On July 27, 2020, a new rule went live, making it easier for retirement plans to communicate with participants electronically. This new rule modernized an existing rule that was becoming obsolete.

Existing Rule

Employer benefit plans must disclose certain information to participants. Information can be delivered electronically if delivery is calculated to ensure actual receipt. Receipt is presumed if information is sent to participants who have e-mail access at their workplace and who actively consent to electronic delivery, subject to additional conditions. Specifically, electronic disclosure must be designed to ensure actual receipt, must be consistent with the paper version, and must explain the significance of the document and the right to a paper copy.

The biggest shortcoming of the existing rule is the requirement of affirmative consent—meaning, electronic delivery must be opt-in and cannot be opt-out. Enter the new rule.

New Rule

The new rule applies to certain individuals and certain documents, and has several requirements. Specifically, participants with e-mail addresses can be furnished certain documents. These documents consist of disclosures from retirement plans only. Disclosures from welfare plans are not covered by the new rule, at least not for now. Also excluded from the new rule are documents that must be furnished only upon request (e.g., the plan document and Form 5500).

Notice of Internet Availability

Under the new rule, participants can be notified that certain documents are available on the Internet. This notice of Internet availability must generally be delivered when the underlying document is made available, with one useful exception. A combined notice that several documents are available online can be delivered within 14 months after the prior notice or notices.

A notice of Internet availability must contain the following:

1. the statement “Disclosure About Your Retirement Plan”;
2. the statement “Important information about your retirement plan is available at the website address below. Please review this information.”;
3. an identification and description of the document (e.g., quarterly benefit statement);
4. the Internet address or link;
5. a statement about the right to a paper copy and related procedure;
6. a statement about the right to opt out and related procedure;
7. a warning that the document is available for one year or until superseded; and
8. a telephone number for questions.

Document Requirements

Any document furnished electronically must be—

1. made available when otherwise required by law;
2. available for one year or until superseded;
3. understandable by the average participant;
4. presented in a common format (e.g., PDF);
5. searchable;
6. savable; and
7. protective of confidential personal information.

Other Requirements

To rely on the new rule, the plan must furnish affected participants with a paper notice that certain documents will be delivered electronically. If a participant terminates employment, the employer must ensure the continued availability of the participant’s e-mail address. As discussed in the notice of Internet availability, there must be reasonable procedures for exercising the right to opt out or request a paper copy for free. And there must be system that alerts the plan’s administrator about dead links.

Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. The author has provided the links referenced above for information purposes only and by doing so, does not adopt or incorporate the contents. Any federal tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the author if you would like to receive written advice in a format which complies with IRS rules and may be relied upon to avoid penalties.