Employers have struggled for years with how to comply with the ERISA mandates requiring “effective” communications of plan terms but wishing to communicate those messages electronically. While those goals are not necessarily mutually exclusive, the U.S. Department of Labor (DOL) guidance historically required those plan communications to be delivered by paper. Even when the DOL offered some additional leeway, it was not consistent with what many employers are looking for in the current digital era.
Recent DOL guidance on electronic communications for retirement plans provides a roadmap more employers may find palatable.
Prior safe harbor for employer plans communications
Prior DOL guidance provides a safe harbor for employers who want to deliver plan communications to employees electronically. Clients may ask their account team for the Lockton guide, Electronic Distribution of Welfare Benefit Plan Required Documents, which gets into the details. Note that this is a safe harbor – not the sole method employers are permitted to use.
In a nutshell, the DOL safe harbor stipulates electronic communications can meet the standard in the following circumstances:
1. For employees who use the employer’s computer network as an integral part of their employment duties: (It does not apply to those who do not, even those who have access to a computer terminal or stand-alone kiosk connected to the employer network.)
- Issue a notice about the electronic disclosure each time an electronic disclosure is made.
- Ensure the electronic disclosure method is resulting in “actual receipt.”
- Present the disclosure in a manner consistent with applicable style, format and content requirements for such documents furnished in paper format.
- Where relevant, the plan administrator must endeavor to ensure the confidentiality of any personal information.
Lockton comment: This is relatively easy for employers whose employees use company computers as part of their daily work requirements. The employers can send emails with the required information and are able to document the receipt of that information via work email.
2. For employees who do not have access to the employer’s computer network as an integral part of their duties, including former employees, retirees, COBRA beneficiaries, etc.
- Obtain affirmative consent to electronic disclosure from the individuals to whom the disclosure is made.
- This consent must include an additional disclosure. To make their consent valid, these individuals, prior to consenting, must be furnished a statement indicating:
- The types of documents to which the consent would apply (e.g., a summary annual report, a summary plan document, etc.).
- Consent may be withdrawn at any time.
- The procedures for withdrawing consent and updating email addresses, as applicable.
- The right to request and obtain paper copies of any documents, free of charge.
- Any software or hardware requirements for accessing and retaining the documents.
As a practical matter, this requirement is difficult for most employers to meet and many just move ahead with paper communications. Therefore, employers continue to seek ways to meet their communication requirements in an electronic format.
New safe harbor for retirement plans
The DOL recently published rules for an additional safe harbor method for retirement plans that will permit posting of the information on the employer website if additional standards are met. The new safe harbor permits the employer to post the information on its website and meet the effective communication standard. To meet that standard see the alert from the Lockton Retirement Services group for the details.
The safe harbor is detailed and still contains a requirement, that at least at the outset, there must be a paper form indicating the information will be provided electronically going forward and providing the option to elect paper documents. That still may result in a dual system for some employers where some employees might require paper documents. However, we suspect most employees will opt for electronic disclosure.
Application to welfare plans
The new guidance specifically provides that the new safe harbor does not apply to welfare benefits plans due to some different communication requirements for welfare plans that do not apply to retirement plans. Nevertheless, this is still good news for many welfare plans – at least until welfare plans have similar guidance issued. We expect similar guidance at some point, but it is not clear when those rules will be released.
There is no ERISA standard that plan information be provided to participants in a specific manner; rather, the obligation is that the information be provided in a manner that is “effective.” What a safe harbor provides is a method to provide communications that will automatically meet the “effective” standard. That does not mean other options are not effective, only that they do not meet the safe harbor for automatic compliance.
There is very little enforcement activity with respect to the dissemination of the plan communications, unless it comes up in the course of some other investigation. Therefore, the main concern for employers is whether the employees understand the information and can rely on it. If that information is not effectively communicated, that can be held against the plan and the plan administrator in claim disputes for benefits. The communications, therefore, must meet the effective communication standard as a practical matter, not just as a technical compliance matter. If the communications are effective, any means of communication will work.
What these new rules provide, therefore, is another practical method for employers to consider in the effective distribution of plan communication. It might not meet the safe harbor standard that most employers would like. Nevertheless, as the DOL has indicated that these rules will work for retirement plans, some employers may wish to consider their use for their welfare plans, even if not a safe harbor.