Electronic Enrollment Questions

[Guest Letocha]

A company plans to enroll its employees in its 401(k) plan through the internet. This would not be a negative election; rather, it is proposed that employees who decide to make elective contributions will be given a password, to be used to enroll through a company web site. Can anyone share guidance on the authentication and privacy concerns that are present with this approach? IRS Notice 99-1 is vague on these issues, as well as on the mechanics of electronic enrollment in general, although it does explicitly state that written paper documents are not required for certain transactions, including participant enrollment. Any advice on issues of authentication and privacy, or on the way electronic enrollment in a non-negative election setting has been handled, would be welcomed.

[alanm]

In the Microsoft case last year, Bill Gates got tagged by the court for his email correspondence because it came from his email address even though he denied sending it. The Courts are saying the email address constitutes signature, which would be ok for accepting enrollments or fund exchanges. Bill Clinton signed a bill in October making electronic signature, or email acceptable if a complex coding verification software was used. The Dol has not issued guidance on acceptance of email for such things as loans which would require a spouses signature. So, my opinion is enrollments from participant individual email addresses will be legal.

[RCK]

As long as the participant needs a Social Security Number and a PIN to get into the site and enroll, I don't see any issue with authentication. There is no real difference between this and a Voice Response system.

I'm a plan sponsor, and we are currently in the process of a phased rollout of an Internet site for account inquiry and initiating transactions. The participant would be able to initiate a full range of transactions--requesting forms and information, reallocating funds, initiating a loan, initiating a withdrawal--and even opting out of our Automatic Enrollment program. Our usually conservative ERISA counsel has no objections.