Employer and other retirement plan sponsors, plan administrators and other service providers desiring to use website or other electronic communications to distribute retirement plan disclosures required by the Employee Retirement Income Security Act (“ERISA”) in lieu of the much more expensive and time consuming process of sending volumes of paper documents through the mail or other ERISA-compliant means should share their recommendations and support for a proposed regulation announced by the . U.S. Department of Labor Employee Benefit Security Administration (“EBSA”) today (October 22, 2019).
Scheduled for official publication in the Federal Register on October 23, 2019, the Proposed Regulation on Default Electronic Disclosure by Employee Pension Benefit Plans under Employee Retirement Income Security Act would loosen current EBSA electronic disclosure rules by creating a“safe harbor” allowing retirement plans and their administrators greater freedom to use electronic disclosures to meet ERISA-mandated retirement plan disclosures.
ERISA requires retirement plan administrators to furnish multiple documents per year to participants and beneficiaries on a variety of topics. Currently, retirement plan disclosures generally are provided through paper documents distributed by first class mail. because existing regulations requiring plan administrators to use delivery methods “reasonably calculated to ensure actual receipt of the documents” make paper distribution safest.
Historically, the general standards for delivery of required disclosures set forth in 29 CFR 2520.104b-1 require retirement plans and their administrators to incur substantial expense to print and deliver the required disclosure communications via mail or hand delivery. Preparing and providing these disclosures in printed form is costly and time consuming. Since many plan participants never read or cannot find copies of these high dollar printed materials, plan sponsors and administrators long have questioned the appropriateness of these expensive mandates.
As internet accessibility and use have expanded, calls to modernize the general delivery rule to allow electronic delivery or access have picked up steam. Employer and other plan sponsors, plan administrators increasingly have urged EBSA to update is regulations to allow electronic delivery to reduce plan costs and administrative burdens as well as to facilitate participant access to these disclosures on demand through the internet.
In an initial effort to respond to these developments and pressures, EBSA amended the general standards for delivery of required disclosures in 2002 by establishing a regulatory safe harbor for the use of electronic media (the “2002 safe harbor”) under 29 CFR 2520.104b-1(c). Unfortunately, the conditions the 2002 safe harbor imposed on electronic distribution hindered use of electronic delivery as the default method of delivery of retirement plan documents. make n administration recently prompted EBSA to reconsider the 2002 safe harbor. In the new proposed regulation, EBSA proposes to allow retirement plans and their administrators greater latitude to use electronic media to provide ERISA required retirement disclosures under the terms set forth in the proposed regulation. EBSA says this rule change would reduce retirement plan communication costs while enhancing the accessibility of communications to plan participants by leveraging internet technology.
Under the proposed regulation’s safe harbor, retirement plans and their plan administrators still would have to provide ERISA retirement plan disclosures, but their options for distributing these disclosures would expand. In addition to distributing paper notifications by mail, hand delivery or other means “reasonably calculated to ensure delivery,” the proposed regulation would provide an option to use website posting as the default means of distribution provided the participant does not elect to continue to receive paper notification. To take advantage of the option to use website posting, however, plan administrators would have to comply with the safe harbor requirements in the proposed regulation including requirements that:
- The plan post the required disclosures on a website that meets the requirements of the safe harbor rule, including system checks for invalid electronic addresses;
- Retirement plan administrators would satisfy their obligation to furnish ERISA-required disclosures by making the information accessible online and by furnishing to participants and beneficiaries a notice of internet availability of these disclosures.
- A notice of internet availability would be sent to the electronic address of the participant, for example to the participant’s email address.
- A notice of internet availability must include, among other things, a brief description of the document being posted online, a website address where the document is posted, and instructions for requesting a free paper copy or electing paper delivery in the future.
- A notice of internet availability generally must be sent each time a retirement plan disclosure is posted to the internet website.
- To prevent “email overload,” the proposal allows a notice of internet availability to incorporate or combine other notices of internet availability in limited circumstances.
The framework in the proposal is similar to the approach the Securities and Exchange Commission takes for certain investor disclosures. EBSA says the proposed regulation safe harbor also is intended to align with Internal Revenue Service rules about delivering retirement plan disclosures electronically while protecting the option for those participants who prefer paper notices to elect to continue to do so.
EBSA projects the adoption of the proposed regulation would substantially reduce the administrative and financial burden of meeting the ERISA disclosure requirements. In fact, EBSA estimates that elimination or reduction of printed materials, printing and mailing costs associated with furnishing printed disclosures allowed through the expanded use of internet technology to furnish covered disclosures to workers allowed by the safe harbor would produce approximately $2.4 billion net cost savings over the next 10 years for ERISA-covered retirement plans. Meanwhile, EBSA says the requirement in the proposed regulation for plans to continue to provide disclosures in paper form to participants that prefer that option would protect the reliability of disclosures to those participants.
EBSA is inviting plan sponsors, administrators and other stakeholders to submit comments on the proposed regulation generally. In addition, the Notice of Proposed Ruling on the proposed regulation also specifically invites stakeholders to assist EBSA to evaluate whether additional changes to the disclosure requirements in the regulations in the future by inviting input on a broad range of disclosure-related questions and topics, including scope, content, design and delivery of ERISA disclosures.
