# Default Electronic Disclosure by Employee Pension Benefit Plans Under ERISA

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URL: https://www.frixlaw.com/law-library/documents/fr%3A2020-10951

## Record

- **Collection:** Federal Register
- **Document type:** Rule
- **Published:** May 27, 2020
- **Citation:** 85 FR 31884

## Text

DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Parts 2520 and 2560
RIN 1210-AB90
Default Electronic Disclosure by Employee Pension Benefit Plans Under ERISA

AGENCY:

Employee Benefits Security Administration, Department of Labor.

ACTION:

Final rule.

SUMMARY:

The Department of Labor is adopting in this document a new, additional safe harbor for employee benefit plan administrators to use electronic media, as a default, to furnish information to participants and beneficiaries of plans subject to the Employee Retirement Income Security Act of 1974 (ERISA). The rule allows plan administrators who satisfy specified conditions to provide participants and beneficiaries with a notice that certain disclosures will be made available on a website, or to furnish disclosures via email. Individuals who prefer to receive disclosures on paper can request paper copies of disclosures and opt out of electronic delivery entirely. The Department expects the rule to enhance the effectiveness of ERISA disclosures and significantly reduce the costs and burden associated with furnishing many of the recurring and most costly disclosures. In addition to benefiting workers, this rule will immediately assist employers and the retirement plan industry as they face a number of economic challenges due to the COVID-19 emergency, including logistical and other impediments to compliance with ERISA's disclosure requirements.

DATES:

Effective date:
The final rule is effective on July 27, 2020.

Applicability date:
The final rule is applicable on July 27, 2020.

FOR FURTHER INFORMATION CONTACT:

Rebecca Davis or Kristen Zarenko, Office of Regulations and Interpretations, Employee Benefits Security Administration, (202) 693-8500. This is not a toll-free number.

SUPPLEMENTARY INFORMATION:

A. Background

(1) Original Delivery Standards for ERISA Disclosures

The Employee Retirement Income Security Act of 1974 (ERISA) and regulations thereunder provide general standards for the delivery of all information required to be furnished to participants, beneficiaries, and other individuals under Title I of ERISA.
1

Plan administrators must use delivery methods reasonably calculated to ensure actual receipt of information by participants, beneficiaries, and other individuals.
2

For example, in-hand delivery to an employee at his or her workplace is acceptable, as is material sent by first class mail. In response to developing internet, email, and similar technologies, the Department of Labor (Department) first amended ERISA's delivery standards in 2002 by establishing a safe harbor for the use of electronic media to furnish disclosures (the 2002 safe harbor).
3

The 2002 safe harbor was not and is not the exclusive means by which a plan administrator may use electronic media to satisfy the general standard. However, plan administrators who satisfy the conditions of a safe harbor are assured that the general delivery requirements have been satisfied.

1

See
29 CFR 2520.104b-1.

2

See
29 CFR 2520.104b-1(b)(1).

3

See
29 CFR 2520.104b-1(c).

The 2002 safe harbor, which is set forth in paragraph (c) of § 2520.104b-1, applies only to two categories of participants and beneficiaries: First, employees who are “wired at work”—those with the ability to effectively access electronic disclosures at any location where they are reasonably expected to perform their employment duties and for whom access to the employer's electronic information system is an integral part of those duties; and second, individuals entitled to documents under Title I of ERISA who do not fit into the first category, but who affirmatively consent to receive documents electronically. The 2002 safe harbor also specifies additional requirements that must be satisfied in order to furnish ERISA disclosures electronically. The preamble to the Department's proposal of this regulation included a comprehensive summary of the 2002 safe harbor's requirements.
4

As explained in detail below, the new, additional safe harbor adopted today does not supersede the 2002 safe harbor; the 2002 safe harbor remains in place as another option for plan administrators.

4
84 FR 56894, 56895 (Oct. 23, 2019).

In addition to the 2002 safe harbor, the Department occasionally has issued interpretive guidance allowing different electronic delivery methods in limited circumstances. For example, Field Assistance Bulletin 2006-03 (FAB 2006-03) allows plan administrators who meet specified criteria to provide continuous website access to pension benefits statement information required by ERISA section 105.
5

Similarly, Field Assistance Bulletin 2008-03 (FAB 2008-03), which provides supplementary interpretive guidance on the Department's qualified default investment alternative (QDIA) regulation,
6

allows plan administrators who want to send required QDIA notices electronically to rely on either the Department's 2002 safe harbor or the regulations issued by the Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) at 26 CFR 1.401(a)-21 relating to use of electronic media.
7

The impact of this final rule on these Field Assistance Bulletins and other interpretive guidance is discussed below, in the section titled “
Transition Issues
.”

5
Field Assistance Bulletin No. 2006-03 (Dec. 20, 2006).

6

See generally
29 CFR 2550.404c-5.

7

See
Field Assistance Bulletin No. 2008-03, (Q&A7), quoting 72 FR 60458 (Oct. 24, 2007).

