DOL Releases Proposed Regulations Authorizing Default Electronic Notices and Disclosures for 401(k) Plans

On October 22, 2019, the U.S. Department of Labor (“DOL”) issued proposed regulations (and accompanying fact sheet) that would authorize the default usage of electronic media for purposes of distributing required disclosures and participant notices under ERISA-covered pension benefit plans, including 401(k) plans. Under the  proposed regs, sponsors of 401(k)s and other retirement plans would be permitted to furnish participants having valid email addresses or smartphone numbers with copies of all of their legally required retirement plan disclosures — such as summary plan descriptions (“SPDs”) and fee disclosure notices — electronically instead of by paper. These participants would remain able to choose to opt out of the electronic delivery if they prefer to instead receive paper notices. Although electronic delivery has been permitted in a wide variety of situations for some time now (see “Effect on Existing Rules,” below), previously, paper disclosures and notices have always remained the default delivery vehicles.

OBSERVATION:  The proposed regs reverse the prior preference for hard copies, mainly in recognition of the huge cost savings that electronic delivery should generate. The result is chiefly intended to further the goal of expanded retirement plan coverage by helping to ease the administrative and financial burden of plan sponsorship.

Proposed Regs Respond to Presidential Executive Order. In August of this year, the DOL had sent to the federal Office of Management and Budget (“OMB”), for its review and approval, the underlying proposal for its expanded use of electronic media. That action was spurred by President Trump’s August 31, 2018 executive order intended to expand retirement plan coverage and otherwise shore up the private retirement system. Among other things, Trump’s executive order directed the DOL to explore ways to reduce the costs and burdens imposed on employers in connection with retirement plan disclosures required under Title I of ERISA, specifically encouraging the broader use of electronic delivery methods.

Conditions Covered in Proposed Regs. The proposed regs, officially dubbed “Default Electronic Disclosure by Employee Pension Benefit Plans under ERISA,” consist primarily of a new, additional safe harbor delivery method. Employers who make use of the new safe harbor receive certain legal protections — for example, protection from the substantial monetary penalties that may be imposed for noncompliance with ERISA’s notice and disclosure provisions — assuming the guidelines spelled out in the regs are followed to the letter.

Generally stated, this “alternative method for disclosure through electronic media” is satisfied if the following conditions are met (this summary is not intended to be exhaustive):

  • The plan administrator must furnish to each covered individual a “notice of internet availability” for each covered document.
    • The notice of internet availability must be sent to the electronic address of the participant (usually, this would be the email address provided by the participant).
    • The notice of internet availability must include, among other things: (i) a brief description of the document being posted online; (ii) a website address where the document is also posted; and (iii) instructions for requesting a free paper copy of the particular document, and/or for electing paper delivery of other such documents in the future.
    • The notice generally must be sent each time a retirement plan disclosure is posted to the internet website.
  • The plan administrator follows the proposed regs’ provisions intended to protect plan participants who lack Internet accesses or who prefer paper notices, as follows:
    • Plan administrators may not default a participant into electronic delivery unless the participant has provided a valid electronic address (or smartphone number).
    • Plan administrators may not default a participant into electronic delivery without first notifying him or her by paper (i) that some or all retirement documents will be furnished electronically; (ii) that the participant always retains the right to request and receive paper copies, and/or to opt out of electronic delivery altogether; and (iii) of the procedures for exercising such opt-out rights.
    • Each notice of internet availability (see above) must remind the participant of: (i) his or her right to request and receive paper; (ii) the right to opt out of electronic delivery altogether; and (iii) the procedures to exercise these opt-out rights.
    • Plan administrators must have procedures in place to ensure that notices of internet, availability arrive at their intended destination. These procedures must be designed to, for example, alert the administrator of an invalid or inoperable electronic address.
    • When an employee leaves his or her job, the plan administrator must take active steps to ensure the continued accuracy of the electronic address on file at the time of separation.

