Not “Wired at Work”? New DOL E-Disclosure Rule is Here to Help

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Note:  This article was originally published by The Bureau of National Affairs, Inc. (Bloomberg Industry Group) (“INDG”) on August 7, 2020 at www.bloombergindustry.com.  Reproduced with permission from © 2020 The Bureau of National Affairs, Inc. (800-372-1033).

On May 21, 2020, the DOL announced final regulations that describe new “safe harbor” procedures for electronic delivery of required ERISA retirement plan disclosures (e-disclosure) such as Summary Plan Descriptions, quarterly or annual account statements, and other items. The new safe harbor procedures are an addition to the DOL e-disclosure rules that date back to 2002, and represent an improvement on the 2002 rules for employees who are not “wired at work,” as defined in those regulations.

The safe harbor procedures took effect July 27, 2020. A plan administrator that relied on the safe harbor before that date wouldn’t be subject to an enforcement action, the DOL vowed.

What is “Wired at Work”?

As defined in the 2002 DOL e-disclosure rules, a plan participant is “wired at work” if they meet both of the following requirements:

• They have the ability to effectively access electronic documents at any location where they reasonably could be expected to perform their employment duties.

• Their access to the electronic information system is an integral part of those employment duties.

This generally will mean someone with a desk that has a computer on it who needs the computer in order to do his or her job. “Computer” for these purposes means a laptop, notebook/tablet, or desk console computer that has an email account. Access to a computer connected to a medical or other electronic device, or a “kiosk,” does not suffice to make someone “wired at work.”

The “not wired at work” category would include active employees who work away from a desk, for instance in the agricultural, hospitality, healthcare, or retail sectors, and it would also include former employees who retain a plan account, beneficiaries of deceased plan participants, and alternate payees under a qualified domestic relations order.

The typical plan sponsor will have a mix of wired at work, and not wired at work, plan participants. For instance a hospital will have administrators who work in front of a desktop computer and who are wired at work. It will also have nurses and medical techs who primarily see patients and who may interact with electronic medical devices, and periodically use a computer at a nursing station, but who are not considered “wired at work” for purposes of the 2002 safe harbor.

How does a plan sponsor determine wired at work status for employees working remotely, whether due to COVID-19 or otherwise? Remote work was fairly rare when the 2002 regulations were published and they are silent on the topic. Common sense would suggest that an employee who met the wired at work criteria in an office setting remains wired at work when performing the same tasks at home, but circumstances may vary. Both the 2002 and 2020 e-disclosure regulations require that confidential information be safeguarded, and remote work arrangements will likely require extra data security efforts to ensure this requirement is met.

2002 Safe Harbor E-Disclosure for Not Wired at Work Populations

The 2002 safe harbor e-disclosure rules consist of, including tracking message receipt, and offering hard copy disclosures, and then separate procedures for wired at work and non-wired at work groups. Individuals who are not wired at work are required, under the 2002 safe harbor, to affirmatively consent to receive electronic delivery of ERISA disclosures. The consent may be delivered electronically provided the plan sponsor obtains a working email address for individuals in this group. Consent is only valid following provision of a statement in which you:

• Identify the documents or types of documents to which the consent applies (e.g., Summary Plan Descriptions, Summaries of Material Modification).

• Specify that the individual may withdraw consent at any time and describe how they may update electronic contact information or withdraw electronic consent (e.g., by email to a human resources manager with “Consent Withdrawn for Electronic Disclosure” in the subject line).

• Explain the individual’s right to request a paper copy (without charge, in the case of an SPD).

• Describe the electronic disclosure system and what software and hardware are needed to use it.

If the plan administrator later changes its hardware or software related to electronic disclosure, or otherwise makes changes that impact access to the system, it must provide notice of the changes and obtain a renewed consent to electronic disclosure from individuals in this group.

By contrast, e-disclosure to individuals who are wired at work need only meet the core disclosure rules. The plan sponsor may attach an electronic SPD or other ERISA disclosure to an email to these employees, or may email them the link to the disclosure document stored on a secure online location. The email in which the sponsor provides the attachment or the weblink can set forth the “Notice re: Electronic Disclosure” that is required for each instance of e-disclosure. There is no need to get their express consent to electronic disclosure.

2020 Safe Harbor Rules E-Delivery Rules for All Populations

The 2020 safe harbor uses a “notice and access” format for all intended recipients, and does not distinguish between wired at work, and not wired at work status. Everyone first must receive an initial hard copy notice about the new e-disclosure system that informs them of the right to globally opt-out of e-disclosure. They in turn must supply an electronic address, consisting of either an email address or a smartphone phone number. An employer-assigned electronic address suffices so long as it is provided for a job purpose other than receiving electronic ERISA disclosures. In essence, under the new safe harbor method everyone establishes themselves as “wired” irrespective of work, by supplying the electronic address.

Then, each time an ERISA disclosure is provided electronically, a Notice of Internet Availability or “NOIA” is sent to the electronic addresses. Note, certain disclosures may be bundled together. In the proposed regulations for the new safe harbor, the NOIA only notified of an online posting, but the final 2020 regulations allow disclosures to be made in the body of, or via attachment to, an email that sets forth the contents of the NOIA. The new e-disclosure rules also sanction the use of an app for electronic delivery of ERISA disclosures.

For participant populations who are not wired at work, the advantages of the notice and access format over the 2002 safe harbor method are clear. There is no longer a need to obtain consent to electronic disclosure, just a requirement to collect an electronic address (and to make sure it remains accurate when an individual separates from service). Cumbersome updates about software or system changes are eliminated. Nor is there the need to monitor the not-wired at work group for opt-outs from electronic disclosure, as the opt-out occurs at the initial paper notice stage. Note, individuals can reverse the opt-out by supplying an electronic address to the plan administrator at any time.

Choosing Which Safe Harbor Rule(s) to Use

Each plan sponsor will need to evaluate its plan participant sub-populations before choosing which e-disclosure safe harbor method or methods to use for retirement plan disclosures going forward.

For instance, an engineering firm whose entire population of active employees is wired at work may be content with the 2002 safe harbor e-disclosure method and may not want to switch to the 2020 safe harbor method, which would require an initial paper notice to all plan account holders notifying them of the new e-disclosure procedures. However, the same employer may want to switch to the 2020 safe harbor method for former employees who retain account balances, and for beneficiaries and alternate payees. Of course, only the 2002 safe harbor e-disclosure methods are permitted, at this juncture, for health and welfare disclosures.

By contrast, a grocery store chain with wired at work administrative and management staff, and not wired at work checkers and other employees working in the stores, may want to either switch entirely to the 2020 safe harbor e-disclosure method, or roll it out only for the not wired at work active employees, and for former employees with plan accounts, beneficiaries, and alternate payees. Many plan sponsors may end up with a patchwork resembling the following, at least until updated e-disclosure rules for health and welfare plan disclosures are announced:

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The above information is provided for general informational purposes only and does not create an attorney-client relationship between the author and the reader. Readers should not apply the information to any specific factual situation other than on the advice of an attorney engaged specifically for that or a related purpose. 

Photo credit: Tyler Nix, Unsplash.com

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Filed under 401(k) Plans, 403(b) Plans, E-Disclosure, ERISA, Plan Reporting and Disclosure Duties

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