(2) Regulatory Background

The Department is issuing a final rule today following an extensive and thorough evaluation not only of the public record for this regulatory initiative, but also of other agencies' disclosure rules; economic and policy research concerning electronic disclosure; and information submitted by, and recommendations of, a variety of stakeholders. This evaluation has been ongoing, as electronic disclosures and modes of delivery have developed over time and as the Department over the years has released additional disclosure requirements and interpretive guidance following issuance of the 2002 safe harbor. The Department consistently receives feedback about compliance with the 2002 safe harbor and suggestions for how the safe harbor could be improved, sometimes in response to other regulatory projects, sometimes in response to ERISA Advisory Council proceedings, and otherwise. A first formal step, however, was the Department's 2011 publication of a Request for Information (RFI) Regarding Electronic Disclosure
8

in response to Executive Order 13563, “Improving Regulation and Regulatory Review,” issued on January 18, 2011.
9

The RFI asked 30 questions soliciting views, suggestions, and comments from employee benefit plan stakeholders, their representatives, and the general public on whether and how to expand

or modify the 2002 safe harbor. The Department carefully evaluated responses to this RFI to better understand the benefits, challenges, and costs of electronic delivery and other disclosure-related issues.
10

8
76 FR 19286 (Apr. 7, 2011).

9

See
76 FR 3821 (Jan. 21, 2011). The Executive Order stresses the importance of achieving regulatory goals through the most innovative and least burdensome tools available.

10
The Department received approximately 78 comments on the 2011 RFI, which are available at
https://www.dol.gov/agencies/ebsa/laws-and-regulations/rules-and-regulations/public-comments/1210-AB50.

Since publication of the 2011 RFI, the Department has analyzed whether there are more effective ways to regulate the disclosure and delivery of information to ERISA plan participants and beneficiaries. Stakeholders routinely ask the Department to recognize ongoing changes in technology, as some other federal agencies have done, and to take advantage of those changes by updating and modernizing ERISA's electronic delivery standards in the 2002 safe harbor. The Department has had numerous discussions with staff of other federal government agencies after reviewing their guidance and standards for electronic delivery of required information, including the Treasury Department, IRS, and the Securities and Exchange Commission (SEC). The preamble to the Department's proposed regulation discussed at length the Department's review of these agencies' guidance, all of which informed the Department in publishing the proposed rule, as did standards and practices of the Social Security Administration, the Comptroller of the Currency, and the Federal Thrift Savings Plan (TSP).
11

Commenters agreed that it is important for the Department to continue coordinating with other agencies, especially the Treasury Department, IRS, and SEC.
12

Plan administrators and service providers may have to comply with other federal and state requirements in administering their plans, and commenters therefore encouraged as much coordination as possible to limit the regulatory burden that may result from inconsistent standards.

11
84 FR 56894, at 56897
et seq.

12
One commenter recommended that the Department coordinate with the Federal Communications Commission (FCC) to ensure that the use of smartphones to comply with this rule will not conflict with FCC guidance. The FCC was included as part of the Executive Order 12866 review process and raised no objection to the requirements of this final rule.

The Department also met with stakeholders and reviewed recent studies and policy and economic analyses concerning disclosure practices, as well as changes in internet access and usage across different populations. Entities such as the ERISA Advisory Council
13

and the U.S. Government Accountability Office
14

also have made recommendations to the Department concerning possible changes to ERISA's electronic delivery rules to improve participants' disclosure experience and reduce administrative burdens. And the Department continues to closely monitor Congressional interest in expanding the use of electronic media for ERISA disclosures.
15

13

See, e.g., Mandated Disclosure for Retirement Plans—Enhancing Effectiveness for Participants and Sponsors,
ERISA Advisory Council (Nov. 2017); 2009 ERISA Advisory Council Report on Promoting Retirement Literacy and Security by Streamlining Disclosures, at
https://www.dol.gov/agencies/ebsa/about-ebsa/about-us/erisa-advisory-council/2009-promoting-retirement-literacy-and-security-by-streamlining-disclosures-to-participants-and-beneficiaries;
2007 ERISA Advisory Council Working Group Report on Participant Benefit Statements, at
https://www.dol.gov/agencies/ebsa/about-ebsa/about-us/erisa-advisory-council/2007-participant-benefit-statements;
and 2006 ERISA Advisory Council Report Working Group on Prudent Investment Process, at
https://www.dol.gov/agencies/ebsa/about-ebsa/about-us/erisa-advisory-council/2006-prudent-investment-process.

14

See
GAO-14-92, Private Pensions: Clarity of Required Reports and Disclosures Could Be Improved, p. 40, GAO (Nov. 2013),
https://www.gao.gov/assets/660/659211.pdf.

15
For example, the Setting Every Community Up for Retirement Enhancement Act of 2019, enacted December 20, 2019, Public Law 116-94 (“SECURE Act”), reflects Congressional interest in expanding electronic delivery of ERISA disclosures and other information. Specifically, section 101(c) of the SECURE Act, which amended section 3 of ERISA, requires the terms of a pooled employer plan to provide that certain disclosures and other information may be provided in electronic form.
See also
Joint Committee on Taxation,
Technical Explanation of H.R. 4, the “Pension Protection Act of 2006,” as Passed by the House on July 28, 2006, and as considered by the Senate on Aug. 3, 2006
(JCX-38-06), Aug. 3, 2006 (regulations relating to the furnishing of pension benefit statements, “could permit current benefit statements to be provided on a continuous basis through a secure plan website for a participant or beneficiary who has access to the website”); Secretary of Labor's 2018 Testimony before the Senate Appropriations Subcommittees on Labor, Health and Human Services, Education, Review of the FY 2019 Dept. of Labor Budget Request, Senate, 115th Cong. (April 12, 2018),
https://www.appropriations.senate.gov/hearings/review-of-the-fy2019-dept-of-labor-budget-request;
and 2017 and 2018 legislative activity concerning the Receiving Electronic Statements to Improve Retiree Earnings Act (RETIRE) Act, at H.R. 4610 (Dec. 11, 2017) and S. 3795 (Dec. 19, 2018).