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About the Author
Recognized by her peers as a Martindale-Hubble “AV-Preeminent” (Top 1%) and “Top Rated Lawyer” with special recognition LexisNexis® Martindale-Hubbell® as “LEGAL LEADER™ Texas Top Rated Lawyer” in Health Care Law and Labor and Employment Law; as among the “Best Lawyers In Dallas” for her work in the fields of “Labor & Employment,” “Tax: ERISA & Employee Benefits,” “Health Care” and “Business and Commercial Law” by D Magazine, Cynthia Marcotte Stamer is a practicing attorney board certified in labor and employment law by the Texas Board of Legal Specialization and management consultant, author, public policy advocate and lecturer widely known for 30+ years of management focused employment, employee benefit and insurance, workforce and other management work, public policy leadership and advocacy, coaching, teachings, and publications.
Highly valued for her rare ability to find pragmatic client-centric solutions by combining her detailed legal and operational knowledge and experience with her talent for creative problem-solving, Ms. Stamer’s clients include employers and other workforce management organizations; employer, union, association, government and other insured and self-insured health and other employee benefit plan sponsors, benefit plans, fiduciaries, administrators, and other plan vendors; domestic and international public and private health care, education and other community service and care organizations; managed care organizations; insurers, third-party administrative services organizations and other payer organizations; and other private and government organizations and their management leaders. As part of this work, she has worked extensively on employee benefit communication and other employee benefit plan legislative and regulatory policy, design, compliance and enforcement including testifying to the EBSA Advisory Council on Employee Welfare and Pension Benefit Plans in on the effectiveness of employee benefit plan disclosures during 2017 hearings on on reducing the burdens and increasing the effectiveness of ERISA mandated disclosures.
Throughout her 30 plus year career, Ms. Stamer has continuously worked with these and other management clients to design, implement, document, administer and defend hiring, performance management, compensation, promotion, demotion, discipline, reduction in force and other workforce, employee benefit, insurance and risk management, health and safety, and other programs, products and solutions, and practices; establish and administer compliance and risk management policies; manage labor-management relations, comply with requirements, investigate and respond to government, accreditation and quality organizations, regulatory and contractual audits, private litigation and other federal and state reviews, investigations and enforcement actions; evaluate and influence legislative and regulatory reforms and other regulatory and public policy advocacy; prepare and present training and discipline; handle workforce and related change management associated with mergers, acquisitions, reductions in force, re-engineering, and other change management; and a host of other workforce related concerns. Ms. Stamer’s experience in these matters includes supporting these organizations and their leaders on both a real-time, “on demand” basis with crisis preparedness, intervention and response as well as consulting and representing clients on ongoing compliance and risk management; plan and program design; vendor and employee credentialing, selection, contracting, performance management and other dealings; strategic planning; policy, program, product and services development and innovation; mergers, acquisitions, bankruptcy and other crisis and change management; management, and other opportunities and challenges arising in the course of workforce and other operations management to improve performance while managing workforce, compensation and benefits and other legal and operational liability and performance.
A Fellow in the American College of Employee Benefit Counsel and Past Chair of both the ABA Managed Care & Insurance Interest Group and it’s RPTE Employee Benefits and Other Compensation Group, Ms. Stamer also has leading edge experience in health benefit, health care, health, financial and other plan, program and process design, administration, documentation, contracting, risk management, compliance and related process and systems development, policy and operations; training; legislative and regulatory affairs, and other legal and operational concerns.
A former lead consultant to the Government of Bolivia on its Pension Privatization Project with extensive domestic and international public policy concerns in pensions, healthcare, workforce, immigration, tax, education and other areas, Ms. Stamer has been extensively involved in U.S. federal, state and local health care and other legislative and regulatory reform impacting these concerns throughout her career. Her public policy and regulatory affairs experience encompasses advising and representing domestic and multinational private sector health, insurance, employee benefit, employer, staffing and other outsourced service providers, and other clients in dealings with Congress, state legislatures, and federal, state and local regulators and government entities, as well as providing advice and input to U.S. and foreign government leaders on these and other policy concerns.
Author of leading works on a multitude of labor and employment, compensation and benefits, internal controls and compliance, and risk management matters and a Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer also shares her thought leadership, experience and advocacy on these and other related concerns by her service in the leadership of the Solutions Law Press, Inc. Coalition for Responsible Health Policy, its PROJECT COPE: Coalition on Patient Empowerment, and a broad range of other professional and civic organizations including North Texas Healthcare Compliance Association, a founding Board Member and past President of the Alliance for Healthcare Excellence, past Board Member and Board Compliance Committee Chair for the National Kidney Foundation of North Texas; former Board President of the early childhood development intervention agency, The Richardson Development Center for Children (now Warren Center For Children); current Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee, current Vice Chair of Policy for the Life Sciences Committee of the ABA International Section, Past Chair of the ABA Health Law Section Managed Care & Insurance Section, a current Defined Contribution Plan Committee Co-Chair, former Group Chair and Co-Chair of the ABA RPTE Section Employee Benefits Group, past Representative and chair of various committees of ABA Joint Committee on Employee Benefits; an ABA Health Law Coordinating Council representative, former Coordinator and a Vice-Chair of the Gulf Coast TEGE Council TE Division, past Chair of the Dallas Bar Association Employee Benefits & Executive Compensation Committee, a former member of the Board of Directors of the Southwest Benefits Association and others.
For more information about Ms. Stamer or her health industry and other experience and involvements, see here or contact Ms. Stamer via telephone at (214) 452-8297 or via e-mail here.
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