New DOL Safe Harbor w/r/t Participant Communication

In a statement from the DOL, among other things, they had this to say: 

“The new safe harbor is an additional method of delivery and does not substantively change the 2002 safe harbor.” 

Nice that it takes them 150 pages to issue a regulation that doesn’t "substantively" change the existing one. Our tax dollars at work!

Now, to be fair, I haven't read it, so maybe it provides more help than I expect. Since my expectations are very low, that's possible...

It added a new safe harbor, while leaving the old one in place. I think that's what most of us would prefer - since many sponsors are probably comfortable with their current understanding of their obligations and happy to continue doing it that way.

The additional safe harbor is very different from the old safe harbor.  It doesn't substantially change the old safe harbor because the purpose of the rule is to add an additional safe harbor, not change the old one.  The proposed rule dropped during last year's ASPPA Annual, and the DOL gave us just about every change we asked for in the final rule.  I have meetings all morning, but I'll post a longer summary of the new rule later on unless someone beats me to it.

The final rule will be published in tomorrow's federal register.  The formatting of unpublished rules make them seem much longer, it will be much shorter than 150 pages tomorrow.  the actual rule will probably be a page or so, but there is some good information in the commentary as well.

7 hours ago, Belgarath said:

Now, to be fair, I haven't read it, so maybe it provides more help than I expect. Since my expectations are very low, that's possible...

Quick summary of "old" v. "new" safe harbor for electronic disclosure.  Both safe harbors are available, new did not replace old.

Old safe harbor

• Opt-in.  P or B has to affirmatively consent and demonstrate ability to access information electronically. 
• P is "wired at work".  Ability to access electronic information at work (such as email), and use of electronic information must be an integral part of employees duties.
• Simply providing a company email is NOT enough.

New safe harbor

• Opt-out.  Electronic is default unless you specifically asks for paper.
• Documents are published to a website (or other electronic variations such as an app) and the individual is notified electronically (email, text, or other means) of availability.  (proposed rule only said website)
• Direct delivery via e-mail as an alternative to publishing to a website.  The requirements for this option are essentially the same as publishing to a website, except for the combined notice of availability, nut several documents can be delivered with one email. (Proposed rule only allowed for website publishing)
• An initial paper notice that all further notices will be electronic is required.  
• Company email IS enough
• P or B can opt out and receive all paper documents (proposed rule had ability to elect document by document)
• Documents that meet a certain criteria can get a combined annual notice of availability, rather than a separate notice for each document. (proposed rule had an itemized list of documents)
• Final rule does supersede interim interpretive guidance, FAB 2006-03, FAB 2008-03 (Q&A 7), and Technical Release 2011-03R (Dec. 8, 2011) (TR 2011-03R).  Transition period of 18 months.  (proposed rule did not have a transition period)
• Rule is effective 60 days after publication in the federal register, but DOL announced a non-enforcement policy from publication to effective date.  (Proposed rule had an effective date of  first day of first calendar year following publication of final rule)

There is a lot of detail left out of this summary, but as you can see it is very different from the old safe harbor. I would keep my eyes open for a ASPPA asap....

Can I do this:  Send a letter to a bunch of terminated participants and say "Dear Term:  Please log into ABC Recordkeeper's website and review the fee disclosure."

IF the answer is yes I will say, and rejoice, Hallelujah!!

1 hour ago, austin3515 said:

Can I do this:  Send a letter to a bunch of terminated participants and say "Dear Term:  Please log into ABC Recordkeeper's website and review the fee disclosure."

IF the answer is yes I will say, and rejoice, Hallelujah!!

Yes and no.  You cant just say "log on and read".  The rule has requirements for how the notice and access has to work.  It needs to be very simple, so more like "go to austin3515.com/disclosures/anotherdisclosureyouwontread.pdf"  .  The document or link also has to be labeled a certain way.

Current terminates would need the initial paper disclosure, and you would need to know a good email for them now in order to send the notice of availability.  