Electronic-Notice-By-Default Proposal Generates Controversy. In recent weeks, there has been pushback to the anticipated default electronic disclosure rules by “Big Paper” and similar vested interests. The Coalition for Paper Options, for example, recently weighed in on the issue, stating that “there is no compelling evidence that DOL knows better than the millions of workers who prefer to receive their particularly sensitive and important retirement information in paper form.”

COMMENT: To be fair, although some of the pushback may smack of protectionism on the part of those invested in the status quo, there is certainly a valid concern that participants who are not “computer savvy,” or who simply prefer receiving their information in paper form, not be “thrown under the bus” in the rush to modernize and economize. Fortunately, as set forth above, the proposed regs contain provisions that are meant to address these concerns. Although it appears that the DOL has put quite a bit of thought into the matter of these protections, whether they go far enough will no doubt be a topic of active discussion during the coming weeks and months.

At any rate, the DOL and its supporters remain steadfast. According to Will Hansen, Chief Government Affairs officer for the American Retirement Association, the DOL estimates that its proposal will save retirement plans $2.4 billion over the next 10 years – savings accomplished through reductions in materials, printing, and mailing costs. The cost savings and resulting ease of retirement plan administration is thought to more than justify the new rule.

Proposal Does Not Cover Health and Welfare, Other ERISA Plans. The proposed regs make clear that the safe harbor, as proposed, does not apply to employee welfare benefit plans, as defined in section 3(1) of ERISA – for example, group health plans or plans providing group disability benefits. This answers a question that was raised by earlier proposals that referred broadly to “documents required under ERISA Title I” — which, if interpreted literally, would have covered all ERISA employee benefit plan disclosures – both those for retirement plans and for health and welfare plans.

COMMENT: It would not come as a surprise if we see a similar proposed default electronic disclosure rule applicable to health and welfare plans introduced in the future – particularly if these proposed regs covering retirement plans are met with an enthusiastic response from plan sponsors and participants.

Request for Information. The preamble to the proposed regs contains a separate Request for Information (“RFI”). The RFI solicits constructive comments and ideas with respect to additional measures, beyond the scope of the proposed electronic delivery safe harbor, that commentators believe the DOL might take in the future to improve the effectiveness of ERISA disclosures. These comments must be submitted to the DOL, in accordance with the specific procedures outlined in the guidance, on or before November 22, 2019.

Effective Date. As is normally the case with proposed regulations, employers may not rely on these proposed regs yet. Rather, they would become effective 60 days following the date of publication of finalized regulations. The preamble to the proposed regs. clarifies that “as proposed, plan administrators who wish to continue to rely on the existing safe harbor for electronic delivery, or to furnish paper documents by hand-delivery or by mail, are free to continue to do so (emphasis supplied).”

Effect on Existing Rules. There is presently extensive guidance on the permissible use of electronic media with respect to the provision or required retirement plan notices.  Currently, the rules govern both notices required for all retirement plans under Title I of ERISA, along with specific notices only applicable to certain 401(k) plans (for example, fee disclosure notices, “blackout” notices, and “safe harbor” plan notices). Importantly, the proposed regs do not make any major changes to the existing guidance, but simply expand upon it by adding the new safe harbor that greatly favors the use of electronic dissemination over paper distribution. For a general discussion of the existing rules for electronic disclosure of required disclosures for both retirement plans and health and welfare plans, see ComplianceDashboard’s Geek Out! page. Additionally, the DOL has published an extensive and employer-friendly reporting and disclosure guide which is available here.

Conclusion. The new proposed regulations should help retirement plan sponsors, including 401(k) plan sponsors, keep their costs down and more effectively disseminate the information required under ERISA to be provided to their plan participants. Whether the industry believes that the proposed regs go far enough to preserve the rights of participants who prefer to receive paper notices is an open question that we will no doubt be hearing more about in the near future. As always, we will keep you updated as to any developments along these lines, including any changes that may be made in response to the RFI or otherwise that might end up being incorporated into final DOL regulations, once they are released.


For specific questions regarding ERISA’s reporting and disclosure requirements, please consult your own ERISA attorney or advisor. The information and content contained in this blog post are for general informational purposes only, and does not, and is not intended to, constitute legal advice.

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