PLANSPONSOR - December/January 2020 - 47

INSIDE ANGLE
A Leap Forward
DOL proposes new electronic disclosure rules
I
t has been nearly two decades since the Department of Labor
(DOL) issued its first guidance on electronic disclosure for
retirement plan communications. Flip phones have been
replaced with smart phones, fax machines soon will be found
only in museums, and society increasingly relies on important
information to be provided electronically. But while our world
looks different than it did 20 years ago, the DOL's electronic disclosure
rules have stayed the same-until now.
In a highly anticipated move, and just in time for 2020,
the DOL has issued its proposed electronic disclosure rule. The
proposed rule aims to modernize the existing electronic disclosure
rules. If finalized, it could pave the way to greater utilization
of electronic disclosure for plan-related communications.
A Safe Harbor
The proposed rule provides a safe harbor for electronic disclosure
based on a " notice and access " approach. Specifically, the
safe harbor would allow plan administrators to satisfy their
ERISA [Employee Retirement Income Security Act] disclosure
obligations by posting required disclosures to a website, provided
the administrator also supply a notice of electronic availability.
Significantly, it surpasses the DOL's 2002 safe harbor, under
which participants had to meet a " wired at work " requirement or
otherwise affirmatively consent before electronic disclosure could
be used. The proposed rule provides broader safe harbor relief
based on supplying " covered documents " to " covered individuals. "
Covered documents generally include any documents a plan
administrator must furnish to participants and beneficiaries
under Title I of ERISA. It should be noted that the proposed rule
does not cover required disclosures for welfare plans, though the
DOL has hinted that it may consider separate guidance for them.
Covered individuals include any participant, beneficiary
or alternate payee, regardless of employment status, who has
provided an electronic address to the employer, sponsor or
administrator. Helpfully, the rule provides that if an individual
has not supplied an address for electronic disclosure, he could
still qualify as a covered individual if the employer assigns him
an electronic address-even if only to satisfy the safe harbor.
Importantly, before relying on the safe harbor for any covered
individual, the administrator must send an initial paper notification
explaining that some covered documents will be supplied
electronically to an electronic address, along with an explanation
of an individual's right to both request a paper version of any
document and opt out of electronic delivery. The proposed rule
also specifically requires the administrators to maintain procedures
governing such requests.
Further Requirements
For safe harbor relief, plan administrators must, e.g., furnish a
notice of internet availability for each covered document provided
electronically. There are several conditions for the content of
such notices, and the DOL gives an extended discussion in the
preamble to the proposed rule as to the expected criteria for
making a document understandable to an average plan participant-e.g.,
use of short sentences and active voice.
The proposed rule imposes a handful of responsibilities
on plan administrators regarding the website to which covered
documents will be posted. For example, the administrator must
ensure that the website meets certain minimum standards,
including protections for confidential information. Further,
among other things, it must ensure that the covered document:
1) is available when required; 2) remains available until superseded
by another version; 3) is searchable; and 4) is in a widely
available format-e.g., a PDF-that allows the document to be
" permanently " maintained.
In seemingly alluding to missing participant issues, the
proposed rule includes a few conditions that relate to maintaining
the accuracy of a participant address and addressing
failed deliveries-i.e., email bounce-backs. In this regard, the
proposed rule requires that the system used for electronic disclosure
include a feature that alerts the plan administrator if there's
an invalid electronic address. The rule would also requires plan
administrators to maintain procedures designed to resolve
invalid addresses-e.g., use a secondary address or treat the individual
as having opted out of electronic disclosure.
Overall, the proposed rule is a positive step toward modernizing
the electronic disclosure framework. Finalizing a rule that
is substantially similar to the proposed rule would go a long way
toward bringing the retirement industry in step with how the
rest of the world works.
Stephen Saxon is a partner with Groom Law Group,
Chartered, and George Sepsakos is a principal with Groom.
Offices for Groom are in Washington, D.C.
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