Future terminates, you could make it part of the termination process to deliver the initial notice get a good private email and phone number for future notices.

Many small employers may not be able to do a website for disclosures, but could comply with the new email requirements.

Once we iron out the wrinkles I think this will be very helpful.

A follow-up on RatherBeGolfing’s explanation about formatting:

The 152 pages of the prepublication release became 41 pages in this morning’s Federal Register.

Of those 41 pages, only the last three are for rules’ text, and within those about two are for the new rule.

But follow RBG’s suggestion and read the explanation of the rulemaking.  As I learned when I wrote my article this past weekend, some elements of the new rule are easier to interpret if one reads the agency’s reasoning.

Please share a link to your article.  i'm sure it would be well worth my while to read it!

Wolters Kluwer (parent of CCH and ftwilliam.com) will publish my article as the Q&A feature in 401(k) Advisor’s July issue.  WK owns the copyright, and my republication rights don’t kick in until an interval after publication.

About your particular question, furnishing a 404a-5 disclosure electronically—whether by a website, or as an email’s attachment—can work if:

The participant provided the plan’s administrator an operable electronic address.  Or, the employer provided an electronic address for its employee and, after the former employee’s severance, the administrator finds the address still reaches the participant.

The administrator sent a (paper) opt-out notice, and the individual did not opt out.

If the communication is by website posting, the administrator sent or sends to the electronic address a notice of internet availability.  Or, for a communication directly by email, the email includes similar notice elements.

Can I do this: Never read another regulation and then complain about the regulations and have someone here explain them all to me?

I just read through Ilene Frenczys article on this, and it sounds all well and good.  But I'm surprised no one is asking the question about sending the Notice of Internet Availability on paper.  This seems like a very logical path for terminated participants because were not going to get email addresses for them at this point. And why would their be a notice that you CAN'T send on paper when there are hoops to jump through for the privilege of sending electronically.

The value is clear - a 1 page notice that the 37 page fee disclosure is available on line.  Has anyone else considered this? 

23 minutes ago, austin3515 said:

But I'm surprised no one is asking the question about sending the Notice of Internet Availability on paper.

It is a safe harbor for electronic disclosures.  The whole point of the safe harbor is that electronic communication is the default because of the advantages of electronic communication (accessibility, reducing postage fees, click a link in an email for a document, etc.)  There is little value to the participant to get a form letter sent via snailmail every time the RK or TPA uploads a new document. 

37 minutes ago, austin3515 said:

This seems like a very logical path for terminated participants because were not going to get email addresses for them at this point.

Why not?

It is actually not that complicated.  The DOL wants communication to be as clear and simple as possible for the participant.  We have bugged them for a long time about electronic disclosures as the default (opt-out).  The DOL has always expressed concern over access, and has been hesitant to give us an opt-out as default because it could make it more difficult for some participants with limited access or limited computer/internet literacy (AARP's argument against the rule).  They don't want you to default to electronic means for communication/disclosure if you don't have an electronic address (email or smartphone number) that you can send to and monitor.  

You can always use a different method, it just won't be safe harbor.

Why not get email addresses for terminted participants???  Because it would be a pain.

In the Labor department’s design, that the notice of internet availability is electronic supports the administrator’s responsibility in testing that a participant’s electronic address remains valid and operable.  If there is a bounce-back and the administrator does not promptly cure it or replace it with another electronic address, one must treat the individual as if she opted out.

Tomorrow, not every former employee will have an email address an administrator may use.  But in time it’s feasible to set things up so most will.  The new rule’s big give is an administrator’s opportunity to rely on an electronic address the participant never asked anything to be sent to.

An employer may provide an electronic address for its employee.  An employer-provided electronic address can be enough to invoke the electronic regime if the employer assigns the address for some employment-related purpose beyond the retirement plan’s communications.  (Imagine an employer tells its employees that human-resources and safety announcements will be sent to employees’ employer-provided email addresses.)  Once such an employer-provided address is set up, a retirement plan’s administrator may use the address even after the employment ends.  After a participant’s severance from employment, an administrator must check that an employer-provided electronic address still enables receipt of the plan’s communications.

