The Department of Labor (Finally) Issues Updated Electronic Disclosure Rules

Remember the internet in 2002?  Friendster was the only social media outlet.  If you had an email, it probably ended with “”  If you wanted to watch a movie, you had to go to an actual store to rent one instead of just pushing a button on a remote control.  The Department of Labor (the “DOL”) also issued its first set of rules with respect to the electronic dissemination of employee benefit plan disclosures (the “2002 Rules”).  The 2002 Rules are a complex tangle of requirements designed for a world in which the primary method of communication was paper and the internet was a mostly-untapped resource.

In the almost two decades since the 2002 Rules were issued, the way in which the world communicates has dramatically evolved.  Now, instead of pen and paper, communication is primarily web-based.  Today, in response to the communication evolution, the DOL finally published final rules updating the methods by which employers, plan sponsors, and plan administrators can electronically distribute certain required retirement plan notices (the “Final Rules”).  This new guidance is especially helpful during the 2019 novel coronavirus pandemic, with many employees working remotely and many employers looking for ways to cut costs.

The Final Rules apply with respect to notices and information required to be provided to retirement plan participants and beneficiaries pursuant to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).  Note that the Final Rules do not include health and welfare plan notices. The Final Rules do not replace the 2002 Rules; rather, the 2002 Rules also remain effective.  A plan administrator can choose electronic notification either pursuant to the 2002 Rules or the Final Rules.

Covered Individual

Under the Final Rules, plan administrators may electronically deliver retirement plan notices to “covered individuals.” A covered individual is an individual who is “entitled to receive documents or information” under ERISA (“covered documents”) and who provides the plan administrator with an email address or smartphone number.  If the individual has an employer-provided email, he or she does not have to provide the plan administrator with a separate email or phone number; the employer-provided email is sufficient to render the individual “covered.”

Initial Notice of Default Electronic Delivery

The plan administrator must provide every covered individual with a paper notice that covered documents will be provided electronically.  The paper notice must include the email address to which the electronic notices will be furnished; any instructions necessary to electronically access the covered documents; a statement that each covered document is not required to be electronically available for longer than 12 months, or, if later, after it is superseded by a subsequent version of the document; a statement of the right to obtain, free of charge, a paper copy of the covered document; and an explanation of how to exercise that right. The initial notice must be provided prior to furnishing any notices electronically.

Standards for Internet Website

The Final Rules provide that retirement plan notices can be provided electronically either via a website or via email.  Where a plan administrator chooses to provide electronic notices via a website, the plan administrator must ensure that the applicable documents and information:

  • Are provided no later than the date otherwise required pursuant to ERISA;
  • Are presented on the website in a “widely-available” format that can be read both online and on paper;
  • Are available on the website for a least one year, or until the document or information is superseded by a new document or information, if earlier;
  • Are drafted in a manner calculated to be understood by the average plan participant;
  • Can be searched electronically;
  • Can be retained electronically for the required duration; and
  • Are confidential.
Notice of Internet Availability

If the plan administrator is providing electronic documents or information via a website, the plan administrator must provide a notice of internet availability at the time each covered document is made available.  The notice of internet availability should be sent to the phone number or email on file for the covered individual and must include:

  • Two statements informing the covered individual that the notice includes retirement plan information;
  • An identification of the covered document by name and a brief description of the document;
  • The web address where the covered document can be found or a hyperlink to the document;
  • A statement that the covered individual can receive, free of charge, a paper copy of the covered document;
  • A statement that the covered individual has the right to opt-out of electronic communication, and an explanation of how to exercise that right;
  • A statement regarding the length of time the covered document will be available on the website; and
  • A contact number.

The notice of internet availability also may, but is not required to, include a statement regarding whether any action is required as a result of the covered document and how the covered individual may take the applicable action.

The plan administrator must furnish the notice of internet availability separately from other documents.  The method by which the notice of internet availability is provided must alert the plan administrator if a covered individual’s phone number or email is inoperative.  If the phone number or email is inoperative, the plan administrator must take reasonable steps to cure the problem, such as obtaining a new email or phone number, and send a paper notice.  In addition, if the plan administrator uses an employer-provided email for notices, the plan administrator must take “measures reasonably calculated to ensure” that the covered individual will continue to receive notices and information in the event of the employee’s termination.

Special Rule for Combined Annual Notices of Internet Availability

The plan administrator can combine notices of internet availability if the combined notice is furnished each plan year and the combined annual notices are provided not more than 14 months apart.  Generally, the plan administrator can provide combined notices for summary plan descriptions, any documents that must be provided annually, and any other documents or information as specifically authorized by the Secretary of Labor or Treasury.

Technical Difficulties

The plan administrator will not be treated as out of compliance with the Final Rules if covered documents are temporarily unavailable due to unforeseeable circumstances or circumstances out of the plan administrator’s control; provided that the plan administrator has reasonable procedures in place to ensure the covered documents are available as soon as practicable.

Disclosure via Email

Instead of providing covered documents electronically on a website, a plan administrator may provide the documents via email; provided that:

  • The covered document is sent to an email provided by the covered individual or an employer-provided email no later than otherwise required pursuant to ERISA;
  • The email’s subject line reads “Disclosure About Your Retirement Plan;”
  • If the covered document is sent as an attachment, the body of the email includes the name of the document and a brief description of the document;
  • The email includes a statement about the right to opt-out of electronic delivery and a statement that the covered individual can receive a paper copy of the covered document free of charge;
  • The email includes a contact number; and
  • The email is drafted in a manner designed to be understood by the average plan participant.

Whether provided on a website or via email, the covered documents must be presented in a format that can be read online or on paper and “permanently retained” in an electronic format. In addition, the covered documents must be searchable.

Right to Opt-Out

Like the 2002 Rules, the Final Rules require that the plan administrator provide the covered individual with the right to receive, free of charge, paper documents.  Covered individuals also must be able to “globally” opt out of electronic delivery.  In this connection, the plan administrator must implement “reasonable” opt-out administrative procedures, which must not present undue barriers to covered individuals electing to opt-out.

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The Final Rules reflect the fact that most employers can, and do, effectively communicate with employees electronically.  While the Final Rules apply only to retirement plans, the Department of Labor left open the possibility for more flexible rules for health and welfare plans in the future.

If you have any questions, please feel free to contact a member of AGG’s Employee Benefits team.