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Ask the Experts November 30, 2021
Satisfying Electronic Disclosure Requirements for SPDs to New Hires
Experts from Groom Law Group and CAPTRUST answer questions concerning retirement plan administration and regulations.
Reported by PS
“In the past, we have been providing a hard copy summary plan description (SPD) to all our new employees in their new hire packet as part of our onboarding process; however, we are looking to reduce the amount of paper we send to employees. We are thinking of including a notice in the new hire packet, that provides a link to a website where the SPD can be electronically accessed by participants. Would this be compliant with the Department of Labor’s (DOL) regulations regarding electronic disclosure with respect to new hires?”
Charles Filips, Kimberly Boberg, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:
As you know, the administrator of a benefit plan covered by the Employee Retirement Income Security Act (ERISA) must provide certain disclosures and documents to participants and other specified individuals at stated times or when certain events occur. When providing these documents, the administrator must “use measures reasonably calculated to ensure actual receipt of the material by plan participants.” In 2002, the DOL provided two safe harbors that would permit an administrator to electronically furnish documents and still be deemed to satisfy ERISA’s disclosure requirements. The DOL’s 2020 final rule on electronic disclosures created a new electronic delivery safe harbor that provides significantly more flexibility in this area.
The DOL appears to anticipate the scenario you describe in its discussion of providing a paper initial notice of internet availability to plan participants as follows:
“This initial notice must explain that covered documents will be provided electronically to an electronic address, identify the specific electronic address to be used for the individual, include any instructions to access the documents, include a notice that materials may not be available for more than a year or, if later, after the posted document has been superseded by a subsequent version of the document, and an explanation of the rights to request a paper version of any document and the right to opt out of electronic delivery globally. This paper notice is required both before a plan fiduciary begins to rely on the safe harbor (after its effective date), and when employees are newly hired over time.”
Note the slight, yet significant, difference, however, in what the DOL is describing compared to what you are describing. Whereas your notice provides a link to access the SPD, what this language is stating is that you need to first provide a notice, on paper, that the participant will be emailed/texted at a specific specified email address/smartphone number with the information necessary to access the website where the SPD will be posted. After that you would then email/text the notice (described as a “notice of internet availability” in the final rule) that is similar to what you proposed be included in your new hire packet.
Thus, your process, as outlined, would not be compliant with the language in the final rule. However, as noted, this is a safe harbor, which means that it is not the only method of satisfying the ERISA’s disclosure requirements electronically, though an administrator who complies with any of the DOL’s electronic disclosure safe harbors will be deemed to have satisfied those disclosure requirements. Thus, before you abandon your proposed process, you may wish to contact ERISA counsel well-versed in such matters to determine whether your proposed method might satisfy ERISA disclosure requirements or could be tweaked to be compliant.
NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.
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