Background. The Department of Labor Issued Technical Release No. 2011-03 Technical Release No. 2011-03 (the “Release”), setting forth its interim policy regarding the use of electronic media to provide information required to be furnished to participants of ERISA‑covered defined contribution plans under the participant-level fee disclosure regulation, 29 C.F.R. §2550.404-5 (the “Regulation”) (discussed in the November 2, 2010 Financial Services Alert) that become effective next year (as described in the July 19, 2011 Financial Services Alert). The Release indicates that DOL is continuing to review issues regarding the electronic delivery of information to participants under the Regulation (and under ERISA more generally). Until further guidance is issued, DOL will not take any enforcement action with respect to compliance with the disclosure requirements of the Regulation against plan administrators who furnish information electronically in accordance with the rules described in the Release.
Under the Regulation, plans that provide participants with the right to direct investments must furnish participants with specified information regarding the plan, the designated investment alternatives available under the plan, and the fees and expenses that may be charged against their plan accounts or those investment alternatives. (For purposes of this article, references to plan “participants” include plan beneficiaries.)
Special Rules for Certain Disclosures that May Be Included in Benefit Statements. The Release notes that under the Regulation certain information may be furnished as part of a pension benefit statement that is provided to participants pursuant to ERISA §105(a)(1)(A)(i) (a “Benefit Statement”), including (among other things) the identity of the plan’s designated investment alternatives, specified information regarding the mechanics of providing investment instructions, and certain information concerning fees charged to participant accounts under the plan. When this information is furnished as part of a Benefit Statement, it may be delivered to participants using electronic media in accordance with guidance DOL has issued concerning the delivery of Benefit Statements. In this regard, the DOL’s Field Assistance Bulletin 2006-03 (the “FAB”) permits Benefit Statements to be furnished by providing participants continuous access to the relevant information through one or more secure websites, subject to conditions specified in the FAB. Participants must be furnished with a notice that (a) explains the availability of the Benefit Statement information and how that information can be accessed by participants; (b) apprises participants of their right to request and obtain (free of charge) a paper version of the Benefit Statement; and (c) is written in a manner calculated to be understood by participants.
Generally Applicable Rules. The following rules are applicable in situations where the special rule described above does not apply – i.e., because the relevant information required to be furnished by the Regulation is not of the type that may be included in a Benefit Statement under the special rule, or because the plan administrator chooses not to include the information in the Benefit Statement even though it could have come within the special rule.
This information may be provided using electronic media consistent with the generally applicable DOL regulation that provides a safe harbor for using electronic media in the furnishing of information required by ERISA, 29 C.F.R. section 2520.104b-1(c). Under that safe harbor, it generally is permissible to provide information to participants electronically if access to the plan sponsor’s electronic information system is an integral part of the participant’s duties as employee, and certain other conditions are satisfied. In other situations, the safe harbor can be utilized only if the participant has affirmatively consented to electronic delivery under specified procedures.
Alternatively, this information may be furnished electronically under interim rules described in the Release. These interim rules generally apply only if the participant has provided the participant’s email address voluntarily to the plan. For this purpose, a participant’s provision of an email address will be considered voluntary if the participant is required to provide the address in order to access a secure continuous access web site that houses information required by the Release, so long as the participant is provided with an initial notice explaining (among other things) that the participant has the right to request and receive, free of charge, a paper copy of any of the relevant information, or to opt out of the electronic delivery arrangement completely. The interim rules generally require that this initial notice be provided with the plan’s request to the participant for the email address; however, in certain circumstances it is permissible to utilize participant email addresses that are on file with the plan sponsor, the employer, or the plan administrator so long as the initial notice is provided to the relevant participants between 30 and 90 days prior to the date when information required by the Regulation is first provided to participants. The interim rules also require that the plan provide participants with an annual notice describing (among other things) the right to opt out of the electronic delivery arrangement, and that other specified conditions be satisfied.