A final important development, prior to the Department's issuance of the proposed regulation in October 2019, was the President's issuance of Executive Order 13847 on August 31, 2018.
16

In relevant part, the Order instructed the Department, in consultation with the Treasury Department, to review whether regulatory or other actions could be taken to improve the effectiveness of required disclosures and ease the costs and regulatory burdens given the number and complexity of ERISA notices. In compliance with the Order, the Department worked with Treasury Department staff throughout the regulatory process and, within the required one-year period, completed a review of actions that could be taken “to make retirement plan disclosures required under ERISA and the Internal Revenue Code of 1986 more understandable and useful for participants and beneficiaries, while also reducing the costs and burdens they impose on employers and other plan fiduciaries responsible for their production and distribution.”
17

The Order directed that the Department consider proposing appropriate regulations or other guidance, if a determination is made that action should be taken. The Department's proposed regulation, issued October 23, 2019 and finalized herein, directly responds to the mandate set forth in Executive Order 13847.
18

16
E.O. 13847,
Strengthening Retirement Security in America,
83 FR 45321 (Sept. 6, 2018).

17

Id.

18
A few commenters suggested that the proposed regulation inadequately responded to the Executive Order 13847, because the proposal focused on delivery, as opposed to other methods of improving the effectiveness of disclosures. The Department does not agree with these commenters. At the outset, the Executive Order does not require the Department to issue any proposed or final rule, but only to review policies and, if warranted, “consider proposing appropriate regulations or guidance.”
Id.
section 2(c). The Executive Order also does not create any enforceable rights against the Department.
See id.
section 3(c). Regardless, the Department is confident that the new safe harbor substantially responds to both prongs of the Executive Order. As discussed in the Regulatory Impact Analysis section of this document, a notice-and-access framework will significantly reduce plan costs. Further, a notice-and-access framework also facilitates, among other things, interactivity, just-in-time notifications, layered or nested information, word and number searching, engagement monitoring, anytime or anywhere access, and potentially improved visuals, tutorials, assistive technology for those with disabilities, and translation software, even though this rule does not mandate such practices. These features may be used to improve participants' and beneficiaries' disclosure experiences. Further, the RFI (published with the proposed rule) solicited information, data, and ideas on additional measures (beyond the electronic delivery safe harbor in 29 CFR 2520.104b-31) that the Department could take in the future (either as part of finalizing the proposal in this document, or a separate regulatory or appropriate guidance initiative) to improve the effectiveness of ERISA disclosures, especially with respect to design and content of ERISA disclosures.

In the preamble to the proposal, the Department described in detail the standard of the Treasury Department and the IRS for notices using electronic media, which was issued in 2006 at 26 CFR 1.401(a)-21.
19

Affected parties, including the ERISA Advisory Council, had previously encouraged the

Department to allow plan administrators to rely on this standard, which they generally interpret as more flexible than the Department's 2002 safe harbor, when furnishing ERISA disclosures.
20

The Department has, in limited circumstances and pursuant to temporary guidance, allowed plan administrators to rely on the Treasury Department's electronic media regulation for applicable notices at 26 CFR 1.401(a)-21(c) as an alternative to reliance on the 2002 safe harbor.
21

In light of Executive Order 13847 requiring consultation with the Treasury Department, the preamble to the proposal explained that the Department's new proposed safe harbor was intended to align with the Treasury Department's electronic media regulation. The Department invited interested parties to share their views on whether this objective is desirable and what other steps might be needed to achieve it. Commenters consistently took the position that it was unclear whether an “intention to align” meant that a plan administrator's use of the notice-and-access framework in the proposal for Code disclosures would satisfy the applicable Treasury Department electronic media regulations. Commenters encouraged the Department to obtain confirmation of this position from the Treasury Department to eliminate any uncertainty.
22

The Department provided these comments to the Treasury Department for its consideration. The Treasury Department and the IRS have indicated that they intend to issue additional guidance relating to the use of electronic delivery for participant notices. This final rule is considered to be an Executive Order 13771 deregulatory action. Details on the estimated cost savings of this final rule can be found in the Regulatory Impact Analysis, below.

19
84 FR 56894 at 56897, 56898.

20
For example, in comments submitted to the ERISA Advisory Council in 2017, the Department was encouraged to adopt the Treasury Department's approach.
See
Groom Law Group, statement to the ERISA Advisory Council, June 7, 2017, p. 4, available at
https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/about-us/erisa-advisory-council/2017-mandated-disclosure-for-retirement-plans-levine-and-winters-written-statement-06-07.pdf.

21

See, e.g.,
Field Assistance Bulletin No. 2006-03 (Dec. 20, 2006), providing for “the furnishing of pension benefit statements in accordance with the provisions of [26 CFR ] 1.401(a)-21, as good faith compliance with the requirement to furnish pension benefit statements to participants and beneficiaries” under ERISA.

22
A few commenters suggested that the Treasury Department also should explicitly adopt a notice-and-access framework. The Department provided these comments to the Treasury Department for its consideration.

(3) Purpose of Regulatory Action

The Department's principal objective in finalizing this rule is to carefully update, based on a comprehensive public record, ERISA's electronic delivery rules for required disclosures to better leverage ongoing improvements in online and mobile-based technology and communications and to provide a structure that will be appealing to, and workable for, today's workers. In doing so, the Department believes the framework of this final rule strikes an appropriate balance between competing policy goals—on the one hand taking advantage of the innovations and reduced costs that may be achieved through enhanced use of electronic communication, and on the other hand ensuring suitable safeguards for participants and beneficiaries who may be less ready to move to electronic communication (or who simply prefer paper).

