Advocacy
Law and regulation require that certain information is provided to plan participants. But those requirements have not necessarily kept pace with technological and social advances. The Labor Department is now addressing electronic means of disclosure, and an ASPPA webcast discussed some of the nuances of using them.
In the April 22 ASPPA webcast “Electronic Disclosures Made Easy,” Frank Porter, APA, QKA, QPA, Head of Institutional Business Development, Empower Institutional, offered his insights on electronic disclosures and how to use them and stay in compliance with federal rules.
New Safe Harbor Details
The regulations the DOL issued in 2002 provided an optional “safe harbor” electronic delivery method plan sponsors could use to satisfy ERISA’s delivery requirements. In August 2019, the DOL’s proposed electronic disclosure rules were delivered to the Office of Management and Budget (OMB); two months later, the DOL released the rules to the public. (XREF) The rules were delivered in final form to the OMB earlier this month.
The new safe harbor would not replace the safe harbor rules governing electronic disclosure that the DOL issued in 2002, but would provide another way to comply. It may be used to electronically provide any documents that must be furnished by a pension plan under Title I of ERISA; for example:
- disclosure of pension benefit statements;
- summary annual reports;
- summaries of material modification; and
- blackout notices.
The new rules would not apply to:
- any plan documents that an eligible person requests in writing; and
- employee welfare benefit plans, such as plans providing group health or disability benefits.
Before beginning to rely on the new safe harbor, an initial notice must be furnished that informs the individual that:
- electronic delivery will be the default method of delivery;
- he or she has the right to request and obtain a paper version of a covered document, free of charge; and
- he or she has the right to completely opt out of receiving covered documents electronically, and how to exercise these rights.
Actual Receipt
Under ERISA, plan sponsors must use delivery methods “reasonably calculated” to ensure required recipients actually receive required plan documents and information, Porter noted, adding that “ERISA documents must be provided in a way to result in actual receipt.”
More specifically, to qualify for the safe harbor, a plan making electronic disclosures must take appropriate and necessary measures reasonably calculated to ensure that the system:
- results in actual receipt of the documents;
- protects the confidentiality of personal information relating to accounts and benefits;
- provides that the intended recipient must be notified of the significance of the document, if its significance is not otherwise evident;
- involves notification of the intended recipient regarding the right to request a paper version of the document; and
- does not impose a fee for a paper copy if the plan is otherwise required to furnish the document without charge; however, if the plan is otherwise permitted to charge a fee for a document, a fee may be imposed.
Consent
Electronic disclosure is “centered on consent,” Porter noted, and but that doesn’t necessarily spell administrative ease. For many plan sponsors, he said, complying with the “opt in” requirements under those regulations proved to be an administrative challenge.
Now, Porter said, no affirmative consent is required. Electronic disclosures may be made to participants without their specific consent as long the disclosures meet the following requirements:
- the participant has the ability to access documents furnished in electronic form at any location where the participant is reasonably expected to perform his or her duties as an employee; and
- accessing the electronic information system is an integral part of the participant's duties as an employee.
Consolidated Notice of Internet Availability
The new rule permits a plan administrator to furnish one notice of internet availability that covers some, or all, of the following documents:
- summary plan description;
- summary of material modification;
- summary annual report;
- annual funding notice; and
- certain required investment-related disclosures.
In addition, the qualified default investment alternative (QDIA) notice must be furnished each plan year. And if a combined notice was furnished in the prior plan year, a new combined notice must be provided no later than 14 months following the date that the prior year's combined notice was furnished.
The DOL is “honing in on when the document is to be provided,” said Porter.
Advocacy Efforts
Porter also cited the activity by ASPPA and the American Retirement Association (ARA), the organization of which ASPPA is a part, to represent the needs and interests of plan participants and employers as the rules were prepared and refined. He highlighted:
The March 31, 2011 ASPPA submission of a comment letter to the DOL in response to its request for comments on how it can improve its regulations, highlighting electronic disclosure as the default option.
The April 29, 2011 ASPPA submission of a comment letter to the Treasury in response to its request for recommendations on how it can improve its regulations.
The June 6, 2011 ASPPA submission of a comment letter to the DOL in response to its request for information regarding electronic disclosure by employee benefit plans.
The June 14, 2011 ASPPA submission of supplemental comments regarding electronic disclosure to the DOL with a White Paper titled, “Delivering ERISA Disclosure for Defined Contribution Plans: Why the Time has Come to Prefer Electronic Delivery.”
The July 1, 2011 ASPPA submission of a comment letter to the DOL regarding its preliminary lan for reducing regulatory burdens; ASPPA’s recommendation related to the use of electronic disclosure as the default option.
The July 25, 2011 ASPPA submission a comment letter to the Treasury regarding its preliminary plan for reducing regulatory burdens.
The June 12, 2017 Government Affairs meeting with the DOL regarding electronic disclosure of ERISA notice.
The delivery of a report by the ARA and the Investment Company Institute in 2018 to the DOL that estimated that participants could save more than $500 million per year across more than 80 million 401(k) account holders.
The May 21, 2018 Government Affairs meeting with the DOL regarding electronic disclosure of ERISA notices.
The ARA’s Dec.12, 2018 submission of a comment letter to the DOL in response to President Trump’s Aug. 3, 2018 Executive Order providing recommendations on making retirement plan disclosures required under ERISA and the Internal Revenue Code more understandable and useful for participants and beneficiaries, while reducing costs and burdens to employers.
The June 10, 2019 Government Affairs meeting with the DOL regarding electronic disclosure of ERISA notices.
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