On May 21, 2020, the US Department of Labor (DOL) and the Employee Benefits Security Administration (EBSA) issued final regulations expanding the use of electronic disclosures for retirement plans. The regulations provide a new safe harbor that will substantially ease the use of electronic delivery by retirement plan administrators to satisfy the disclosure requirements of Title I of the Employee Retirement Income Security Act of 1974 (ERISA). The new regulations were published in the Federal Register on May 27, 2020, and they take effect on July 27, 2020 (though the DOL will not take enforcement action against a plan administrator that relies on the regulations’ new safe harbor before that date).
The new safe harbor contained in the final regulations includes two significant improvements over the safe harbor created by regulations issued in 2002 (the “2002 safe harbor”). The first is the adoption of an “opt-out,” as opposed to an “opt-in,” procedure for retirement plan e-disclosures. In other words, under the new safe harbor, retirement plan administrators can distribute essentially all required Title I ERISA disclosures (save for those that must be furnished only upon request) electronically, even if a participant is neither “wired at work” nor has affirmatively consented to receive e-notices. Second, under the new safe harbor, e-notice can be accomplished either via the “notice and access” method—i.e., sending an email to participants to notify them that a new ERISA disclosure has been posted on a designated website—or by sending ERISA disclosures directly to plan participants, either in the body of, or as an attachment to, an email. Unfortunately, unlike the 2002 safe harbor, the new regulations apply only to retirement plans; they do not apply to welfare plans.
Given that the new regulations can be implemented immediately, they may greatly assist in the provision of retirement plan notifications while many people are still working from home due to the COVID-19 crisis. Even if plan administrators do not take steps to implement the new safe harbor immediately, they may still benefit from the DOL’s Notice 2020-01, which it issued on April 28, 2020, in connection with the pandemic. Notice 2020-01 allows plan administrators to use electronic means to satisfy ERISA Title I disclosure requirements for welfare and retirement plans alike, and it does not expressly require satisfaction of the 2002 safe harbor but only applies during the national health emergency.
The accompanying Legal Update first addresses the DOL’s final 2020 e-disclosure regulations, and then discusses its coronavirus-specific guidance regarding electronic disclosures. This is followed by a discussion of the benefits of increased electronic notice. The Legal Update concludes with practical guidance for plan fiduciaries considering whether to adopt the new electronic notice safe harbor.
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