The final rule reflects the Department's reliance on a wide variety of sources of evidence concerning individuals' access to, and use of, electronic media in the United States:

• A 2019 survey found that 90 percent of U.S. adults use the internet, representing a substantial increase from 2000 when 52 percent of U.S. adults reported using the internet.
23

23
Monica Anderson, Andrew Perrin, et al,
10% of Americans don't use the internet. Who are they?,
Pew Research Center (Apr. 22, 2019). Available at
https://www.pewresearch.org/fact-tank/2019/04/22/some-americans-dont-use-the-internet-who-are-they/.

• A 2017 survey by the U.S. Census Bureau estimated that 87 percent of the U.S. population lives in a home with a broadband internet subscription.
24

24
“Types of internet Subscriptions by Selected Characteristics,” U.S. Census Bureau American Community Survey 1-Year Estimates (Table S2802) (2017).

• A 2019 survey found that among non-broadband users, 45 percent cite their smartphone as a reason for not subscribing to high-speed internet service at home.
25

25

See
Monica Anderson,
Mobile Technology and Home Broadband 2019,
Pew Research Center (June 13, 2019),
https://www.pewresearch.org/internet/wp-content/uploads/sites/9/2019/06/PI_2019.06.13_Mobile-Technology-and-Home-Broadband_FINAL2.pdf.

• A 2018 study concluded that 93 percent of households owning defined contribution accounts had access to, and used, the internet in 2016.
26

26
Peter Swire and DeBrae Kennedy-May, “Delivering ERISA Disclosure for Defined Contribution Plans: Why the Time has Come to Prefer Electronic Delivery—2018 Update,” (April 2018), p. 19.,
See Also
ICI Research Perspective, “Ownership of Mutual Funds, Shareholder Sentiment, and Use of the internet, 2018” (November 2018), finding among households with defined contribution plans, 92% had access to the internet in 2016 and 93% had access in 2018.

• A 2015 survey of retirement plan participants' online habits indicated that 99 percent reported having internet access at home or work, and 88 percent of respondents reported accessing the internet on a daily basis.
27

27
2015 Telephone Survey Conducted by Greenwald & Associates for the SPARK Institute.
Improving Outcomes with Electronic Delivery of Retirement Plan Documents,
Quantria Strategies, (June 2015),
https://www.sparkinstitute.org/content-files/improving_outcomes_with_electronic_delivery_of_retirement_plan_documents.pdf.

• A 2015 report observed that smartphones are used for much more than calling, texting, or basic internet browsing. Based on surveys, the report notes that 62 percent of smartphone owners have used their smartphones in the past year to look up information about a health condition; 57 percent, to do online banking; 44 percent, to look up real estate listings; 43 percent, to look up information about a job; 40 percent, to look up government services or information; 30 percent, to take a class or find education content; and 18 percent, to submit a job application.
28

28
Aaron Smith,
Smartphone Use in 2015,
Pew Research Center, (April 1, 2015),
https://www.pewresearch.org/internet/2015/04/01/us-smartphone-use-in-2015/.

The Department believes that these trends have continued to the present and will into the future, increasing the number of individuals for whom electronic delivery of ERISA disclosures is appropriate or preferred.

(4) 2019 Proposed Regulation and Request for Information

In October 2019, the Department published in the
Federal Register
a proposed rule and RFI intended to expand the methods by which required ERISA disclosures may be furnished electronically.
29

The proposal would allow plan administrators who satisfy certain conditions to notify participants and beneficiaries that certain disclosures will be made available on a website, while preserving the right of these individuals to opt out of electronic delivery and to request paper copies of disclosures. The Department invited interested persons to submit comments on the proposed rule and RFI and, in response to this invitation, the Department received 257 written comments from a variety of parties, including plan sponsors and fiduciaries, plan service and investment providers, and employee benefit plan and participant representatives, as well as 210 submissions in response to a petition. These comments are available for review on the “Public Comments” page under the “Laws and Regulations” tab of the Department's Employee

Benefits Security Administration website.
30

This Notice includes a detailed discussion of the provisions of the final rule, the public comments received by the Department, and how these comments impacted the Department's decision-making when adopting the final rule.

29
84 FR 56894 (Oct. 23, 2019).

30

https://www.dol.gov/agencies/ebsa/laws-and-regulations/rules-and-regulations/public-comments/1210-AB90.
A few commenters on the proposal requested an extension, arguing that the 30-day comment period for the proposed rule was unreasonable and insufficient to adequately address the many complex issues presented by the proposal. One commenter further requested that the Department hold a hearing on the proposal prior to issuing final guidance. The Department declined these requests, in part because so few commenters raised the objections, and also because most issues relevant to electronic disclosure have been analyzed and reviewed by the Department and the public for many years, especially after the 2011 RFI and temporary guidance issued by the Department. A substantial and comprehensive public record exists, supplemented and updated with comments on the proposed rule. The Department disagrees that a public hearing is necessary to supplement an already comprehensive public record. The scope and depth of the public record that has been developed belies arguments that a 30-day comment period was insufficient.