For the Labor department to find that something posted to a website is “furnished” to a particular individual, the rulemaking needed something to make it reasonable to believe the individual is an internet user.  If one could send a paper notice of the availability of a website disclosure to someone not known to have a functioning electronic address, an administrator might lack evidence that the individual can practically see a website.

While this law change might be more incremental than some might like, it’s a big step.

2 hours ago, Peter Gulia said:

Tomorrow, not every former employee will have an email address an administrator may use.  But in time it’s feasible to set things up so most will.  The new rule’s big give is an administrator’s opportunity to rely on an electronic address the participant never asked anything to be sent to.

 

I disagree.  The big give is allowing the employer to put the disclosure itself on a website.  To not have to mail a 20 page fee disclosure is an enormous cost savings (or 35 page Summary Plan Description).  If I only had to mail a 1 page paper disclosure with the NOIA required language that would be a huge savings. Dear Participant:  "Log into your 401k account at ABC REcordkeeper and go to this section of the website."  Why can't that be done on paper?

I get that the rule doesnt say thats ok, but I just am struggling with the fact that no one else sees it the way I do...  That would be such an efficient way to handle fee disclosures, including for the recordkeepers who will clearly have the problem I have described above.

9 minutes ago, austin3515 said:

I disagree.  The big give is allowing the employer to put the disclosure itself on a website.  To not have to mail a 20 page fee disclosure is an enormous cost savings (or 35 page Summary Plan Description).  If I only had to mail a 1 page paper disclosure with the NOIA required language that would be a huge savings. Dear Participant:  "Log into your 401k account at ABC REcordkeeper and go to this section of the website."  Why can't that be done on paper?

I get that the rule doesnt say thats ok, but I just am struggling with the fact that no one else sees it the way I do...  That would be such an efficient way to handle fee disclosures, including for the recordkeepers who will clearly have the problem I have described above.

The big give is opt-out rather than opt-in.  That is what we have been asking for for a over a decade.

I think you are missing the overall point though.  It isn't about what what is most efficient or practical for the service providers, it is about making sure that participants get the disclosures and documents in the easiest and most practical way for the participant.  While service providers would love the idea of a form letter and posting something on a website, it doesn't benefit the participant.  

Your proposed situation is pretty much what the DOL does NOT want. They dont want an easy out for RKs that puts it on the participant to do the leg work to get the information.  You can send them a paper copy that is in their hands when they open the envelope, or an email with a link that takes them right to the notice/disclosure.  They don't want a bunch of menu's and click-through's to get to the right document.  For the safe harbor, it is path of least resistance for the participant.  

You can use any reasonable method you want, you just don't get the benefit of the safe harbor. 

7 minutes ago, RatherBeGolfing said:

hey dont want an easy out for RKs that puts it on the participant to do the leg work to get the information.  You can send them a paper copy that is in their hands when they open the envelope, or an email with a link that takes them right to the notice/disclosure. 

Not according to what I'm reading.  The NOIA requires only this, which is a far far cry from a link to a website.  No reason this could not be done on paper just as effectively as in an email:

"Any instructions needed about how to access the provided information (such as passwords, a need to download a mobile application, or the need to set up an on-line account to view secure documents);"

30 minutes ago, austin3515 said:

Not according to what I'm reading.

Are you reading the rule itself or someones summary?

The rule covers disclosure/delivery of "covered documents" to "covered individuals".  

A covered individual (§ 2520.104b-31(b))

Quote

is a participant, beneficiary, or other individual entitled to covered documents and who—when he or she begins participating in the plan, as a condition of employment, or otherwise—provides the  employer, plan sponsor, or administrator (or an appropriate designee of any of the foregoing) with an electronic address, such as an electronic mail (“email”) address or internet-connected mobile-computing-device (e.g., “smartphone”) number, at which the covered individual may receive a written notice of internet availability, described in paragraph (d) of this section, or an email described in paragraph (k) of this section.  Alternatively, if an electronic address is assigned by an employer to an employee for employment-related purposes that include but are not limited to the delivery of covered documents, the employee is treated as if he or she provided the electronic address.

