ARA Weighs in on E-Delivery Proposal

On Nov. 22, the American Retirement Association weighed in on the Labor Department’s e-delivery proposal.

The proposal – which fulfills a key component of President Trump’s August 2018 retirement security Executive Order – would allow plan administrators who satisfy specified conditions to provide participants and beneficiaries with a notice that certain disclosures will be made available on a website. It was unveiled roughly a month ago.

In a letter to the Honorable Preston Rutledge, Assistant Secretary for Employee Benefits at the Employee Benefits Security Administration, the ARA cited its longstanding support for the DOL’s initiatives regarding electronic delivery of ERISA disclosures. The comment letter also noted that goals of making retirement plan disclosures more understandable and useful, reducing administrative burdens imposed on employers and other plan fiduciaries, and protecting access to paper documents where preferred, or where Internet access is unavailable were “not mutually exclusive.”

Emphasizing upfront its belief that the DOL coordinate with the Department of the Treasury and the Pension Benefit Guaranty Corporation in developing a uniform approach that can be used for all required disclosures in an ERISA-covered plan, the ARA supported the approach put forth by the Labor Department in adding an additional safe harbor for electronic disclosure rather than replacing the current safe harbor. “Preferred compliance methods will vary among plans and we believe that the flexibility afforded by alternative safe harbors will be welcomed by plan sponsors,” the ARA explained.

Recommend ‘Ed’

While backing the proposal’s “notice and access” approach to electronic disclosures as “an efficient way for plan administrators to satisfy their document and disclosure obligations by posting required disclosures on a website and furnishing an electronic Notice of Availability,” the ARA made the following recommendations:

• Employers not be required to provide paper copies of the notice of default to those who have already opted to receive electronic disclosures.
• A participant’s choice to opt out should apply “…to all required notices and disclosures furnished to a particular individual,” rather than allowing participants to mix delivery choices.
• Employers should be required to ensure that participants have received the Notice of Availability, but rather believes that these notices should be subject to existing standards for furnishing required ERISA documents (which, regardless of delivery method, require a reasonable certainty of receipt).

“The ARA believes requiring employers to ensure that a required document is received and read – when this has not been required for paper documents -- would surely substantially increase cost, time and liability for plan fiduciaries,” the letter says.

The ARA commented that it supports the proposal’s reliance on e-mail addresses and access to a website, but cautioned that the proposal should provide for “future incorporation of technological developments in a manner that will not automatically require additional rulemakings.” That suggests that the regulatory language should “flexibly accommodate inevitable advancements in technology through a standards-based approach,” written to promote objectives rather than narrowly defining how the website must operate – in sum, that “any electronic form of disclosure should be permitted so long as specified qualitative criteria are met, similar to those found, for example, in the bipartisan RETIRE Act, H.R. 4610, introduced in the 115th Congress.”

‘Ex’ Says

With regard to communications with participants who have ceased employment, the ARA notes its belief that, if the email address being used by a terminated employee is not one assigned by their employer, there would not be a need to update it. However, in the case of an employer-assigned e-mail, the ARA found the language in the safeguard found in subsection (f)(4) of the proposal (which requires administrators to have a system in place to alert participants of an invalid email address and to take steps to cure it), appropriately addresses this issue. Moreover, the ARA recommends that the special rule under subsection (h) of the proposal be eliminated as unnecessary.

There is, of course, the possibility that covered documents become temporarily unavailable due to unforeseeable events or circumstances beyond the control of the plan administrator – and that, provided the plan administrator has procedures in place to ensure the documents are available and the plan administrator takes acts promptly to cure any unavailability as soon as practicable following knowledge of the problem, the ARA backed the proposal’s provision that the plan administrator will not fail to be in compliance with the safe harbor under those circumstances.

The letter notes that providing the plan administrator with 14 months in which to announce the availability of the consolidated disclosures not only “strikes the right balance of interests,” but “generally is a process already imbedded in record keeping systems.”

Other Recommendations

The ARA also recommended that:

• The documents covered by a final rule should not be limited to a list of specified required disclosures, but should “include both required notices and those that are available upon request.”
• A principles-based approach be applied to which documents may be consolidated in a single Notice of Availability, noting that the list provided in the proposal could serve as examples of the types of recurring disclosures that are appropriate for consolidated presentation.
• A “time certain” be identified for maintaining certain disclosure documents (for example, one year from its expiration), and that for documents of ongoing relevance, suggested maintenance on a website until superseded by a minimum standard.
• A model be developed for the Initial Notice (cautioning that any model notice should not include elements that are likely to change with technology).

Finally, since the proposed safe harbor is voluntary, the ARA commented that there wouldn’t appear to be a need for a transition period prior to general applicability, but rather that the rule “should be effective and applicable as soon as the date of publication in the Federal Register, or have an applicability date paralleling the effective date (60 days after publication of a final rule)” (unless, of course the DOL does not agree to maintain the guidance under FAB 2006-03 or 2008-03, in which case the ARA respectfully requested “a sufficient transition period”).