DOL Announces New Safe Harbor for Plan Sponsors

Atlanta businesses that sponsor an employee benefit plan such as a 401(k), 403(b), and profit-sharing plans understand the challenge involved in plan management. The Department of Labor (DOL) and IRS have implemented various rules and regulations that must be followed in order to maintain good standing. Many of these apply to all plans but those with over 100 eligible participants are also required to conduct a plan audit. While requirements vary by plan size, plan sponsors are required to send plan disclosures and related information to participants. Traditionally such information was printed and sent via U.S. mail, but a new DOL rule has changed that. On May 21, 2020, a new DOL Final Rule (the Rule) was approved which permits employers to post relevant disclosures online or deliver to employees through emails, as a default. This change is expected to make it easier and less costly for employers while making important information easily accessible for employees. To help clients, prospects, and others, Wilson Lewis has provided a summary of the key information below.

New Voluntary Safe Harbor

The Rule has created a voluntary safe harbor for plan administrators that elect to use electronic media to provide essential documentation to covered individuals. The safe harbor allows for two optional methods of electronic delivery.

• Website – Covered documents may be posted on a website assuming that appropriate notification has been given to covered individuals about the internet availability of such information.
• Email – Plan administrators may also decide to forego website postings and email the information to covered individuals. It is required that the information be included directly in or as an attachment to the email.

It is important to note plan administrators that comply with the new safe harbor guidelines will be deemed to have satisfied their duty under ERISA to provide covered documentation to covered individuals.

Participant Protections

The safe harbor also includes participant protections that plan sponsors need to consider. These include:

• Paper Documentation – Participants should be allowed the option to request paper copies of specific documents or opt-out of electronic delivery.
• Change Notification – Plan sponsors are required to send an initial notification, on paper, to participants the way they currently receive plan disclosures is changing. In the notice, it is required to inform them of the new delivery method, address which will be used, and their option to opt-out. The notice must be sent before an electronic delivery method can be used.
• Internet Availability – Participants must be sent a notice of internet availability each time a new document is published on the web. In addition, all documents must remain in the site until a superseded or new version is made available. Under no circumstances should any documents be removed in less than one year from date of publication.
• Email Address Verification – There must be a method in place which alerts plan administrators if a participant’s email address is invalid. When this happens, rules require the individual should be treated as having opted out of electronic communications.

Effective Date

The safe harbor effective date is July 27, 2020, or 60 days after publication in the Federal Register. However, the DOL has indicated they will not take enforcement actions against an administrator that uses the safe harbor before the effective date.

Contact Us

The new changes make the required communications much less costly and easier to manage. Now is the time to review the final rule and determine if your plan should make changes. If you have questions about the information outlined above or need assistance with a plan audit issue, Wilson Lewis can help. For more details call us at 770-476-1004 or click here to contact us. We look forward to speaking with you soon.