For terminated individuals, it also requires (§ 2520.104b-31(g))

Quote

At the time a covered individual who is an employee, and for whom an electronic address assigned by an employer pursuant to paragraph (b) of this section is used to furnish covered documents, severs from employment with the employer, the administrator must take measures reasonably calculated to ensure the continued accuracy and availability of such electronic address or to obtain a new electronic address that enables receipt of covered documents following the individual’s severance from employment.

30 minutes ago, austin3515 said:

The NOIA requires only this, which is a far far cry from a link to a website.  No reason this could not be done on paper just as effectively as in an email:

"Any instructions needed about how to access the provided information (such as passwords, a need to download a mobile application, or the need to set up an on-line account to view secure documents);"

No, what you are looking at is the Initial notification of default electronic delivery and right to opt out , which is always delivered on paper.  This notice is different from the NOIA you have to deliver when you publish a covered document.  A link isn't required, but they want it to be very simple for the participant 

(§ 2520.104b-31(d)(3)(i)(D))

Quote

(D) The internet website address, or a hyperlink to such address, where the covered document is available. The website address or hyperlink must be sufficiently specific to provide ready access to the covered document and will satisfy this standard if it leads the covered individual either directly to the covered document or to a login page that provides, or immediately after a covered individual logs on provides, a prominent link to the covered document.

https://ferenczylaw.com/flashpoint-the-dol-edisclosure-regulations-reduction-in-paper-and-mailing-costs-but-no-guarantee-that-the-documents-have-been-read-under-intel/

From Ilene's article:

The NOIA must contain only the following elements (where items are in quotes below, that specific language must be used:

-Unless the document is attached, the website address with sufficient instructions as to how to locat the Covered Document on the web page to provide ready access, OR a directly hyperlink to the Covered Document.

[my point is, it can be mailed on paper to the same affect].

7 minutes ago, austin3515 said:

https://ferenczylaw.com/flashpoint-the-dol-edisclosure-regulations-reduction-in-paper-and-mailing-costs-but-no-guarantee-that-the-documents-have-been-read-under-intel/

From Ilene's article:

The NOIA must contain only the following elements (where items are in quotes below, that specific language must be used:

-Unless the document is attached, the website address with sufficient instructions as to how to locat the Covered Document on the web page to provide ready access, OR a directly hyperlink to the Covered Document.

[my point is, it can be mailed on paper to the same affect].

Except that you can't click on a piece of paper.

My impression is that the DOL wants the disclosures to be as easy to access as possible. Requiring a participant to read a URL off a piece of paper and type it in to their browser, especially if it is a long URL, is not easy and few are likely to actually do it.

I could see a QR code being ok on a printed notice though.

1 minute ago, C. B. Zeller said:

Except that you can't click on a piece of paper.

My impression is that the DOL wants the disclosures to be as easy to access as possible. Requiring a participant to read a URL off a piece of paper and type it in to their browser, especially if it is a long URL, is not easy and few are likely to actually do it.

Yea that is the point I was trying to get across yesterday, a paper notice requiring participant to access the document manually through electronic means is a non-starter for the DOL.  The point is convenience and ease of access for the participant, not an easy out for the service provider.  It may not be evident in the final rule, but its part of the reasoning and discussions we have had with the DOL for the past decade (or longer).

4 minutes ago, C. B. Zeller said:

I could see a QR code being ok on a printed notice though.

Possibly, but only if the electronic address is a smartphone number.  What benefit is a QR code if you are using email rather than accessing it via smartphone?  It also fails to capture the other benefits of electronic communication, such as instant notification and access to the notification from anywhere.  You are not going to carry around a folder of paper communications so that you can access the disclosure website quickly and easily.

21 minutes ago, austin3515 said:

[my point is, it can be mailed on paper to the same affect].

