On Oct. 23, 2019, the Department of Labor (DOL) issued a proposed rule to significantly reduce the costs and burden associated with furnishing many of the recurring (and most costly) ERISA required disclosures. This is in response to Executive Order 13847 issued by President Trump on Aug. 31, 2018, which focused on the concern that high costs and complex regulations discourage employers, especially small employers, from offering retirement plans to their employees. The order specifically directed the DOL to review whether regulatory or other actions could be taken to improve the effectiveness of required notices and disclosures, and reduce their cost to employers.
The proposed rule provides a new, alternative electronic method for furnishing certain disclosures for retirement plans (unfortunately, the proposed rule does not apply to welfare plans). The proposed rule does not change or replace the DOL’s current safe harbor for electronic delivery, e.g., emailing participants and beneficiaries plan documents, so plan administrators who wish to continue that practice may do so.
For employers with retirement plans who have been seeking a more flexible and cost-saving approach, this new rule would provide just that.
The proposed rule would allow retirement plans (or sponsoring employers) to use websites to make available any document required to be furnished to participants and beneficiaries (e.g., pension benefit statements, summary annual reports, and summaries of material modification) other than those documents that must be furnished upon a participant’s or beneficiary’s request. For documents that may be posted online under the proposed rule, administrators will generally need to provide each covered individual a notice of availability for each covered document. For example, if a plan were required to provide eight different documents in a given year, under the proposed rule the administrator would have to furnish to covered individuals eight notices of internet availability. The proposed rule provides the deadline for furnishing a notice of availability and the content requirements for such notices (e.g., a title or subject line that reads, “Disclosure About Your Retirement Plan”). The proposed rule also describes the manner in which these notices must be furnished. There are also standards that would apply for the internet websites themselves. For example, plan administrators would be responsible for ensuring the establishment and maintenance of the websites.
In addition, employers will have to (1) keep documents online until superseded by newer versions; (2) make sure the documents are in an easy to understand format and suitable for reading online and being printed; and (3) make the documents electronically searchable. Overall, the proposed rule provides employers a much-needed and long-overdue alternative to the distribution of paper documents.
Recognizing the significant flexibility and cost-saving features the proposed rule would provide employers, we will be monitoring its status closely. In the meantime, interested parties may comment on the proposed rule through Nov. 22, 2019. While employers cannot rely on the proposed rule until it is finalized, it is promising to that see that relief from high costs and burdensome regulations may be on the horizon.
For questions or more information, please contact one of Taft’s ERISA attorneys.