The U.S. Department of Labor’s (DOL) Employee Benefits Security Administration (EBSA) recently announced the publication of a Final Rule that expands the ability of private sector employers to communicate retirement plan information online or by email.
In a press release dated May 21st, 2020, the EBSA revealed that the Rule would allow employers to deliver disclosures to plan participants primarily electronically. This would in turn reduce printing, mailing, and related plan costs by an estimated $3.2 billion over the next decade. Also, by being provided digitally, disclosures would become more readily accessible and useful for plan participants. The Rule does however allow those who prefer paper disclosures to still receive those kinds of documents.
Prior to this announcement, on October 22nd, 2019, the EBSA issued a proposed rule to allow specific plan administrators that satisfy certain conditions to notify retirement plan participants that required disclosures, such as a plan’s summary plan description, would be posted on a website. This is known as a “Notice-and-access” system. Following that October proposal, plan sponsors and fiduciaries, plan service and investment providers, retirement plan and participant representatives, and other interested parties submitted several hundred written comments.
After review of the comments, the approved version of the Final Rule was constructed to allow retirement plan administrators to furnish certain required disclosures using the proposed “notice-and-access” model. Retirement plan administrators also have the option to use email to send disclosures directly to participants. These administrators must notify plan participants about the online disclosures, provide information on how to access the disclosures, and inform participants of their rights to request paper or opt out completely. The new Rule also includes additional protections for retirement savers, such as accessibility and readability standards for online disclosures and system checks for invalid electronic addresses.
In addition to potentially lowering plan costs, the DOL believes that the Final Rule may also help some employers and the retirement plan industry in their economic recovery from the disruption caused by the coronavirus pandemic. Many retirement plan representatives and their service providers, for example, have indicated that they are experiencing increased difficulties and, in some cases, a present inability to furnish ERISA disclosures in paper form. According to the EBSA, enhanced electronic delivery offers an immediate solution to some of these problems.
The Final Rule was published in the Federal Register on May 27th, 2020, and will go into effect 60 days later (July 27th, 2020).