The Department also issued the RFI on electronic disclosure based on the Department's conclusion, at the time the proposed rule was published, that further information from stakeholders is necessary before proposing any substantive regulatory additions, deletions, or changes to ERISA's disclosures themselves, as opposed to changes in the means of delivery for such disclosures. The RFI, which was included in the preamble to the proposed rule (as opposed to being a stand-alone document), contained a series of questions to elicit views from all interested parties on additional ways to improve the usefulness and effectiveness of ERISA disclosures, for example with respect to the design or content of disclosures. The Department is analyzing responses to the RFI to determine whether regulatory or other action, in addition to today's final rule on electronic delivery of disclosures, should be taken to further enhance the effectiveness of ERISA's disclosures.
31

31
Review of comments on the RFI also is responsive to Executive Order 13847, which directed the Department to improve the effectiveness of plan disclosures, in addition to exploring reductions in employer costs and administrative burden, through expanded use of electronic delivery.
See generally
E.O. 13847, 83 FR 45321 (Sept. 6, 2018).

B. Final Rule—Alternative Method for Disclosure Through Electronic Media

The Department is amending part 2520 by adding a new section, § 2520.104b-31, entitled “Alternative method for disclosure through electronic media.” This section is a regulatory safe harbor that provides a new, optional method for compliance with ERISA's general standard for furnishing or delivering disclosures to participants and beneficiaries. A number of commenters on the proposed rule asked about the relationship between the new safe harbor and the existing 2002 electronic delivery safe harbor. Some commenters indicated satisfaction with the existing safe harbor. The new safe harbor is an additional method of delivery and does not substantively change the 2002 safe harbor.
32

Plan administrators, therefore, have additional flexibility with the rule in selecting the electronic delivery method that works best for the plan and its participants and beneficiaries. Plan administrators who wish to continue to rely on the 2002 safe harbor for electronic delivery, or to furnish paper documents by hand-delivery or by mail, can continue doing so.

32
In response to comments, non-substantive conforming amendments are being made to the 2002 safe harbor to facilitate the new safe harbor. For example, in response to commenters' requests, the Department is adding a cross reference to the new safe harbor in paragraph (f) of § 2520.104b-1 to improve regulatory clarity. Similar conforming amendments were made to §§ 2520.101-3(b)(3) and 2560.503-1.

Most commenters on the rule, as a general matter, believe that the new framework is a welcome addition to the 2002 safe harbor, which they argue is difficult for them to satisfy with respect to many participants and beneficiaries. In support of this position, these commenters cited with approval the many prior recommendations of the ERISA Advisory Council, the U.S. Government Accountability Office, and other parties.
33

These commenters also argue that electronic disclosure is both feasible and preferred; that paper disclosure is very costly; that participants' disclosure experiences can be improved online; that data obtained online enables plans to improve disclosures; that online activity may improve participants' savings rates and retirement outcomes; that participants can access information online at any time; and that web-based disclosures have the capacity to serve diverse populations better than traditional paper disclosures.

33
These recommendations also are set forth in the preamble to the proposed rule.
See
84 FR 56899, 56900.

Commenters who object to the new safe harbor, on the whole, believe that the 2002 safe harbor is sufficient on its own and is a preferable rule because it retains paper delivery as the default.
34

The principal argument of these commenters against the proposal is that some participants and beneficiaries lack reasonable access to the internet and others simply prefer paper, and the proposed rule, if finalized, would fail to adequately protect the interests of both categories of individuals. The Department disagrees with this argument. The statistics cited above, under the heading “
Purpose of Regulatory Action,”
show nearly universal access to the internet among individuals who participate in an ERISA covered plan. These statistics also demonstrate significant and upward trends in both access to, and usage of, the internet by individuals covered by ERISA plans, including for banking, research, and other non-browsing functions. Despite these statistics, however, the Department understands that some people prefer paper documents for a variety of legitimate personal reasons, including improved reading comprehension, distrust of electronic storage solutions, computer illiteracy, difficulty navigating websites, username and password fatigue or forgetfulness, and the cost of computer hardware and establishing and maintaining access to the internet or managing files electronically. The final rule, therefore, honors the preference of these individuals by including several key provisions to ensure that if covered individuals desire paper documents, plans must accommodate these individuals with minimal friction. The first, and perhaps most important, of these conditions in the final rule is the provision that guarantees covered individuals a right to request and receive paper copies of specific covered documents or to globally opt out of electronic delivery altogether. This provision alone addresses commenters' major concerns with a plan administrator's decision to change the default mode of delivery from paper to electronic media. Second, not only are plan administrators prohibited from charging covered individuals a fee in connection with their exercise of these rights, plan administrators also are prohibited from having procedurally cumbersome or complex processes for exercising these rights. Thus, a covered individual's decision to receive paper disclosures must be respected and cannot be met with economic or procedural hindrances. Finally, the final rule mandates that covered individuals

receive multiple reminders, on different mediums, of these rights. Thus, a participant's initial decision against opting out of electronic delivery is not permanent and can be revisited with each reminder or at any time. Collectively these three provisions protect individuals' preference for paper by guaranteeing a right to it and by barring plan administrators from imposing unreasonable burdens on exercising this right.

34
One of these commenters requested that, to prevent the misuse of any cost savings attributable to this final rule, the Department require plan administrators to document all savings attributable to their reliance on this safe harbor and apply these savings directly to participants' accounts or benefits. Such a request is beyond the scope of this safe harbor and ERISA's disclosure requirements, which are the subject of this rulemaking.

