Current Guidelines for Electronic Communications

The Employee Retirement Income Security Act (ERISA) requires multiple disclosures of information about the plan to participants on a regular basis, a key protection of the act. But the time and expense of doing so make electronic delivery a good option. Electronic delivery can be a boon, as long as plan sponsors follow the rules.

Email and other electronic methods can simplify the disclosure process, provide a more reliable way to deliver information and possibly even reduce administration costs for the plan over time. The Department of Labor (DOL) and the Internal Revenue Service (IRS) issued a series of sub-regulatory guidance and interpretations around using email and other electronic disclosure methods (see “Saxon Angle: The Electronic Age”).

Provided the plan sponsor meets the proper requirements, almost all notices and statements can be delivered to participants electronically, according to Andrew Miller, director of retirement services at the Principal Financial Group, which released a white paper on the subject. “Sometimes, this will entail the participant’s consent,” Miller tells PLANSPONSOR. “Participants must be given the right to receive information via paper, if requested.”

The types of information that can be delivered electronically are notices, disclosures and even quarterly benefit statements, Miller says, as long as the plan sponsor determines that they can successfully meet the requirements.

Employees can consent to this form of communication, or they can be considered “wired at work.”

Electronic disclosure through “wired at work” is for:

• Current employees, participating in a 401(k) or other retirement plan. They must have the ability to effectively access electronic documents at any location where they perform duties as an employee; and
• Employees who use the employer’s electronic information system as an integral part of their duties.

The DOL published a safe harbor for electronic disclosure in 2002. According to The Principal’s white paper “Electronic Delivery of Participant Disclosure Materials: A Guide for Plan Sponsors of 401(k) and Other Participant-Directed Retirement Plans,” the DOL says that as long as a plan administrator takes the steps required in the safe harbor, a notice or other disclosure document sent by email or other electronic means will be considered to have been delivered, as if the information was sent by first-class mail. Plan administrators may rely on the Electronic Disclosure Safe Harbor for delivering plan information that is required to be delivered to participants.

Plan information may be delivered electronically under the Electronic Disclosure Safe Harbor only if all of the following general requirements are met:

• The electronic system used must be designed to reasonably assure actual receipt of the information. This may require periodic reviews or surveys to confirm receipt of the electronically delivered information. Also, the plan administrator should be aware of, and follow up on, undelivered and, to the extent known, unopened emails;
• The system must be designed to protect the confidentiality of the personal information of the participant who receives the information;
• A participant receiving an electronically delivered document must, at the time the document is delivered, be provided with a notice explaining the importance of the document and the right to receive a paper copy of the disclosure;
• Electronically delivered documents must be prepared in the style and format applicable to the particular disclosure;
• Electronically delivered documents must contain all of the information required to be included in the particular disclosure; and
• Upon request, the participant must be provided a paper version of the document.

As long as these requirements are met, plan administrators have flexibility when providing information by electronic delivery methods. For example, a document may be sent in the text of an email or as an attachment to an email. A plan administrator may also send, via electronic or paper mail, a link to the required information on a website.

Although the DOL has not yet offered its opinion, the future could see Facebook or Twitter used as acceptable delivery methods, The Principal says in its paper. In 2011, the DOL requested public comments to assist in determining whether and how to expand or modify current rules regarding the electronic distribution of employee benefit plan information. But such rules are currently not on its regulatory agenda.

“The best thing a plan sponsor can do is make sure it has a well-documented approach to delivering communications,” Miller says. Often, one-size-fits-all is not the best method. Plan sponsors may deliver to all active participants electronically, for example, but deliver to former participants via paper, he adds.

In cases like that, plan sponsors should document the different approaches, Miller suggests. After choosing an approach, the plan sponsor should maintain the communication and keep track of who received it. In some cases, if the plan sponsor has an affirmative consent from participants or is using the “wired at work” method, it does not need to confirm receipt.

Miller points out that it is a good idea for plan sponsors to monitor any emails that bounce back and make sure they have a way to confirm that all required notices are delivered.

“Electronic Delivery of Participant Disclosure Materials: A Guide for Plan Sponsors of 401(k) and Other Participant-Directed Retirement Plans” can be downloaded here.