The Department of Labor’s Employee Benefits Security Administration (EBSA) has issued an interim policy (Technical Release 2011-03) (pdf) setting forth the conditions that a plan administrator must meet in order to provide electronic disclosures of information required under the EBSA’s final participant-level fee disclosure rule. Generally, this rule requires retirement plan sponsors and fiduciaries to disclose certain plan and investment-related information, including that related to fees and expenses, to participants and beneficiaries in participant-directed individual account plans, such as 401(k)s. The rule allows for the electronic disclosures – including the use of continuous access websites – under certain circumstances. According to the Technical Release, plan administrators will not be subject to an enforcement action based on their electronic disclosures if they comply with the conditions established by the interim policy.

Generally, a plan administrator may provide electronic disclosures only to employees that ordinarily have access to computers – i.e., using computers is an integral part of their duties – and/or if the employee, retiree or beneficiary has provided consent to receive such disclosures electronically. However, as outlined in the Technical Release, disclosures that are not included in a pension benefit statement can only be furnished electronically if the following six conditions are met:

1. Recipients must voluntarily provide plan sponsors, administrators, or their employers with an email address;


2. Along with a request for an email address, participants and beneficiaries must be provided with a clear and conspicuous Initial Notice that contains:
   
   
   
   • A statement explaining that providing an email address for disclosure purposes is voluntary, and that as the result of providing the email address, the required disclosures will be made electronically;
   
   
   • Identification or a brief description of the information that will be furnished electronically and how it can be accessed by participants and beneficiaries;
   
   
   • A statement that the participant or beneficiary has the right to request and obtain, free of charge, a paper copy of any of the information provided electronically and an explanation of how to exercise that right;
   
   
   • A statement that the participant or beneficiary has the right, at any time, to opt out of receiving the section disclosure information electronically and an explanation of how to exercise that right; and
   
   
   • An explanation of the procedure for updating the participant’s or beneficiary’s e-mail address.
   
   
   
   


3. The plan administrator must provide an Annual Notice to each such participant or beneficiary that contains much of the information provided in the Initial Notice;


4. The plan administrator must take “appropriate and necessary measures reasonably calculated to ensure” that the individuals receive the information;


5. The plan administrator must take “appropriate and necessary measures reasonably calculated to ensure that the electronic delivery system protects the confidentiality of personal information”; and


6. The electronic notices must be “written in a manner calculated to be understood by the average plan participant.”

The guidance also contains a special transition provision aimed at employers/plan sponsors who already have participants’ email addresses on file. In this instance, steps one and two will be deemed to have been satisfied, provided a special “Transition Group Initial Notice” is sent containing information specified in the Technical Release.

In a statement, EBSA?Assistant Secretary of Labor Phyllis C. Borzi said: “This technical release responds to requests by some plan sponsors and service providers to expand the ability of ERISA plans to use modern electronic disclosure technologies to communicate with plan participants while ensuring that all workers will benefit from the increased transparency provided by our fee disclosure rule.”

This interim policy will be in force until the EBSA issues further guidance on this topic.

by Ilyse Schuman