The final rule adopted today is fundamentally similar to the proposed rule, although modifications were made to reflect a variety of comments from affected parties. As in the proposal, the final rule establishes a safe harbor for compliance with ERISA's general standard for delivery of disclosures to participants and beneficiaries.
35

The general scope of the safe harbor relief is set forth in paragraph (a) of the final rule. Paragraphs (b) through (k) of the final rule set forth the detailed conditions to receiving the relief, and paragraph (l) contains the effective and applicability date. The detailed conditions are discussed below along with public comments on the proposal. The safe harbor applies only to “covered individuals” and only with respect to “covered documents.” Over 10 years, the new safe harbor will save plans approximately $3.2 billion net, annualized to $349 million per year (using a 3 percent discount rate).
36

35
Commenters have asked about the application of ERISA's fiduciary standards and other statutory requirements to electronic disclosure in varying contexts. This safe harbor addresses only a plan administrator's compliance with ERISA's standard for the furnishing of covered documents to covered individuals. It neither addresses nor supplants more general fiduciary or other statutory obligations under ERISA.

36

See
the Regulatory Impact Analysis in Section D of this preamble for a fuller discussion of net cost savings.

(1) Covered Individual

Paragraph (b) of the final safe harbor defines a “covered individual” for purposes of the rule as 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. This includes an email address or internet-connected mobile- computing-device (
e.g.,
smartphone) number, and is intended to be broad enough to encompass new and changing technology.

The existence of an electronic address for notification to a covered individual is critical to the effective implementation of a notice-and-access framework, much like a mailing address is critical to delivery of a paper document. The existence of a valid email address is similarly essential for a plan administrator who will deliver ERISA disclosures by complying with the requirements of new paragraph (k) of this final rule, which allows plan administrators to send documents via email. The final rule continues to require, as a condition of reliance on the safe harbor, including the new paragraph (k), that a plan administrator possess an electronic address that enables electronic communication with a covered individual.

The final rule offers plan administrators a variety of ways to comply with the condition to obtain an electronic address for each covered individual. This provision, for example, is satisfied if the company provides plan participants an electronic address because of their employment. This requirement also is satisfied if an employee provides a personal electronic address to the plan administrator or plan sponsor, for example, as part of the job application process or on other human resource documents. In addition, a plan administrator or service provider can request an electronic address in plan enrollment paperwork or to establish a plan participant's online access to plan documents and account information.

A few commenters raised a pragmatic concern with the use of electronic addresses that are phone numbers (as opposed to an email, for instance). They asked what would happen if a notice of internet availability (hereinafter “NOIA”) inadvertently is sent to a landline number, rather than a smartphone or similar number. It is not always readily apparent, given a ten-digit phone number, whether the number belongs to a landline or not. Exacerbating this potential problem, a plan administrator who sends an NOIA to a landline may not receive a bounce-back or any other notification that the recipient's phone address is a landline that cannot receive text messages. If the plan administrator did receive such a notification, it would trigger the substantive protections in paragraph (f)(4) of the safe harbor, which require a plan administrator to take curative steps if the electronic address of a covered individual is invalid or inoperable. The inability of an electronic address to receive, for example, a text message that is intended to be an NOIA, would mean that the address is in fact inoperable for purposes of the rule. Some phone carriers offer a landline service that converts a text message into a voice message, instead of returning a bounce-back notification. ERISA generally mandates that disclosures be in writing. Thus, the Department does not consider receipt of a voice-based message to be operable for purposes of this rule; the electronic address must be able to accept text (rather than audio) messaging. To address this concern, the final rule clarifies that an electronic address that will be used to satisfy paragraph (b) for a covered individual must be an address at which the individual may receive and inspect a written NOIA. Plan administrators who use internet-connected mobile computing device numbers, as opposed to email addresses, for example, will have to take steps to confirm with plan participants and beneficiaries, or through other reasonable means, such as using mobile phone carriers' validator services, to distinguish landline numbers from mobile or similar numbers that enable the receipt and inspection of written messages.

The final rule continues to recognize the validity of employer-assigned electronic addresses. Paragraph (b) of the proposal, in relevant part, provides that “if an electronic address is assigned by an employer to an employee for this purpose, the employee is treated as if he or she provided the electronic address.” The proposal specifically solicited comments on whether this provision of the proposal, as distinguished from the provision authorizing participants to affirmatively provide a personal electronic address to receive covered documents, should impose additional or different conditions to ensure that participants receive their disclosures.

Many commenters supported the proposal's recognition of the validity of employer-assigned electronic addresses. These commenters believe the provision is a common-sense technique to facilitate default electronic delivery: Employers routinely assign employees electronic addresses as part of their employment, for a variety of business purposes including human resource management, work-related assignments, and routine communications. Commenters also noted that the Department's 2002 safe harbor allows for electronic delivery of disclosures to employer-assigned electronic addresses without the affirmative consent of participants, and called attention to the lack of reported problems or harm to participants caused by or attributable to that provision in the 2002 safe harbor.

Other commenters, however, raised objections to the proposal's recognition of the validity of employer-assigned

electronic addresses. These commenters were particularly concerned about the language in the proposal that permitted an employer-assigned address to be created
solely for purposes
of using the proposed safe harbor. These commenters were concerned that ineffective disclosure will result if employers, or service providers or third-party technology firms hired by employers, create and assign electronic addresses with unclear or unfamiliar URL components solely to comply with the new safe harbor. In these circumstances, such attenuated or ambiguous electronic addresses (
e.g.,
email accounts) may be unfamiliar to, ignored, overlooked, or forgotten by covered individuals. One commenter asserted that an employer-assigned electronic address for purposes of this rule could, in some jurisdictions, constitute a breach of fiduciary duty.

