New e-delivery rules for employee retirement plans equal significant employer savings

New rules allowing employers to post-retirement plan disclosures online or deliver them to employees by email or smartphone could save companies an estimated $3.2 billion in printing and mailing costs.

The “Default Electronic Disclosure by Employee Pension Benefit Plans under ERISA”, which was released by the federal Department of Labor (DOL) in May and went into effect in July, marks the beginning of efforts to modernize the required plan notice delivery process.

Under the DOL guidelines, employees can decide how they would like to receive their retirement plan information, and they can change their mind at any time.

Keep in mind that the e-delivery option only covers documents or information required by ERISA or DOL regulations.  The Treasury Department and Internal Revenue Service (IRS) have not issued any related guidance for documents or information required under their jurisdiction. Additionally, electronic delivery is only available to retirement plan documents and information, excluding welfare benefit plans.

The following are seven common questions regarding the new guidelines:

 1. How does e-disclosure work?

The plan administrator sends the initial notification about online options to covered employees. After the initial announcement, the administrator can send further details about internet availability (NOIA) to participants, and post-disclosure items on a website or send an email or text with disclosure items attached.

 2. What should the initial notification include?

The initial notification should be in paper form and, in addition to instructions on accessing the plan information electronically, the initial notification should also let covered employees know the material is available on the website for at least a year before a newer document replaces it.

Recipients should also receive instructions on how to request specific information via paper or all information via paper if electronic format is not preferred.

 3. What is a Notification of Internet Availability (NOIA) and how often should it be issued?

A Notice Of Internet Availability (NOIA) must briefly describe or identify the covered document posted online, include a web address or hyperlink to the website, and inform the covered individual of the right to request paper copies or opt-out of electronic delivery altogether.

The final rule permits an annual NOIA to include information about multiple covered documents, saving employers from having to send numerous NOIAs throughout the year. This special rule can only be used for the summary plan description, covered documents or information to be furnished annually, other covered documents authorized by the Secretary of Labor, and any applicable notice required by the Internal Revenue Code.  A separate notice must be provided for any documents not subject to the special rule.

 4. What are the two acceptable e-delivery methods?

• Website posting: Plan administrators can post documents to a website after electronically sending the appropriate NOIA to covered recipients.
• Email delivery: Alternatively, covered documents can be sent directly to the electronic addresses of covered individuals, with the covered documents either in the body of the email or as an attachment to the email.

 5. Who is covered?

Plan participants, beneficiaries, or other individuals who provide their employer, plan sponsor, or plan administrator with an electronic address (email or smartphone number).  An employee who receives an electronic address by their employer for job-related purposes that include, but are not limited to, delivery of covered documents.

 6. What is a covered document?

A covered document includes any information the plan administrator must give participants and beneficiaries under Title 1 of the Act, except for documents upon request.

Examples include notices related to qualified default investment alternative (QDIA), automatic enrollment, summary plan description, summary annual report, annual participant statements and annual participant fee disclosures.

 7. How should an employer check on the status of an electronic address?

Plan administrators must ensure that the electronic delivery system alerts them if a participant’s electronic address is invalid or inoperable. In that case, the plan administrator must attempt to promptly cure the problem or treat the participant as opting out of electronic delivery.

If an employee leaves their job, the plan administrator must take steps to ensure the continued accuracy and operability of the person’s employer-provided electronic address or an alternative electronic address.

Bottom line

While the new guidelines were effective July 27, the DOL has said it would not take any enforcement action against plan administrators who adopted the policies early. In announcing this safe harbor, the agency said it was part of the federal government’s goal during the ongoing COVID-19 crisis to lessen businesses’ burden.

Plan administrators should note that the new guidelines do not replace the current safe harbor option of Wired at Work and Affirmative Consent, which cover IRS and DOL documents. Instead, they provide an additional safer harbor option for employers to send required notices electronically.

Retirement plan administrators who comply with the safe harbor rules for e-delivery will satisfy their statutory duty under ERISA to furnish covered documents to covered individuals. The new safe harbor does not supersede the 2002 safe harbor; the 2002 safe harbor remains in place as another option for plan administrators.

Managing retirement plans can be confusing, and the federal penalties for mismanagement steep. The Boyer & Ritter team is ready to help your company with any questions and ensure your plan complies with all federal and state regulations.

Kimbarley A. Williams, CPA, is a principal at Boyer & Ritter LLC and is co-chair of the firm’s Employee Benefit Plan Services Group. Kim has over 20 years of experience providing audit, accounting and tax services to employee benefit plans, business trade associations, charitable organizations, community foundations and closely held businesses. Contact Kimbarley at 717-761-7210 or kwilliams@cpabr.com.