(b)lines Ask the Experts – Proper Delivery Method for SPDs

“Per your Ask the Experts column on this issue, I realize we have to distribute Summary Plan Descriptions every five years if amendments to our Employee Retirement Income Security Act (ERISA) 403(b) plan have been made. However, mailing these SPDs, which are fairly large documents, to all our plan participants is incredibly expensive! Could we possibly mail a letter/postcard with a link to where the document could be accessed via our recordkeeper’s website instead?”

Stacey Bradford, Kimberly Boberg, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, vice president, Retirement Plan Services, Cammack Retirement Group, answer:

We have outlined the Department of Labor’s (DOL)’s electronic delivery rules below, but this is a question for which the specific facts and circumstances of your process are important. Regardless of the method of delivery, ERISA-required disclosures, including SPDs, must be distributed to participants in a manner “reasonably calculated to result in actual receipt.”  29 C.F.R. 2520.104b-1(b). 

The DOL regulations provide a safe harbor for the electronic delivery of ERISA disclosures.  29 C.F.R. 2520.104b-1(c). First, eligible recipients are those who fall into one of the following categories:

• participants who have affirmatively consented to electronic disclosure (valid consent must meet certain requirements); or
• participants (A) who have the ability to effectively access documents furnished in electronic form at any location where the participant is reasonably expected to perform his or her duties as an employee AND (B) for whom access to the employer’s or plan sponsor’s electronic information system is an integral part of those duties.

Additional conditions must also be met, including:

• the system for furnishing documents must be “reasonably calculated” to (A) result in actual receipt of the transmitted information and (B) protect the confidentiality of personal information relating to the individual’s accounts and benefits;
• electronically delivered documents must be prepared and furnished in a manner that is consistent with the style, format and content requirements applicable to the particular document; and
• notice must be provided to participants and beneficiaries at the time the document is provided electronically that highlights the significance of the document and notes the right to request a paper copy.

One thing to keep in mind is that different furnishing methods can be used for different plan populations.  So, if you have a population that has the effective ability to access a document at their work station, another population that has affirmatively consented to electronic disclosure and a final population that does not fit into either safe harbor group, you can utilize the safe harbor for those participants that fit into the safe harbor and use paper based disclosures for everyone else.

The DOL has regularly and repeatedly made it clear that the standards set forth in the regulation are a safe harbor, and therefore, are not the exclusive means of satisfying ERISA’s distribution standard. That said, any process that falls outside the safe harbor, including the one you propose, should be evaluated with outside counsel.

We note that, while the DOL regulations are not applicable for a non-ERISA 403(b) plan which chooses to provide an SPD, they do provide helpful guidelines that should be considered if electronic delivery is utilized.

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.