Temporary unavailability due to website maintenance or unforeseeable events or circumstances beyond the control of the administrator will not be non-compliant with the safe harbor, as long as the administrator has electronic delivery procedures in place, and takes prompt action to ensure the covered documents become available as soon as practicable following the time the administrator knows or reasonably should know that the covered documents are temporarily unavailable can still choose to use the prior safe harbor for electronic disclosure under 2002 regulations, or if they do not use an electronic disclosure safe harbor, can choose to provide paper disclosures via mail or hand-delivery.
These new regulations apply to the disclosures that must be made by the plan administrator, which is often the employer, but employers that have designated a different plan administrator (e.g., a committee or an ERISA 3(16) administrator) should ensure that the administrator complies with applicable requirements if implementing the new safe harbor. The new rules do not change the timing requirements for ERISA disclosures, so plan administrators should be sure to continue complying with applicable deadlines, even if taking advantage of the new safe harbor. The new safe harbor does not yet apply to health and welfare plans, although the Department of Labor is considering expanding the rules in the future.
Who and What is Covered
A “covered individual” is a participant, beneficiary, or other individual entitled to covered documents and who, when he or she begins participating in the plan, as a condition or employment, or otherwise, voluntarily provides the employer, plan sponsor, or plan administrator (or appropriate designee) an email address or smartphone number at which the covered individual may receive a written notice of internet availability (“NOIA”) of a covered document. If the employer assigns an employee an email address for employment-related purposes (but not solely for the purpose of delivering covered documents), the employee is treated as if he or she provided the email address.
A “covered document” includes any document or information required to be furnished under Title I of ERISA (e.g., summary plan description, summary annual report, QDIA notice, auto enrollment notice), but not any document or information that must be furnished only upon request (e.g., Form 5500, plan document –but these can still be distributed electronically under the prior safe harbor). A covered document would also presumably include any other notifications for which there is a general fiduciary duty to disclose under Title I, such as notices regarding changes in plan terms that would impact participants’ decisions with respect to the plan (e.g., COVID-19 distribution options being added).
Initial Notice of Default Electronic Delivery
Before the first NOIA or emailed covered document is sent to covered individuals, the administrator must first provide a easily-understood initial notification –on paper –that covered documents will be furnished electronically, and which includes the following information: (i) the email address that will be used for the individual; (ii) any instructions necessary to access the covered documents; and (iii) the statements in items (5) –(7) of the NOIA contents below. Note, however, that a new initial notice is not required when changing recordkeepers if a covered individual is already receiving electronic disclosures pursuant to the new safe harbor (and thus has already received an initial notice).
Two Ways to Take Advantage of Safe Harbor
The new safe harbor allows administrators to provide electronic disclosures either by providing a NOIA that directs employees to a website, or by emailing the covered document to the employee directly. The requirements for each method of delivery are described in more detail below. Regardless of which method an administrator uses, the initial notice must be provided in paper form.
Requirements of Notice of Internet Availability/Website Delivery
Contents of NOIA
The NOIA must be written in an easily-understood manner and furnished to the email address or smartphone number of each covered individual. The notice must contain only the information below, although it can contain pictures, logos, or similar elements, as long as they are not misleading or inaccurate.
Prominent statement (e.g., title, subject, or legend) that states “Disclosure About Your Retirement Plan.”
Statement that reads “Important information about your retirement plan is now available. Please review this information.”
Identification of the covered document by name, and a brief description if identification by name does not reasonably convey the nature of the covered document.
Website address, or hyperlink to the address, where the covered document is available.
The web address will be sufficient if it leads directly to the covered document or to a login page that provides, or immediately after login provides, a prominent link to the covered document. Note that having to click through an unreasonable number of webpages to reach the document will not satisfy this requirement.
5. A statement of the right to request and obtain a paper version of the covered document, free of charge, and an explanation of how to exercise this right.
6. A statement of the right, free of charge, to opt out of electronic delivery for all covered documents and receive only paper versions, and an explanation of how to exercise this right.
7. A cautionary statement that the covered document is not required to be available on the website for more than one year or, if later, after it is superseded by a new version of the covered document.
8. A telephone number to contact the administrator or other designated representative of the plan.
9. Optional: a statement as to whether the covered individual may or has to take any action in response to the covered document and how to take such action, or that no action is required, provided that the statement is not inaccurate or misleading.
Combined NOIA Permitted for Certain Covered Documents
Generally, a NOIA for each covered document must be furnished separately from any other documents or disclosures. However, a combined NOIA can be provided that includes the required NOIA content with respect to one or more of the following: (i) Summary Plan Description; (ii) any covered document that must be furnished annually (rather than upon occurrence of an event) and does not require action by a covered individual by a deadline; (iii) any other document authorized by the Secretary of Labor by regulation or otherwise; or (iv) any applicable notice required by the Internal Revenue Code if authorized by the Secretary of the Treasury.
