On May 21, 2020, the U.S. Department of Labor (DOL) announced publication of its long-awaited guidance on electronic participant  disclosures. The good news is that the DOL has taken a step in the right direction in easing some of the difficulties that were present in the prior electronic communications safe harbor. The bad news is that the new guidance applies only to retirement plans. This leaves health and welfare plans without an updated compliance safe harbor.

The DOL requires certain participant disclosures—such as summary plan descriptions, summaries of material modifications, and summary annual reports—to be provided to participants in a manner that is “reasonably calculated to ensure actual receipt.” In the early days of electronic communications, plan administrators were reluctant to rely on electronic distribution methods without the DOL’s approval.

The old DOL electronic disclosure rule, issued in 2002, sets forth complex safe harbor requirements. If these requirements were met, electronic delivery would be deemed acceptable. The rule was fairly burdensome for employees with work-related computer access. For employees who did not have work-related computer access, the rule was so burdensome that it was nearly useless. As electronic communications have advanced and become nearly ubiquitous, benefits industry groups and plan sponsors have been asking the DOL to update its electronic disclosure guidance to keep up with current technology.

The new DOL rule is the answer to those requests, but only for retirement plans. Retirement plan administrators will soon be able to post disclosures on a website or include disclosures in an email if certain criteria are met.

Before using electronic delivery under the new rule, plan administrators are required to notify individuals “on paper that covered documents will be furnished electronically to an [email] address.” The notification must include a listing of the email address that will be used, any relevant instructions for accessing the covered documents, a statement of the participant’s right to opt out of electronic delivery and receive a paper copy of the covered document, and an explanation of how to exercise this right.

The rule also states that if disclosure documents will be posted on a website, plan administrators are required to provide a “notice of internet availability” to participants by email. This notice is provided when the document is posted on a website and, if the notice applies to multiple disclosures, annually thereafter. The DOL has set forth specific content requirements for the notice, including a description of the covered document, the website where the document is located, a statement of the participant’s right to opt out of electronic delivery and/or receive a paper copy of the disclosure, a statement regarding the length of time the document will be available on the website, and contact information for the plan administrator.

The new DOL rule also includes requirements for the website where disclosures are posted. Disclosures must be available on the website until they are superseded by a new version of the disclosure, with a minimum posting time of one year. The format of the posted disclosure should be easily readable (both online and when printed), searchable electronically, and downloadable.

In addition, the electronic delivery system “must be designed to alert the administrator of [an] . . . invalid or inoperable [email] address.” When the plan administrator receives a notification that an individual’s email address is invalid or inoperable, it is required to use other means of delivering the notice of internet availability, such as obtaining “a new valid and operable email address” or furnishing a paper version to satisfy the disclosure requirements.

A special rule applies for individuals who terminate employment. Under this provision, plan administrators must “take measures reasonably calculated” to confirm the email addresses for terminated employees, as many employees provide their employer-supplied email address when consenting to electronic benefit disclosures.

The DOL also outlined a special method when the disclosure will be attached to or included in an email itself, including a very specific subject line for the email, certain identifying information, and notification of the participant’s right to a paper copy of the disclosure. The disclosure document itself must be written to be understood by an average plan participant, use a widely available format that can be printed, and be searchable electronically.

The new rule is scheduled to be published in the Federal Register on May 27, 2020, and will be effective 60 days later. Although the new rule will not technically be effective for a few months, the DOL has indicated in its press release that plan administrators may rely on the safe harbor contained in the new rule prior to its effective date. Because the new rule applies only to retirement plans, plan administrators for health and welfare plans may still rely on the old electronic disclosure rule from 2002, but they cannot yet rely on the updated rule. The DOL has, however, left the door open for the new rule to apply to health and welfare plans in the future by leaving a placeholder in the regulations for rules applicable to health and welfare plans to be added at a later date.