Based on these concerns, the Department eliminated the phrase “for this purpose” from the final rule. Paragraph (b) now provides that participants will be treated as if they provided an electronic address to an employer if the 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.” Thus, to satisfy the rule's definition of a covered individual, the electronic address assigned by an employer for an employee must be assigned for some employment-related purpose other than the delivery of covered documents under the new safe harbor. An employer could not, for example, establish for an employee a personal electronic address (
e.g.,
a Google or Yahoo email account) that will be used by the plan's administrator only to send notices required by this safe harbor. The employer-assigned address must have an employment-related purpose other than to comply with the safe harbor. Whether such an assignment meets ERISA's furnishing standard is a matter to be determined based on the facts and circumstances of the particular situation.

Although the safe harbor recognizes the validity of employer-assigned electronic addresses, it does not permit plan administrators to assign them. A few commenters explicitly agreed with the Department's concern, expressed in the preamble to the proposal, about the assignment of electronic addresses by plan administrators and third-party service providers. These believe that misuse could result from allowing these individuals and entities to assign electronic addresses, for example, citing a practice under which a plan's service provider would use commercial locator services or similar people-finder tools to acquire electronic addresses of plan participants. The Department agrees, and paragraph (b) of the final rule continues to prohibit plan administrators or their service providers from assigning electronic addresses under the new safe harbor. To ensure effective access to electronic media, paragraph (b) confers this authority only on an employer with respect to its employees. Accordingly, in response to one commenter's request for clarification, a plan administrator could not use a commercial locator service to acquire, and then use, personal electronic addresses under this safe harbor.

Similarly, a few commenters raised concerns about application of the proposed safe harbor to spouses, divorced spouses, and other beneficiaries who may be entitled to disclosures under ERISA. Specifically, these commenters believe that it would be inappropriate for employers to assign electronic addresses for disclosure of covered documents to these individuals, because, unlike employees participating in an employer's plan, spouses and other beneficiaries may not have any real relationship with the employer. The Department agrees with this concern. Although paragraph (b) of the final rule allows employers to assign electronic addresses for their employees, employers cannot assign electronic addresses for non-employee spouses or other beneficiaries of their plans' participants. For a spouse or other beneficiary that is entitled to ERISA disclosures to be a covered individual for purposes of the final rule, the spouse or other beneficiary must affirmatively provide (or must have provided) the employer, plan sponsor, or administrator (or appropriate designee) with an electronic address; otherwise the plan administrator cannot furnish disclosures to these individuals pursuant to this rule.

The definition of “covered individual” in the final rule does not exclude participants in multiemployer plans. Commenters representing multiemployer plans requested confirmation that these individuals could be covered individuals for purposes of paragraph (b) of the rule. Their concern stemmed from the proposal's use of the phrase “as a condition of employment,” as a predicate for providing the plan administrator an electronic address because, according to the commenters, multiemployer plan sponsors do not have the ability to establish employment conditions, unlike plan sponsors generally. In this regard, they argue, multiemployer plans are very different from single-employer plans. The Department confirms for affected parties that the final rule's definition of covered individual in paragraph (b) is intended to include multiemployer plan participants. This necessarily follows from paragraph (c) of the final rule, which defines the scope of “covered documents” to include all pension benefit plans under ERISA. If the Department had intended to exclude from this safe harbor a subset of pension plans, such as multiemployer plans, the exclusion would have been set forth in paragraph (c) of the final rule. Nevertheless, the Department has slightly rephrased paragraph (b) to clarify that providing an electronic address as a condition of employment is only one way that an individual might supply an electronic address. The individual might supply it as part of their initial participation in the plan, or they might supply it otherwise: Through other means and for other reasons. In addition, in response to one commenter's question regarding the source of an electronic address, the definition of “covered individual” includes multiemployer plan participants who provide their electronic addresses directly to the plan administrator, as well as plan participants whose personal or employer-assigned electronic address is provided to the plan administrator by an employer.

(2) Covered Documents

(i) Employee Pension Benefit Plans

Paragraph (c) of the proposal defined the “covered documents” to which the rule would apply. It provided that the safe harbor may be used by the administrator of a pension benefit plan, as defined in ERISA section 3(2), to furnish any document that the administrator is required to furnish to participants and beneficiaries pursuant to Title I of ERISA, except for any document that must be furnished only upon request. The proposal clarified that a plan administrator would not be required to furnish all of these documents, as applicable for a particular plan, pursuant to the safe harbor if the plan administrator prefers a different method of furnishing for some of the documents. The Department requested comments generally as to whether the scope of covered documents is appropriate, and specifically whether certain employee pension benefit plan disclosures are better suited for such electronic disclosure.

Commenters generally supported the scope of the definition of covered documents as including disclosures for pension benefit plans. The final rule does, however, include two minor revisions. First, in response to numerous commenters, the Department added the words “or information” to this paragraph to clarify that certain “information” required to be disclosed pursuant to 29 CFR 2550.404a-5, the Department's participant-level fee disclosure regulation, is covered by the final rule. Second, the Department added the word “only” to this paragraph to clarify the scope of the definition's exception for documents that must be furnished upon request (the exception now applies to documents “that must be furnished
only
upon request,” emphasis added).

Commenters disagreed about this exception. Some commenters argued that the final rule should not exempt documents that are available upon request by a covered individual, particularly if the individual agrees or has not objected to the rule's method for delivery. Other commenters did not object to the exception, but requested that it be revised to ensure that the safe harbor's exclusion from covered documents is limited to documents that are available
only
upon request. Under ERISA, some documents must be furnished automatically and others only upon request by an eligible person.
37

However, these commenters point out that in certain cases (including pursuant to this safe harbor) participants may request copies of many different documents—even documents that must be furnished automatically, such as the summary plan description (SPD). The Department's intention, as reflected in the preamble to the proposed regulation and unchanged for purposes of the final rule, is that the exception applies to documents that are furnished only upon request (
i.e.,
the exception does not apply to, and therefore the final rule includes as covered documents, documents for which the plan administrator has an affirmative obligation to furnish but that are also, for various reasons, requested by covered individuals).
38

The 2002 safe harbor, if satisfied, remains available for plan administrators to furnish ERISA disclosures that are excluded from this safe harbor.

