Chances are you’ve not yet delved deeply into the Labor Department’s final rule on default electronic disclosure. Regardless, here are some things you might have missed. 

1.  The electronic disclosure default is optional.

That’s right, the new electronic disclosure safe harbor is an additional method of delivery and does not substantively change the 2002 safe harbor. The Labor Department reminds that plan administrators who wish to continue to rely on the 2002 safe harbor for electronic delivery, or to furnish paper documents by hand-delivery or by mail, can continue doing so.

2.  Only a global opt-out is required.

However, plan administrators may offer additional opt-out election options, such as a document-by-document opt out or one based on categories or classifications of covered documents. 

3.  It doesn’t change the timing for disclosures. 

Though at least one commenter suggested that the flexibility of online posting should call for any disclosures affecting covered individuals’ benefits should be posted as soon as reasonably possible after the decision affecting benefits is made, the Labor Department clarified that this rule was about mediums, not timing. They also clarified that the final rule provided no extension to the timing requirements for covered documents.

4.  The final rule’s standard for NOIA readability is less specific.

The Labor Department says that it received “significant commentary” on the readability standard outlined in the proposal, which made specific reference to short sentences, active voice, and the Flesch reading ease score—and those comments were mostly strenuous objections. Those commenters apparently were concerned that the standards would be interpreted as a new legal standard—not only for this final rule’s notices but for other ERISA disclosures, such as the SPD. 

The final rule requires only that the NOIA be written in a manner calculated to be understood by the average plan participant—though the Labor Department notes that it will “continue to analyze readability and other measures in connection with the responses to the RFI on general disclosure issues that was published with the proposed rule.” In the meantime, the rule says that plan administrators may look to the Department’s SPD regulations for guidance on the meaning of “written in a manner calculated to be understood by the average plan participant.”

5.  You can’t bury the document(s).

In addition to the readability of the document itself, the final rule states that covered documents “must be presented on the website in a manner calculated to be understood by the average plan participant.” Moreover, the Labor Department notes that a website address or hyperlink must be “sufficiently specific” to provide ready access to a covered document.[i]

6.  Only one paper copy must be free.

Paragraph (f)(1) of the final rule clarifies that only one paper copy of any specific covered document must be provided free of charge under the safe harbor. Beyond that, the rule notes that “whether the plan charges for additional copies of the same covered document depends on the terms of the particular plan and other applicable provisions of ERISA and regulations thereunder, and is outside the scope of this regulation.” As for how quickly that paper must be delivered, “the Department expects that the plan administrator will furnish the copy to the covered individual as soon as reasonably practicable after receiving the request.”

7.  Non-delivery = opt out.

“If a plan administrator learns of an invalid or inoperable electronic address (e.g., the email is returned as undeliverable or “bounces back” and the problem is not promptly cured), the plan administrator must treat the covered individual as if he or she had elected to opt out of electronic delivery under paragraph (f)(2).”

8.  A change in recordkeepers isn’t a restart.

Cautioning that the same ERISA fiduciary obligations that apply when changing recordkeepers responsible for furnishing paper disclosures will apply when changing recordkeepers responsible for furnishing electronic disclosures, the final rule explains that the Labor Department is “of the general view that, to the extent a plan participant or beneficiary is a “covered individual” who already is receiving disclosures electronically pursuant to the safe harbor (and therefore already received an initial notice and is accustomed to the notice-and-access delivery method permitted by this safe harbor), a new initial notice is not necessary.”

9.  You don’t have to wait.

Noting that the final rule is not effective or applicable until 60 days after its publication, the Labor Department notes that, as an enforcement policy, it “will not take any enforcement action against a plan administrator that relies on this safe harbor before that date. The Department’s decision to provide this non-enforcement policy supports the Federal government’s broader effort to respond to COVID-19.”

10.  The rule may be final, but it’s not necessarily ‘done.’

The Department is analyzing responses to the RFI to determine whether regulatory or other action, in addition to the final rule, should be taken to “further enhance the effectiveness of ERISA’s disclosures.”

[I] More specifically, the final rule explains that “a link that requires a covered individual to click through an unreasonable number of webpages to find a covered document would not satisfy the standard.”

Original Author:  Nevin E. Adams, JD

Source: National Association of Plan Advisors

Additional information:  Fact Sheet: Retirement Plans Electronic Disclosure Safe Harbor Rule

Note: This information is intended as a service to our clients and is not intended to provide legal guidance. You should check with your legal counsel to determine any information applicable to your particular situation.