EBSA’s Wilson: E-Delivery Paper Notices Can Be Deferred Under COVID-19 Relief

Addressing the 2020 NAPA D.C. Fly-In Forum July 21, a key Department of Labor (DOL) official confirmed that the DOL’s deadline relief provided in response to the Coronavirus pandemic also applies to initial paper notices under the DOL’s new electronic disclosure regulations. 

 

Responding to a question from American Retirement Association CEO and NAPA Executive Director Brian Graff about whether plans, in implementing the new e-disclosure regulations, could defer paper notices for 60 days consistent with the relief provided by the DOL, Acting Assistant Secretary for the Employee Benefits Security Administration (EBSA) Jeanne Klinefelter Wilson said that the department will consider plans in compliance if the initial notice is provided via email, as long as there is a good-faith confidence that that communication will be received. Wilson also emphasized that a paper notice will be required as soon as practicable. 

 

The new safe harbor under the DOL’s final e-disclosure rule requires that individuals be furnished a notification on paper that some or all of the plan’s covered documents will be furnished electronically. That initial notice also requires a statement of the right to receive a paper version of covered documents and of the right to opt out of receiving such documents electronically, along with an explanation of how to exercise these rights.

 

As Wilson noted during her presentation, the relief is consistent with the relief that EBSA provided in Disaster Relief Notice 2020-01, extending from March 1, 2020 for up to 60 days after the announced end of the COVID-19 national emergency, that the department would not take enforcement action for delays in furnishing benefit statements, annual funding notices, and other notices and disclosures required by ERISA “so long as they make a good faith effort to furnish the documents as soon as administratively practicable.” 

 

 

Wilson also reviewed the wide range of other regulatory proposals and guidance the DOL has issued in just the past two months, including: 

 

Regarding the factors on selecting plan investments, more specifically environmental, social and governance (ESG) investments, Wilson said it was done to resolve decades of uncertainty on the part of plan fiduciaries and to codify the DOL’s long-standing perspective on weighing non-pecuniary interests. Acknowledging interest in the issue, she said the DOL was looking forward to receiving comments on the proposal.

 

Wilson explained that the proposed exemption provides more flexibility to cover more transactions than existing exemptions, while insisting on adherence to basic fiduciary standards. Additionally, she noted that the DOL envisions that financial institutions and investment professionals that have already developed compliance structures with other regulatory standards, such as the SEC’s Regulation Best Interest, will be able to experience “regulatory efficiencies” in reliance on the new exemption.

 

Wilson also explained how the exemption is broadly available to include recommendations to rollover assets from an employee benefit plan to an IRA and that the preamble makes clear that advice to take a distribution of assets is covered as long as all five elements under 1975 definition are satisfied. She also noted that the DOL no longer agrees with DOL Advisory Opinion 2005-23A, commonly known as the “Deseret letter.” (The DOL withdrew the Deseret letter on June 29.) 

During the question-and-answer period, Graff reiterated that the ARA believes that it’s important for 401(k) plan advisors to maintain relationships with participants on potential rollovers. Graff explained that, for many participants, the only advisor they’ve ever known is their 401(k) advisor, and the ARA believes that it’s very important for advisors to be able to maintain that relationship, but also to do so as a fiduciary. As such, the ARA supports the withdrawal of the Deseret letter, he observed. 

 

Graff further noted, however, that another issue surfaces in relation to Pooled Employer Plans (PEPs) and the proposed exemption. He explained that technically, it appears that advisors of a broker dealer that is a Pooled Plan Provider (PPP) and that forms a PEP would not be able to take advantage of the exemption for rollovers because the broker dealer of the PPP is also the named fiduciary of the PEP, and asked whether that is what was intended.  

 

In response, Wilson noted that the DOL is working on multiple projects that may have overlapping context, and, to address issues like this, the Department issued the June 18

 

Request for Information. While the comment period on that RFI has passed in relation to PEPs, Wilson noted that the department welcomes comments on the proposed investment advice exemption, which is open until Aug. 6, 2020.