Is there a better way for employers to provide required retirement plan disclosures to participants? According to the U.S. Department of Labor (DOL), clearing the way for eDelivery would deliver both immediate and long-term benefits to retirement plan sponsors and participants. Here’s a brief look at the DOL’s proposed safe harbor rule, the logic and numbers behind it, and when it might become reality.
eDelivery rules for ERISA plans
Officially titled “Default Electronic Disclosure by Employee Pension Benefit Plans under ERISA,” the DOL’s proposed rule would provide legal protection to plan sponsors who follow the Employee Benefits Security Administration guidelines laid out in the rule.
The proposed rule would establish new safe harbor guidelines for ERISA plans regarding electronic distribution of required plan disclosures, such as annual notices and summary plan descriptions.
It reflects a straightforward process that the DOL calls notice and access. The plan sponsor sends out an email or text message alert that an important plan disclosure for participants or beneficiaries is available online (formally known as a notice of internet availability).
Each of these messages would provide a link to the website where the notice has been posted. A separate notice would be required every time a new disclosure is posted to the site.
What else is required for acceptable eDelivery?
The DOL has set specific guidelines, some broad and some narrow, for how safe harbor-eligible disclosures would work. For instance:
- eDelivery would be available only for participants and beneficiaries who have a current personal email, work email, or cell phone number on file with the plan sponsor or administrator.
- The safe harbor would apply only to retirement plan disclosures required by Title I of ERISA for delivery direct to participants. Any documents normally furnished on request would still need to be available on paper.
- Participants would be able to opt out of eDelivery, if they prefer paper notices. However, for the first time, eDelivery could be used as the default distribution method.
- Every outgoing message would include a subject line or headline with the words “Disclosure about your retirement plan.”1
No effect on the current, limited safe harbor for electronic disclosure
The current safe harbor rule, which was published in 2002, applies only to participants who can effectively access electronic documents at work, as well as participants and beneficiaries who’ve consented to receive disclosures electronically. The proposed rule wouldn’t change any aspect of this provision, which would remain available going forward.
The potential participant experience and business advantages of eDelivery
The DOL stresses that eDelivery could transform the current disclosure process into something more comprehensive and effective over time, citing the possibility for:
- Interactive communications
- On-demand multimedia education
- Real-time updates
- Assistive technologies
- Online translation
They also cite the potential for new efficiencies and cost savings across the retirement system, as website postings and email outreach replace print production and mailing expenses.1
Participants may even save more in their retirement plans
In fact, the DOL’s rationale seems to reflect the sentiment of eDelivery supporters overall. The consensus opinion is that leveraging the available technology may save some plan sponsors money. There’s also a strong belief that, by improving the quality of plan communications, the adoption of eDelivery could, in theory, also help encourage participants to save more.2
Opponents of eDelivery maintain that paper delivery should remain the default option, since participants are more likely to receive and open disclosures that arrive by regular mail. In addition, some claim that print is just a more readable medium for financial disclosures.
What comes next for the DOL’s new rules for retirement accounts?
A 30-day comment period on the proposed safe harbor—as well as a request for information on other measures the DOL could take to improve the effectiveness of ERISA disclosures—closed on November 22, 2019.
If enacted as described in the proposed rule, the safe harbor would be available as of the first day of the first calendar year after the regulation is published in the Federal Register. This would make January 1, 2021 the earliest possible effective date.
However, keep in mind that the DOL has requested comments on whether this applicability date should be sooner or later. And, if support is vocal enough, we could see the door opening to widespread eDelivery sometime in 2020.
1 “Default Electronic Disclosure by Employee Pension Benefit Plans under ERISA," the Federal Register, 10/23/19. 2 Covered in a joint letter to the U.S. Department of Labor signed by the American Bankers Association, the American Council of Life Insurers, the American Retirement Association, the ERISA Industry Committee, the Investment Company Institute, the Securities Industry and Financial Markets Association, the SPARK Institute, and the U.S. Chamber of Commerce.
The content of this document is for general information only and is believed to be accurate and reliable as of the posting date, but may be subject to change. It is not intended to provide investment, tax, or legal advice. Please consult your own independent advisor as to any investment, tax, or legal statements made herein.
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