Plan sponsors and participants have won a significant victory in the effort to maintain access and transparency with respect to benefits communications. The finalized rule, entitled “Default Electronic Disclosure by Employee Pension Benefit Plans under ERISA” was released on May 21, 2020, to almost universal acclaim. To quote from the Summary of the release:
“The Department of Labor is adopting in this document a new, additional safe harbor for employee benefit plan administrators to use electronic media, as a default, to furnish information to participants and beneficiaries of plans subject to the Employee Retirement Income Security Act of 1974 (ERISA).”
This is a huge step in the effort to keep participants informed, while also alleviating the burdensome process of sending physical notices that often go unread. Participants will now be able to access important plan information, such as the changes affecting plans due to the COVID-19 pandemic, electronically and at their convenience. Plan sponsors will save time and money in distributing required disclosures as long as they communicate with participants and advise them on how to access the information.
Importantly, the regulation establishes electronic delivery as the default method, but it also allows participants to opt-in to physical delivery by need or preference. This is a more responsive method than the reverse, which would frequently lead to notices being mailed and, unfortunately, getting ignored.
The regulation also specifies standards for making the notices readily understandable, an important step. Often communications are crafted to adhere to strict standards that leave readability as an afterthought. When it comes to people’s retirement savings, clearly written notices will go a long way in helping many get a grip on important information throughout their working careers and beyond.
The regulation goes to 152 pages, making sure the process is spelled out and made clear. Practitioners in plan consulting will be poring over the rule in the coming days and weeks, with comments and clarifications no doubt resulting. Suffice it to say that almost no one is objecting to this bold initiative to make information more accessible and understandable.