Final electronic delivery guidance for plan administrators
This morning the U.S. Department of Labor issued their final rule creating a new, additional method for plan administrators to use to deliver certain benefit plan documents to participants and beneficiaries electronically. Below is a quick overview:
- New rule = “notice and access” option. The new rule is optional and allows administrators who satisfy certain requirements to provide participants and beneficiaries with a notice that certain disclosures (e.g., 401(k) plan summary plan description) will be made available on a website, or to furnish disclosures via email. Individuals who prefer to receive disclosures on paper can request paper copies and opt out of electronic delivery.
- New rule effective date. The new rule is effective 60 days after the rule is published in the Federal Register. This rule has not been officially published yet. I anticipate it will be published on May 27, 2020, so I think it will likely be effective around July 27, 2020.
- New rule only applies to “covered individuals.” The regulation defines a “covered individual” for purposes of the rule as a participant, beneficiary, or other individual entitled to covered documents and who—when he or she begins participating in the plan, as a condition of employment, or otherwise—provides the “employer, plan sponsor, or administrator (or an appropriate designee of any of the foregoing)” with an electronic address. This includes an email address or internet-connected mobile-computing-device (e.g., smartphone) number, and is intended to be broad enough to encompass new and changing technology.
- The existence of an electronic address for notification to a covered individual is critical to the effective implementation of a notice-and-access framework, much like a mailing address is critical to delivery of a paper document.
- The final rule offers plan administrators a variety of ways to comply with the condition to obtain an electronic address for each covered individual. This provision, for example, is satisfied if the company provides plan participants an electronic address because of their employment. This requirement also is satisfied if an employee provides a personal electronic address to the plan administrator or plan sponsor, for example, as part of the job application process or on other human resource documents. In addition, a plan administrator or service provider can request an electronic address in plan enrollment paperwork or to establish a plan participant’s online access to plan documents and account information.
- New rule only applies to 401(k) and pension plan documents. The new rule can generally be used to furnish any pension benefit plan (which would include 401(k) plans) document that a plan administrator is required to furnish under Title I of ERISA, e.g., summary plan descriptions, summary of material modifications, participant fee disclosures, etc. This means the rule does not apply or help with health and welfare plan disclosures.
- Prior/current electronic delivery rule. Currently, plan administrators must use delivery methods reasonably calculated to ensure actual receipt of information, e.g., in-hand delivery, sending by first class mail, etc. Back in 2002, the DOL issued guidance (an optional safe harbor) that also allows plan administrators to send documents to participants and beneficiaries electronically – without their consent – if they are “wired at work,” i.e., they use a computer as part of their job. This prior/current electronic delivery option remains in place and you can continue to use it, but you also have the new option (i.e., notice and access) available now too.
- New rule has other requirements. As I mentioned above, the new rule was literally issued this morning so we are still reading/processing, but there are additional requirements beyond those that I’ve stated in this quick summary.
Also, on a completely unrelated note, in case you are interested, we filed a motion for leave to file an amicus brief last week on behalf of the State Chamber and Hobby Lobby in the federal lawsuit challenging the Oklahoma state PBM law. You can read about our filing in this Law360 article.