You can deliver the words of the notice on paper or email, but you are not really arguing that an email/text and a paper communication are interchangeable are you? 

I'm only asking if it is reasonable to assume that mailing the NOIA on paper will qualify for the safe harbor.  I'd say yes because it is BETTER than sending it via email.  All of these hoops and hurdles are to obtain the luxury of emailing something versus hard-copy.  For this one aspect I'm going to mail hard-copy and not email, so that should be construed as going above and beyond the safe harbor.

Yes that's it. that is my point.

8 minutes ago, austin3515 said:

I'd say yes because it is BETTER than sending it via email. 

What's the reasoning here? In this situation I think hard copy is worse because it results in more effort on the part of the participant to be able to access the disclosures.

24 minutes ago, RatherBeGolfing said:

What benefit is a QR code if you are using email rather than accessing it via smartphone?

Good point, I wasn't thinking about participants who might not have a smartphone.

25 minutes ago, RatherBeGolfing said:

You are not going to carry around a folder of paper communications so that you can access the disclosure website quickly and easily.

They could bookmark the page on their phone or save a copy of the disclosure after opening it.

1 minute ago, C. B. Zeller said:

Good point, I wasn't thinking about participants who might not have a smartphone.

Still a few out there, and even more that don't know how to use them ?

1 minute ago, C. B. Zeller said:

They could bookmark the page on their phone or save a copy of the disclosure after opening it.

Good point.

5 minutes ago, C. B. Zeller said:

16 minutes ago, austin3515 said:

I'd say yes because it is BETTER than sending it via email. 

What's the reasoning here? In this situation I think hard copy is worse because it results in more effort on the part of the participant to be able to access the disclosures.

It's better in the DOL's opinion.  Why would I say such a thing?  You can always send a notice on paper.  There are no hoops at all to jump through to be able to send a paper disclosure, no "Safe harbor rule on mailing paper".  You just mail the paper. That's it.  There are only hoops to jump through to send a disclosure electronically.  So if as part of the e-disclosure safe harbor I am "required" to send a disclosure electronically, if I voluntarily opt to send that disclosure on paper then I am going above and beyond the safe harbor. 

I should be more clear - that is the case I am making / the question I am asking is wouldn;t it be reasonable to conclude that mailing the NOIA on paper is consistent with the Safe Harbor?

16 minutes ago, austin3515 said:

I'm only asking if it is reasonable to assume that mailing the NOIA on paper will qualify for the safe harbor.

Gotcha.  Thats an unequivocal NO.  

First, the safe harbor requires that it is sent electronically after the initial notice.

Second, for terminee's the safe harbor requires that you have a personal electronic address.  If you fail to request and receive one upon termination (unless the employee has already provided one), the terminee in NOT a covered individual, and the safe harbor does not apply.

Third, for reasons stated earlier in this thread, requiring the participant to do more work to accesss disclosures and miss out on the instant notification and on the go availability of the notice is a non starter.

35 minutes ago, austin3515 said:

All of these hoops and hurdles are to obtain the luxury of emailing something versus hard-copy.

Its not, but you can follow most of the steps and email the documents directly under the safe harbor.  The hoops and hurdles are to obtain the luxury of not needing participant consent to electronic communication/notification.

The biggest issue with your approach is that you want to take the electronic notice out of the equation, which is really the foundation the DOL crafted the rule on.  You can default to electronic disclosure because the participant has indicated that they are willing to communicate directly by giving you an electronic address.  You have to monitor this electronic address, and if notifications bounce back or become deliverable, you can no longer assume that the participant is willing or able to access communications electronically, and can therefore not rely on the safe harbor.

DOL may be ok with your method (without participant consent, I highly doubt it) , but it does not get the reliance of safe harbor.

33 minutes ago, austin3515 said:

It's better in the DOL's opinion.  Why would I say such a thing?  You can always send a notice on paper.  There are no hoops at all to jump through to be able to send a paper disclosure, no "Safe harbor rule on mailing paper".  You just mail the paper. That's it.  There are only hoops to jump through to send a disclosure electronically.  So if as part of the e-disclosure safe harbor I am "required" to send a disclosure electronically, if I voluntarily opt to send that disclosure on paper then I am going above and beyond the safe harbor. 

