PLANSPONSOR - June/July 2020 - 47

INSIDE ANGLE
E-Disclosure
Is in Effect
Sponsors may now supply all ERISA-required documents electronically
O
n May 27, the Department of Labor (DOL) issued its
highly anticipated final electronic disclosure rule for
retirement plan communications. The move comes as
employers and workers across the country continue to adjust to
working remotely and embracing technology as never before.
While the rule is not officially effective until July 27,
employers may begin relying on the final rule immediately. The
DOL enabled this via a nonenforcement policy within the rulemaking
to address challenges that were reported in distributing
paper notices due to the ongoing coronavirus pandemic.
With certain refinements, the final rule retains the key
elements of the proposed rule, which the DOL issued last October.
Like the proposed rule, the final rule establishes a safe harbor
for providing " covered documents " to " covered individuals. "
The former term is defined broadly as virtually every document
required to be disclosed under the Employee Retirement Income
Security Act (ERISA), and the latter is defined as participants,
beneficiaries or alternate payees-regardless of employment
status-who provide an electronic address to an employer, plan
sponsor or fiduciary.
The safe harbor relies on a " notice and access " approach. In
this regard, plan fiduciaries are deemed to satisfy their notice
obligations if they post required disclosures to a website and
notify covered individuals of their availability. The new framework
is a welcome alternative to the conditions in the DOL's prior
guidance from nearly 20 years ago that limited use of electronic
disclosure to participants who were either " wired at work " or
provided affirmative consent.
The rule is available only for retirement plan disclosures. The
DOL declined the request of various commenters to broaden the
rulemaking to apply to health and welfare plans, and instead noted
that it would need " more time to analyze unique issues about
health and welfare plans, " including to consult with the other
federal agencies that oversee such plans.
The rule imposes several conditions for safe harbor relief.
At the outset, an initial paper notice of internet availability must
be provided to covered individuals. The notice must explain that
certain documents will be provided electronically and direct
covered individuals to the specific online location. The notice
must also caution covered individuals that documents are not
required to be maintained on the website for more than one
year or after they are superseded by newer versions. In addition,
the notice must inform covered individuals of their right to
request paper versions of any document and opt out of electronic
disclosure altogether.
The rule also imposes a responsibility on employers to
ensure that the website used for plan disclosures meets certain
standards such as sufficient protections for confidential information.
Helpfully, the DOL has clarified that " website " is defined to
include mobile applications and not just traditional web pages.
Overall, particularly due to current events, the rule is
welcome guidance, as many workplaces have transitioned to
electronic mechanisms to address day-to-day needs. Besides the
convenience of electronic disclosure, the rule may increase participants'
engagement with their retirement account, which could
have beneficial results, including lower risks of potential fraud.
Action Steps
For plan sponsors, there are several important questions to
consider prior to applying the rule. As a starting point, it may
be helpful for the sponsor to " inventory " its current electronic
disclosure practices, along with the guidance-i.e., DOL or
IRS-that they rely on to facilitate those practices. While the
rule does not supersede the DOL's 2002 rule, it does supplant
certain intermediary guidance such as Field Assistance Bulletin
(FAB) 2006-03, as to pension benefit statements; FAB 2008-03,
as to qualified default investment alternative (QDIA) notices;
and Technical Release 2011-03R, as to participant level fee disclosures.
Thus, employers that rely on any of the foregoing guidance
for electronic disclosure should consider how to adjust their
practices to conform with the final rule prior to the end of the
18-month transition period.
In addition, employers should work with their plan service
providers to implement the various administrative changes that
will be needed to rely on the rule. For instance, among other operational
items, the rule requires that there be processes in place
to keep track of " opt out " requests and email bounce-backs. It's
important to keep in mind that the DOL could potentially examine
an employer's compliance with the rule in the future. Thus, it may
be helpful to be as proactive as possible in the meantime.
Steve 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.
PLANSPONSOR.COM June - July 2020 47
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PLANSPONSOR - June/July 2020

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