EBSA proposes new voluntary safe harbor for electronic retirement plan disclosures

By Pension and Benefits Editorial Staff

The Employee Benefits Security Administration (EBSA) has issued proposed regulations that provide a new voluntary safe harbor for the use of electronic media by retirement plans subject to ERISA to furnish plan information to participants and beneficiaries. Under the proposed regulations, plan administrators who satisfy specified conditions would be allowed 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 would be able to request paper copies and to opt out of electronic delivery entirely.

Background. In August 2018, the White House issued Executive Order 13847, which called for the Secretary of Labor, in consultation with the Treasury Secretary, to complete a review of actions that could be taken through regulation and/or other guidance to make retirement plan disclosures more understandable and useful for workers, while also reducing the costs and burdens the disclosures impose on employers and plan administrators (see Pension Plan Guide Newsletter No. 2322, September 18, 2018). The order explicitly directed the Labor Department to explore the potential for broader use of electronic delivery as a way to improve disclosures’ effectiveness.

EBSA noted that through the years it has issued guidance on the standards for the delivery of required plan disclosures, especially on electronic delivery of disclosures. For example, in 2002, EBSA amended the general standards for delivery of required disclosures by establishing a safe harbor for the use of electronic media. Among other requirements, the final regulations required that notice be provided to each participant, beneficiary, or other individual at the time a document is furnished electronically, that apprised the individual of the significance of the document when it is not otherwise reasonably evident as transmitted, and of the right to request and obtain a paper version of such document. This safe harbor applied to two categories of individual recipients: participants that could effectively access documents furnished electronically through their jobs, and participants, beneficiaries, and other persons who were entitled to documents under Title I of ERISA who did not fit into the first category, but who affirmatively consented to receive documents electronically.

In 2006, EBSA issued Field Assistance Bulletin 2006-03 (FAB 2006-03) to help administrators and their service providers comply with amendments to ERISA’s periodic pension benefit statement requirements made by the Pension Protection Act of 2006. The guidance provides that when pension plans give participants continuous access to benefit statement information through one or more secure websites, “the Department will view the availability of pension benefit statement information through such media as good faith compliance with the requirement to furnish benefit statement information, provided that participants and beneficiaries have been furnished notification that explains the availability of the required pension benefit statement information and how such information can be accessed by the participants and beneficiaries.”

Alternative safe harbor. Noting the increased use and access by Americans to electronic media and in response to Executive Order 13847, EBSA is proposing to add a new electronic delivery framework, as a safe harbor, for ERISA disclosures. The proposed safe harbor would be in addition to the 2002 safe harbor. Thus, plan sponsors and administrators could choose between the two safe harbors, or use both safe harbors, selecting the best approach for their plan population. It is expected that the proposal, if adopted, would improve the effectiveness of the disclosures and significantly reduce the costs and burden associated with furnishing many of the recurring and most costly ERISA disclosures.

EBSA has decided to use a “notice and access” structure, similar to that previously adopted by the Department in FAB 2006-03, in the new safe harbor for all required ERISA disclosures for pension benefit plans.

Covered individuals. A covered individual for purposes of the safe harbor, is a participant, beneficiary, or other individual entitled to covered documents and who, as a condition of employment, at commencement of plan participation, or otherwise, provides the employer, plan sponsor, or administrator (or an appropriate designee of any of the foregoing) with an electronic address, such as an email address or internet-connected mobile-computing-device (e.g., smartphone) number. Alternatively, if an electronic address is assigned by an employer to an employee for this purpose, the employee is treated as if he or she provided the electronic address. It is a condition of reliance on the safe harbor that an administrator receives an electronic address or number with which to communicate with a covered individual, according to EBSA.

Covered documents. The safe harbor may be used by a pension benefit plan to furnish any document that the administrator is required to furnish to participants and beneficiaries pursuant to Title I of ERISA, except for any document that must be furnished upon request. This includes documents that must be furnished solely because of the passage of time and because of a specific triggering event (other than the passage of time). EBSA explains that a plan administrator is not required to furnish all of these documents pursuant to the safe harbor if the administrator prefers a different method of furnishing for some of the documents.

Notice of internet availability. In general, plan administrators must furnish each covered individual with a notice of internet availability for each covered document. A list of content requirements for the notice of internet availability is provided in the proposed regulations. The proposed regulations do allow an administrator to combine notices for certain covered documents. The administrator must furnish a notice of internet availability at the time the covered document that is the subject of the notice is made available on the website. If, however, the administrator furnishes a combined notice of internet availability for more than one covered document, the requirement to furnish a notice of internet availability will be treated as satisfied if the combined notice of internet availability is furnished each plan year, and, if the combined notice was furnished in the prior plan year, no more than 14 months following the date the prior plan year’s notice was furnished.

Furthermore, the proposed regulations require that a covered document must be made available on the website no later than the date on which the covered document otherwise must be furnished in accordance with the applicable section of ERISA or regulations. EBSA wants the notice of internet availability to be a concise, clear disclosure that will convey its importance and easily call the recipient’s attention to its content. Among other requirements, the notice of internet availability must be furnished separately from any other documents or disclosures furnished to covered individuals, except as permitted for the consolidation of certain notices of internet availability. The proposed regulations also provide minimum standards for the availability of the covered documents on a website.

Right to paper copies. The proposed safe harbor provides two safeguards for participants and beneficiaries who prefer to receive covered documents on paper. First, upon request from a covered individual, the administrator must furnish to these individuals, free of charge, a paper copy of a covered document. EBSA expects that the copy will be furnished to the covered individual as soon as reasonably practicable after receiving the request. Second, for those who want all of their covered documents in paper, the proposal provides covered individuals with a broad opt out right. Specifically, the administrator must give covered individuals the ability to opt out of electronic delivery and receive only paper versions of some or all covered documents.

The proposed regulations require a plan administrator to provide participants and beneficiaries a paper copy of an initial notice before adopting a new method of electronic delivery that they will receive some or all future retirement plan information (i.e., covered documents) electronically, through a notice and access model in which the notice will be furnished to an electronic address (e.g. email), and that they have a legal right to request paper copies or to opt out of electronic delivery.

Effective/applicability dates. When the proposed regulations are finalized, they are proposed to be effective 60 days following publication in the Federal Register. They are proposed to be applicable to retirement benefit plans on the first day of the first calendar year following the date of publication of the final regulations in the Federal Register.

Request for information. Besides seeking comments on the proposal, the proposed regulations also contain a Request for Information that explores whether and how any additional changes to ERISA’s general disclosure framework, focusing on design, delivery, and content, may be made to further improve the effectiveness of ERISA disclosures. EBSA has concluded that it needs further information from stakeholders before proposing any substantive regulatory additions, deletions, or changes to ERISA’s disclosures themselves, as opposed to delivery of such disclosures.

Comments. Comments on the proposal and on the Request for Information must be submitted on or before November 22, 2019 to:

  • Federal eRulemaking Portal: https://www.regulations.gov. Follow the instructions for submitting comments.
  • Mail: Office of Regulations and Interpretations, Employee Benefits Security Administration, Room N-5655, U.S. Department of Labor, 200 Constitution Avenue NW, Washington, DC 20210, Attention: Electronic Disclosure by Employee Benefit Plans, RIN 1210-AB90.

Source: 84 FR 56894.

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