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Overview

  • The U.S. Department of Labor (Department) announced a proposed rule on October 22, 2019 to allow retirement plan disclosures to be posted online to reduce printing and mail expenses for job creators and make disclosures more readily accessible and useful for America’s workers.
  • The proposal:
    • Offers more disclosure options, which will benefit retirees, workers, and employers by enhancing communication regarding retirement savings.
    • Saves an estimated $2.4 billion net cost over the next 10 years for ERISA-covered retirement plans by eliminating materials, printing, and mailing costs associated with furnishing printed disclosures.
    • Ensures workers’ rights to make the decision on how to best access their retirement information.
  • Reflecting modern internet technology, the proposal offers a new, voluntary safe harbor for employers who want to make retirement plan disclosures accessible on a website, rather than sending volumes of paper documents through the mail.
    • Plan participants would be notified that information is available online, including:
      • Instructions for how to access the information.
      • The right to paper copies of information.
    • The proposal includes additional protections for retirement savers:
      • Standards for the website where disclosures will be posted and
      • System checks for invalid electronic addresses.
    • When the conditions of the safe harbor are met, plan administrators may furnish documents electronically unless participants affirmatively opt out.

Strengthening Retirement Security in America

  • On August 31, 2018, President Trump issued Executive Order (EO) 13847, entitled Strengthening Retirement Security in America.
  • The EO directs the Department to complete a review of actions that could be taken through regulation or guidance, or both, to make retirement plan disclosures required under ERISA more understandable and useful for participants and beneficiaries, while also reducing the costs and burdens they impose on employers and other plan fiduciaries responsible for their production and distribution.

Background

  • There are approximately 700,000 retirement plans covered by ERISA.
  • ERISA requires retirement plan administrators to furnish multiple documents per year to participants and beneficiaries.
  • Plan administrators must use delivery methods reasonably calculated to ensure actual receipt of the documents.
  • The Department amended the general standards for delivery of required disclosures in 2002 by establishing a regulatory safe harbor for the use of electronic media (the 2002 safe harbor). See 29 CFR 2520.104b-1(c).
  • Stakeholders have raised concerns with the effectiveness of the 2002 safe harbor, characterizing its conditions as hindering broader use of electronic delivery especially as the default method of delivery of retirement plan documents.

Evidence Suggests Nearly Universal Access to the Internet in U.S. Among Workers

  • A 2017 survey by the U.S. Census Bureau found that 87 percent of the United States population lives in a home with a broadband internet subscription.
  • A 2018 study concluded that 93 percent of households owning defined contribution accounts had access to, and used, the internet in 2016.
  • A 2015 survey of retirement plan participants’ online habits indicated that 99 percent reported having access at home or work, and 88 percent of respondents reported accessing the internet on a daily basis.

Proposed Rule Permits Default Electronic Delivery

A plan administrator would be permitted to furnish documents by means of electronic delivery to plan participants and beneficiaries with valid electronic addresses unless they affirmatively opt out of electronic delivery.

Proposed Rule Adopts Optional “Notice-and-Access” Style of Electronic Delivery

  • Retirement plan administrators would satisfy their obligation to furnish ERISA-required disclosures by making the information accessible online and by furnishing to participants and beneficiaries a notice of internet availability of these disclosures.
  • A notice of internet availability would be sent to the electronic address of the participant, for example to the participant’s email address.
  • A notice of internet availability must include, among other things, a brief description of the document being posted online, a website address where the document is posted, and instructions for requesting a free paper copy or electing paper delivery in the future.
  • A notice of internet availability generally must be sent each time a retirement plan disclosure is posted to the internet website. To prevent “email overload,” the proposal allows a notice of internet availability to incorporate or combine other notices of internet availability in limited circumstances.
  • The framework in the proposal is similar to the approach the Securities and Exchange Commission takes for certain investor disclosures and is intended to align with Internal Revenue Service rules about delivering retirement plan disclosures electronically.

Proposed Rule Protects Participants Who Prefer Paper or Lack Access to the Internet

  • A plan administrator may not default a participant into electronic delivery unless the participant has an electronic address.
  • A plan administrator may not default a participant into electronic delivery without first notifying the participant by paper that some or all retirement documents will be furnished electronically to the electronic address, of the right to request and receive paper copies or to opt out of electronic delivery altogether, and of the procedures for exercising such rights.
  • Each notice of internet availability must remind the participant of his right to request and receive paper, of the right to opt out of electronic delivery altogether, and the procedures to exercise such rights.
  • A plan administrator must ensure that the system for furnishing the notice of internet availability is designed to alert the administrator of an invalid or inoperable electronic address. In the event an administrator is alerted to an invalid address, the administrator must treat the individual as opting out of electronic delivery if the problem is not promptly cured.
  • When a worker leaves his or her job, the plan administrator must take steps to ensure the continued accuracy of the electronic address on file.

Proposed Rule Would Generate Significant Cost Savings to Plan Sponsors

  • The Department expects that the proposed rule would result in cost savings of approximately $2.4 billion in the next ten years for ERISA-covered retirement plans by reducing printing and mailing costs.
  • Millions of participants and beneficiaries would benefit if cost savings are passed on to them.

Notice and Access Delivery Could Improve the Effectiveness of Retirement Disclosures

  • A notice-and-access framework allows for retirement plan disclosures on a continuous-access website that workers could access at their convenience.
  • Although the rule gives plan fiduciaries a great deal of discretion on presentation style, the notice-and-access framework could well encourage interactivity, just-in-time notifications, layered or nested information, word and number searching, engagement monitoring, anytime or anywhere access, and potentially improved visuals, tutorials, assistive technology for those with disabilities, and translation software.
  • These features may be used to improve participants’ disclosure experiences.
  • A notice-and-access framework permits a protected point of access, such as requiring a secure password for logging into a plan account.

Related Request for Information

  • The proposed rule would improve the effectiveness of retirement disclosures primarily by focusing on how they are delivered to participants and beneficiaries.
  • The preamble to the proposal contains a separate, but related Request for Information (RFI).
  • The RFI solicits information, data, and ideas on additional measures (beyond the proposed electronic delivery safe harbor) the Department could take in the future to improve the effectiveness of ERISA disclosures, especially with respect to the design and content of ERISA disclosures.