On Oct. 23, 2019, the Department of Labor (DOL) released a proposed rule for electronic delivery of ERISA disclosures. Although the DOL already allows for electronic delivery under the 2002 Electronic Safe Harbor, its availability is limited and technology quickly outpaced its usefulness. The proposed rule creates a new, additional safe harbor the DOL calls the “Notice and Access” safe harbor that will allow for electronic delivery as a default method of delivery for certain ERISA Title I disclosures. At this point, the safe harbor applies only to ERISA-governed retirement plans, and does not reach health and welfare benefit plans, though the DOL reserves a section in the proposed regulations for potential future application to required disclosures for such plans.

How does it work?

First, the plan administrator must notify all participants and beneficiaries that the default method of delivery for plan disclosures will be changing. Naturally, this initial notice must be furnished on paper, even for participants who currently receive disclosures under the 2002 safe harbor. The notice must also allow participants the opportunity to opt out of electronic delivery.

Second, administrators must provide an electronic “notice of internet availability” for each ERISA disclosure at the time the disclosure is made electronically available to the participant. The DOL requires the notice to:

  • Be furnished on its own, separately from any other notice
  • Contain certain language describing the document covered and its URL
  • Allow the participant to opt out of electronic delivery or request a free paper copy
  • Be written in a manner calculated to be understood by the average participant

Although the notice of internet availability must be furnished on its own, , that notice itself can apprise participants and beneficiaries of the availability of multiple ERISA disclosures.

Third, the administrator must make the ERISA disclosure accessible on a secure website. The disclosure must be available to the participant by the time it must be furnished under ERISA and must remain there until it is superseded by a subsequent version of that disclosure. The ERISA disclosure must, essentially, be available to participants as a word-searchable, downloadable, and printable PDF.

Who and what is covered by the safe harbor?

Unlike the 2002 safe harbor, which was available only to employees who were “wired at work” or participants who affirmatively consented to electronic delivery, the “notice and access” safe harbor will be available to all participants, beneficiaries, and any other individuals that are entitled to the covered documents. The only requirement is that the individual provide the administrator with an electronic address or internet-connected mobile-computing-device number (i.e., an email address or a smartphone number), or be provided an electronic address by the employer.

The proposed safe harbor will cover documents that are required to be furnished to participants under ERISA Title I, except for any document that is furnished only upon request. This means any document that must be furnished solely because of passage of time or a specific triggering event is included. This includes the following documents:

  • Summary plan descriptions
  • Summaries of material modifications
  • Summary annual reports
  • Annual funding notices
  • 404a-5 investment-related disclosures
  • Qualified default investment alternative notices
  • Blackout notices
  • Pension benefit statements

Surely, somewhere, the Lorax is crying tears of joy.

What can plan administrators do?

Right now? Nothing. The “notice and access” safe harbor won’t be effective until 60 days after the final rule is published and the DOL is not allowing reliance on the proposed rule, on which the DOL is seeking public comment through Nov. 22, 2019. After the safe harbor rule is finalized and effective though, plan administrators will be able to greatly expand their use of electronic distribution of documentation (or gain more comfort in the processes they might already be following).

The beauty and danger of the DOL proposed rule is that it is purposely and purposefully broadly-worded to allow for innovations in technology. For instance, the requirement that the participant have an email address or a smartphone number allows for creative methods of notice: Email? Text? In-app or push notifications? So long as the safe harbor is met, it would seem all of the above are acceptable to the DOL. But just because you can do something, doesn’t mean you should. To avoid DOL scrutiny, administrators should be careful not to push participants past their technological comfort zones.

And although the proposed rule requires an initial notice that a plan is changing its default notice method, expect a rough transition. As plan administrators (and the Supreme Court) know, just because a participant receives a notice, doesn’t mean they’ve read it or even opened it. This means many participants will not be aware of the change to electronic disclosures until they realize they haven’t received a paper notice in a really long time. To ease the transition, in addition to the required paper notice, plan administrators should consider notifying participants using every method they currently use to communicate with participants (e.g., website pop-ups, website banners, direct messaging, texts, email, etc.). But, at the very least, this is progress.