The U.S. Department of Labor (DOL) final rule on electronic disclosures for retirement plans went into effect this past July. This means that plan administrators now have the option to use electronic delivery as a default for certain disclosures, provided safe harbor conditions are met.
Who is covered?
Plan administrators may use electronic delivery for participants, beneficiaries, and others. However, e-delivery is allowed only if the recipient has a work email address or provides a personal email address or text-capable cellphone number. Also, a process must be in place to validate the email addresses or cell numbers. Any messages that bounce back must be corrected or switched to paper delivery. Therefore, contact information should be verified and updated upon employee termination.
Safe Harbor Delivery
The new safe harbor allows two electronic delivery methods. Documents can be sent via email to the participant-provided email address or posted to a website/mobile app. If posted to a website/app, a notice must be delivered to the covered individual’s email or cell phone. Any posted materials must remain available for a minimum of one year or until superseded.
Either delivery method must include specific details such as:
• A brief description of the document and if any action is required
• How to receive a paper copy free of charge
• How to opt-out of electronic delivery
• Plan contact phone number for more information
• How to access any documents that are posted via a website or mobile app
Covered Documents
Most plan-related documents are eligible for e-delivery, including:
• Summary plan descriptions
• Summary of material modifications
• ERISA 404(c) self-directed investment information disclosures
• Fee and expense disclosures
• QDIA, blackout, and automatic enrollment notices
• Summary annual reports (SAR)
• 401(k) Traditional Safe Harbor Notice
Also, note that the rule does not apply to documents that are available only upon request. These include the plan document, 5500 annual reports, or trust agreements.
As with all aspects of retirement plan administration, proper documentation is critical. Maintaining written or electronic records of all actions taken regarding the implementation and ongoing delivery of electronic disclosures will be vital to regulatory compliance. The plan sponsor is responsible for compliance, even when outsourcing the delivery/notification process to a recordkeeper or third-party administrator.