The Department of Labor recently expanded the ability of qualified retirement plans to provide certain communications to participants and beneficiaries online or via email, in large part to reduce the cost to plans of participant communications and to facilitate communication with participants during the COVID-19 crisis. This change is set forth in final regulations adopted May 21, 2020. The long-anticipated new safe harbor rule allows plans that meet the safe harbor conditions to use electronic delivery as the default method to communicate with participants. Participants wanting to receive paper notices will need to opt out of electronic delivery.
NEW DEFAULT ELECTRONIC DELIVERY SAFE HARBOR
Under the new rule, the plan sponsor must provide participants with an initial paper notice communicating that future notices will be provided electronically to a specified email address or smart phone number, and must describe the participant’s right to opt out of electronic notices. Further, a plan may not impose a cost for participants to elect to receive paper notices, the procedure to do so must not be unnecessarily complicated, and the plan must allow a participant to opt out of specific electronic notices or all electronic notices. The initial paper notice must be provided to all employees intended to be covered under the new safe harbor, including employees already receiving electronic notices under the 2002 safe harbor rule for electronic notices (which is still available).
A plan must have a valid email address for each participant to be covered by this safe harbor, which can be a work email assigned by the employer or a personal email provided by the participant, as long as the email address is utilized for some employment-related purpose in addition to plan communications. A smart phone number capable of connecting to the internet may also suffice but is subject to additional requirements. The plan must also have a system to alert it to email addresses that are not valid and when made aware of an invalid address, the plan must identify another valid address for that participant or treat the participant as electing to receive paper notices.
A plan sending a notice directly via email can include the notice in the body of the email or as an attachment. A plan posting a notice on a website will be required to furnish a Notice of Internet Availability (NOIA) that describes the notices to be posted online, provides a link to the website, and restates the participant’s right to request paper copies of the covered notices, among other things. A combined NOIA may be furnished at least annually for certain disclosures.
The final rule becomes effective 60 days following its May 27 publication in the Federal Register, but the DOL has indicated it will not take enforcement action against plans relying on the new safe harbor prior to its effective date.
The Department of Labor’s fact sheet describing the final rule is available here.
The full text of the final rule is available here.