As described in our previous article on participant notices, plan sponsors of qualified
retirement plans must routinely provide various notices to participants and
beneficiaries regarding plan provisions, investment information, fees and more. On May 21, the U.S. Department of Labor
released new regulations regarding the electronic disclosure of these notices, ushering
in an era of convenience for a historically arduous requirement.
Electronic delivery rules have existed for years, but abiding
by them has been prohibitive, particularly when delivering to employees not
using a computer as an integral part of work duties. The new rules do not replace
the existing ones, but instead offer a more feasible alternative to them.
In short, the new safe harbor framework allows sponsors to
provide required notices directly via email or to make them available on the internet
under certain requisite conditions. The process can be applied for participants
who have provided an email address or mobile number (for text notifications),
as well as those who are assigned a work email address. If an electronic
address isn’t provided by the participant or assigned by the employer or if
such an address is deemed to be invalid, then the sponsor must treat the
participant as if they “opted out” of electronic delivery and provide a paper copy
instead.
An initial paper notification must be provided to inform
participants about the electronic delivery process. This notification must be
provided prior to relying on the safe harbor as well as to all newly hired
employees. A Notice of Internet Availability
is sent electronically to participants once the notices are ready for viewing
(e.g., annually for most documents).
With certain exceptions, the availability of multiple notices can be
communicated in a single NOIA.
As with the existing rules, a paper notice must be furnished
upon request at no charge. Participants can choose to opt out of electronic delivery
and receive paper. For those who don’t opt out, the sponsor must evaluate the
use of electronic delivery for newly terminated employees who no longer have
access to work email.
The new rules present an opportunity to significantly reduce
cost and time spent in printing and distributing required disclosures. The rules
take effect on July 26, but the DOL will allow plans to begin using the new
rules immediately. These rules do not apply to welfare plan notices or to certain
retirement plan notices required by the Internal Revenue Code, such as safe
harbor and automatic enrollment notices.
Although greatly simplified, the rules remain complex in nature. Plan
sponsors should work with their service providers to take advantage of the new
rules and to make sure all applicable notices are delivered as required by the
IRS and DOL.
If you have any questions or would like to begin talking to
a retirement plan advisor, please get in touch by email or by calling (800)
388-1963.