I should be more clear - that is the case I am making / the question I am asking is wouldn;t it be reasonable to conclude that mailing the NOIA on paper is consistent with the Safe Harbor?

You are mixing apples and oranges.

Your have an obligation to provide the participant with certain documents.  You can always provide the documents on paper by mailing them. The DOL is giving you three outs to provide them electronically with a safe harbor.

1.  Get participant consent to electronic delivery

2. Default to electronic delivery.  The website delivers the communication.  delivering the NOIA is just one of the requirements.  You do not have an option of sending the NOIA on paper if the actual document has to be accessed electronically. 

3. Default to electronic delivery of the communication itself.

If you cant/wont do one of the three, you dont get the safe harbor.

6 minutes ago, RatherBeGolfing said:

You do not have an option of sending the NOIA on paper if the actual document has to be accessed electronically. 

Listen, I think this at least something worth confirming with the DOL.  Without this intepretation, there is no relief at all with respect to terminated participants.  We're not getting their emails.  It just isn;t happening. Not for anyone.  I think its worth asking the DOL at some Q&A.

About what would have been the agency’s best or better interpretation of ERISA, people might (and, in comments on the proposed rule, did) disagree.

The final rule is clear that a notice of internet availability cannot be on paper.  To be codified 29 C.F.R. § 2520.104b-31(d)(4)(i) (“A notice of internet availability must: Be furnished electronically[.]”), 85 Federal Register 31884, 31923 (May 27, 2020).

The preamble states the Assistant Secretary’s reasoning: “The Department did not, however, adopt certain commenters’ suggestion that plan administrators should be able to furnish the [notice of internet availability] in paper form.  One of the goals in adopting this safe harbor is to advance the use of electronic tools to enhance the effectiveness of, and reduce the costs associated with, ERISA disclosures.  The Department maintains that it is important for covered individuals to receive an initial notice, on paper, alerting them that disclosures will be furnished using different procedures.  But after that, the safe harbor will create consistency by requiring plan administrators to communicate electronically.  As to ensuring the receipt of notices, the rule includes a specific provision in paragraph (f)(4) requiring that action be taken in response to invalid or inoperable electronic addresses.  Accordingly, paragraph (d)(4)(i) of the final rule adopts the proposal’s requirement that an NOIA must be furnished electronically to the address referred to in paragraph (b) of the safe harbor.”  85 Federal Register 31884, 31894 (May 27, 2020).

The new rule’s preamble, on its first page, describes the 2002 and 2020 safe-harbor rules as not the “exclusive means” of furnishing something.  A plan’s administrator might defend other methods as “measures reasonably calculated to ensure actual receipt of the material by plan participants, beneficiaries and other specified individuals.”  29 C.F.R. § 2520.104b-1(b)(1).

Now were talking.  They actually said "no paper."

So that was stupid.  This rule is completely worthless.

RBG, I know youre going to say "I said that already" but until Peter posted the preamble I thought it could be suggested/argued or whatever that paper was above and beyond.  I did not know until his post that they specifically said you cannot use paper for the NOIA.  I thought you were inferring paper would not qualify.  It doesn't matter I guess. 

Thanks!

Lol.  No worries Austin.

FWIW, I have been involved in the back and forth with DOL on this issue for many years, and it has taken a lot to get them to move this far.  

On 5/29/2020 at 10:52 AM, RatherBeGolfing said:

FWIW, I have been involved in the back and forth with DOL on this issue for many years, and it has taken a lot to get them to move this far.  

After all this, I just can't wrap my head around the DOL actually writing this down: "You cannot mail a hard-copy of this notice."  That is a breathtaking statement based on their past aversion to e-delivery.  Mind you there is not a requirement that a "hyperlink" be provided, and how could you since a login will inevitably be required.  But I guess this is over now.