As a 401(k) plan sponsor, you can now deliver “covered documents” electronically by:
- Posting the documents on a website.
- Sending the documents directly by email.
According to the DOL, the new rule will eliminate costs associated with preparing, printing and mailing retirement plan disclosures. It is expected to yield a net savings of $3.2 billion over the next 10 years.
Background on Annual 401(k) Disclosures
The Employee Retirement Income Security Act of 1974 (ERISA) mandates covered retirement plans disclose plan-related information to participants each year. Delivering the information by hand or mail has always been acceptable. However, the DOL offered a “safe harbor,” or set of conditions under which an electronic delivery could be made, in 2002. It had only two requirements:
- The employer must obtain the employee’s consent.
- The employee must have computer access that is integrally related to their work.
In other words, the files could not be sent through personal email or personal mobile phones and devices such as smartphones and tablets.
Although the DOL’s new rule does not replace the 2002 safe harbor, it provides a new, additional safe harbor for sending electronic 401(k) disclosures.
Covered Individuals and Documents
The new regulations define “covered individuals” as participants, beneficiaries, or other individuals entitled to covered documents who provide the plan sponsor with an electronic address such as an email address or a smartphone number. If you assign eligible employees a work-related email address, then they are deemed to have given you an email address. “Covered documents” are documents you’re required to give participants annually under Title 1 of ERISA (e.g., summary plan descriptions and annual funding notices), but not documents that must be furnished upon request.
Under the final rule, you can post covered 401(k) documents on a website as long as you send a Notice of Internet Availability (NOIA) to participants via either text message or email. The NOIA must include specific information, including how to access the website document and a statement of employees’ right to opt out of electronic disclosures and receive paper versions free of cost.
The final rule allows you to send 401(k) disclosures directly to participants’ email. In this case, simply place the covered document in the body of the email or send it as an attachment. You do not have to include an NOIA since the participant will not be retrieving the document from the internet.
While the final rule permits you to make electronic disclosures your default delivery method, you must give employees the right to opt out. In addition, the rule contains specifics not addressed in this article, so be sure to get the full picture before adopting the provisions.