Timing of NOIAA
NOIA for each covered document must be furnished at the time the document is made available on the website. If a combined notice is provided, an administrator can meet the NOIA timing requirement if the combined notice is furnished each plan year, within 14 months after the prior plan year’s notice was furnished.
Requirements for Website
The administrator must ensure existence of the website (or other internet or electronic-based information repository, such as a mobile app) referenced in the NOIA. The administrator must take reasonable measures to ensure that the website protects the confidentiality of personal information related to any covered individual.
The administrator must also take reasonable measures to ensure that the covered document:
is available on the website by the date on which it must be furnished under ERISA;
remains available on the website at least until one year after the date it is made available on the website, or, if later, the date it is superseded by a subsequent version of the covered document;
is presented in a manner that is easily understood by the average plan participant;
is presented in a widely available format or formats that are suitable both to read online and printed clearly on paper;
can be searched electronically; and
can be permanently retained in an electronic format.
Temporary unavailability due to website maintenance or unforeseeable events or circumstances beyond the control of the administrator will not be noncompliant with the safe harbor, as long as the administrator has electronic delivery procedures in place, and takes prompt action to ensure the covered documents become available as soon as practicable following the time the administrator knows or reasonably should know that the covered documents are temporarily unavailable.
Requirements for Emailed Covered Documents
If an administrator decides to provide covered documents by email instead of on a website, it must comply with the following requirements:
1. The covered document is sent to a covered individual’s email address no later than the date on which the covered document must be furnished under ERISA.
2. In lieu of the NOIA, the administrator sends an easily understood email that includes:
the covered document in the body of the email or as an attachment;
a subject line that reads: “Disclosure About Your Retirement Plan;” and
the information in (3), (5), (6), and (8) of the NOIA contents above.
3. The covered document is presented in a manner that is easily understood by the average plan participant, in a widely available format or formats that are suitable both to read online and print clearly on paper, is permanently retained in electronic format, and can be searched electronically.
4. The administrator must take reasonable measures to protect the confidentiality of personal information related to any covered individual.
5. The administrator complies with the requirements described below for (i) providing the initial notification of default electronic delivery (except the cautionary statement), copies of paper documents, and the right to opt-out, and (ii) maintaining the covered individual’s email address after termination from employment.
Additional Administrator Responsibilities
Upon request from a covered individual, the administrator must promptly furnish, free of charge, a paper copy of a covered document. Only one copy must be provided free of charge. Covered individuals must have the right, free of charge, to globally opt out of electronic delivery and receive only paper versions of covered documents.
The administrator must promptly comply with an opt-out election. The administrator must establish and maintain reasonable procedures for requests for paper copies and opt-out elections. The procedures must not, in content or administration, unduly inhibit or hamper the initiation or processing of a request or election.
The electronic delivery system must be designed to alert the administrator when an email is invalid or inoperable, and administrator must promptly take reasonable steps to cure the problem (e.g., by providing the NOIA to a secondary electronic address provided by the individual, or asking for a new valid and operable electronic address from the individual). If the problem is not promptly cured, then the administrator must treat the covered individual as if he or she has elected to opt out of electronic delivery, and must promptly furnish a paper copy of the covered document.
If a covered individual for whom electronic delivery is in place terminates employment, the administrator must take reasonable measures to ensure the continued accuracy and availability of the individual’s email address, or obtain a new email address that enables receipt of covered documents after termination of employment.
Key Takeaways
Administrators who wish to utilize the new safe harbor for electronic disclosure should ensure that there are adequate procedures in place that comply with the regulations. Additionally, administrators should review agreements with service providers that facilitate use of the safe harbor (e.g., website designers and recordkeepers) to ensure that the agreement contains provisions related to compliance with the safe harbor. See also: 10 Questions to Ask Before Signing That New Service Agreement.
Administrators should also ensure they have procedures for handling returned emails and mail, including steps that should be taken to locate any missing participants whose notices are returned.
Further, administrators may want to consider requiring additional safeguards (such as online tracking or online participant acknowledgment) to help prove that participants have read and understood the electronic disclosures they receive. The DOL specifically decided not to require a stricter standard on monitoring participants’ use of electronic disclosures but in light of the Supreme Court taking a strict interpretation of when a participant has actual knowledge for purposes of an ERISA claim in Intel Corp. Investment Policy Committee v. Sulyma,No. 18-1116 (S. Ct. February 26, 2020), adding more safeguards may be helpful in the event of an ERISA claim.
If you have questions about the new electronic disclosure safe harbor, please contact a Boutwell Fay attorney.
© Boutwell Fay LLP 2020, All Rights Reserved. This handout is for information purposes only and may constitute attorney advertising. It should not be construed as legal advice and does not create an attorney-client relationship. If you have questions or would like our advice with respect to any of this information, please contact us. The information contained in this article is effective as of June 2020.