Technical Release 2011-03 Provides New Method For Satisfying New Participant Fee Disclosure Rule Through Electronic Media
On September 13, 2011, the Department of Labor issued Technical Release 2011-03. The Technical Release provides ERISA plan administrators with an additional safe-harbor method of providing required fee disclosures to participants electronically.
Recent Department of Labor regulations require employers to disclose more information to participants who direct their own investments in ERISA-covered 401(k) and other individual account retirement plans. Disclosures under the new regulations generally must begin no later than May 31, 2012. Information to be disclosed include information about plan and investment costs, fees and expenses.
The Department of Labor has a long-standing safe-harbor method for providing ERISA required disclosures electronically to plan participants. Under that long-standing safe-harbor method, electronic disclosure can be made only to:
(a) Employees who have regular access to electronic information from any location where the participant is reasonably expected to perform his or her duties as an employee and where access to such electronic information is an integral part of the employee’s job, or
(b) Participants who affirmatively consent to receiving disclosures through electronic media.
On December 20, 2006, the Department of Labor issued Field Assistance Bulletin 2006-03, which provided another safe-harbor method of electronic delivery of pension benefit statements, as required by the Pension Protection Act. Under FAB 2006-03, pension benefit statements can be provided to participants through a secure website, where participants have continuous access to benefit statement information. Participants must be notified at least annually of the ability to access the benefit statement via the website and must have the right to request and obtain, free of charge, a paper version of the pension benefit statement.
Since the electronic disclosure safe-harbor under FAB 2006-03 can be satisfied even for employees who do not have regular access to a computer at their work station, and does not require participants to affirmatively consent to receiving electronic disclosures, it is a much more effective way for employers to satisfy their disclosure obligations, versus the long-standing DOL safe-harbor method. However, the method under FAB 2006-03 is only available with respect to pension benefit statements.
Technical Release 2011-03 provides that required participant disclosures under the new fee disclosure rules may be made through the long-standing DOL safe-harbor method, or under a new safe-harbor method that, like FAB 2006-03, can be satisfied even for employees who do not have regular access to a computer at their work station. Under the new safe-harbor method in Technical Release 2011-03, a plan administrator may furnish such disclosures through electronic media, with the conditions described below:
(a) Participants must voluntarily provide the plan administrator with an e-mail address for the purpose of receiving the required disclosures.
(b) An initial notice must be provided by the plan administrator, containing the following information:
(1) A statement that providing an e-mail address is entirely voluntary and that by providing the email the required disclosures will be made electronically.
(2) A brief description of the information that will be provided electronically.
(3) A statement that the participant has the right to request and obtain, free of charge, a paper copy of the disclosure.
(4) A statement that the participant has the right to opt out of the electronic disclosure process.
(5) An explanation of the procedure for updating the participant’s e-mail address.
(c) An annual notice must be provided, similar in content to the initial notice.
(d) The plan administrator takes appropriate measures to ensure that the electronic delivery system results in actual receipt of the information being disclosed, and that the confidentiality of personal information is protected.
Technical Release 2011-03 also contains a Special Transition Provision, which allows a plan administrator to use an e-mail address for a participant that it already has on file and that has been used in the past 12 months for plan purposes for providing the initial and annual notice, without requiring the participant to “opt-in” to this method of electronic delivery of the fee disclosure information, provided the initial notice is furnished to such participants no earlier than 90 nor later than 30 days prior to the date the initial fee disclosures are required to be made for a plan.
Technical Release 2011-03 is available here: http://www.dol.gov/ebsa/newsroom/tr11-03.html