37

See, e.g.,
29 U.S.C. 1024(b)(4) for the general requirement that upon written request of any participant or beneficiary, plan administrators must furnish plan documents including the latest updated SPD, latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is established or operated.
See also
29 U.S.C. 1021(k) with respect to multiemployer plan information provided to participants and beneficiaries upon written request.

38
84 FR 56894, 56901 n. 63 (“The proposed safe harbor does not apply to documents that are furnished only upon request.”).

(ii) Employee Welfare Benefit Plans

The proposed safe harbor did not apply to employee welfare benefit plans, as defined in section 3(1) of ERISA, such as plans providing disability benefits or group health plans. The Department instead reserved paragraph (c)(2) of the proposal so that it could continue to study the future application of the new safe harbor to documents that must be furnished to participants and beneficiaries of employee welfare benefit plans. In the proposal, the Department noted that this reservation accords with Executive Order 13847, which focuses the Department's review on retirement plan disclosures. The Department further explained that it does not interpret the Order's directive as limiting the Department's ability to take future action with respect to employee welfare benefit plans, especially to the extent similar policy goals, including the reduction of plan administrative costs and improvement of disclosures' effectiveness, may be achieved. The Department noted in the preamble of the proposal that welfare plan disclosures, such as group health plan disclosures, may raise different considerations, such as pre-service claims review and access to emergency and urgent health care. Moreover, the Department shares interpretive jurisdiction over many group health plan disclosures with the Treasury Department and the Department of Health and Human Services. In considering any possible new electronic delivery safe harbor for group health plan disclosures in the future, the Department would consult with these other Departments.

Many commenters agreed with the Department's reasoning as set forth in the preamble to the proposed rule. These commenters urged the Department not to include welfare plans in the final rule, the most common reason being that welfare plans present unique issues as compared to other types of employee benefit plans. These commenters also acknowledged the necessity of the tri-agency consultation process for any such rule.

Other commenters, by contrast, encouraged the Department to expand the final rule to apply to disclosures for welfare plans or begin immediately the formal process of doing so. These commenters argued that there is no sound legal or policy basis for excluding welfare plans, and that significant additional reductions in regulatory costs and burdens would follow if the safe harbor were expanded to cover welfare benefit plans, especially group health plans. A few of these commenters estimated that even extending the safe harbor only to routine health care denials (
e.g.,
“Explanation of Benefits” or “EOBs”) would save millions of dollars annually for health plan administration.

The Department understands that there could be significant cost savings if the safe harbor were extended to cover welfare plan disclosures. At the same time, such an extension warrants careful consideration and analysis that goes beyond the scope of this final rule. The Department, therefore, has decided not to expand the scope of the final rule to cover welfare benefit plans at this time. The Department will continue exploring whether, and under what circumstances, to extend the safe harbor in the final rule to welfare benefit plans, and may undertake rulemaking in the future.

(3) Notice of Internet Availability

As a general rule, the proposal required that plan administrators furnish to each covered individual an NOIA for each covered document in accordance with the requirements of this section. A special rule, in paragraph (i) and discussed below, allowed plan administrators to combine the content of the required notices for certain covered documents. Paragraph (d) of the final rule, as in the proposal, continues to require that plan administrators furnish an NOIA and sets forth the conditions for satisfying this requirement, as modified to reflect the Department's response to commenters' views on the notice requirement.

(i) Timing of Notice of Internet Availability

Paragraph (d)(2) of the final rule continues to provide that the plan administrator must furnish an NOIA at the time the covered document is made available on the website described in paragraph (e). One commenter argued that, due to the flexibility of online posting, covered documents should be posted earlier than required by law, for example that any disclosures affecting covered individuals' benefits should be posted as soon as reasonably possible after the decision affecting benefits is made. The Department disagrees that it would be appropriate, in a rule focused on the acceptable methods for

delivering required ERISA disclosures, to alter the timing requirements for the disclosures themselves. As set forth in the preamble to the proposal, the rule is not intended to alter the substance or timing of any of ERISA's required disclosures. The rule merely expands the possible delivery methods for disclosures. ERISA and the regulations thereunder include thoughtfully prescribed timelines for each required disclosure; the Department maintains that any changes to those substantive, legal standards would have to be made on a disclosure-by-disclosure basis, subject to the regulatory process, including public notice and comment. The Department does agree with this commenter, however, that, for similar reasons, it would not be necessary or appropriate to include any extensions to the timing requirements for covered documents that are posted online.

As in the proposal, the final rule continues to allow plan administrators to furnish a combined NOIA each plan year for more than one covered document. If a combined NOIA was furnished in the prior plan year, the next plan year's combined NOIA must be furnished no more than 14 months later. As discussed below, however, the covered documents that may be combined pursuant to paragraph (i) of the final rule have changed. The final rule continues to provide plan administrators with a 14-month period to comply with the annual NOIA requirement. The Department does not want plan administrators to have to push back the date of furnishing from year to year to avoid the risk that they run afoul of a strict 12-month requirement, and the Department acknowledges that actual disclosure dates can vary slightly from year to year. The two-month grace period should offer sufficient flexibility without compromising individuals' receipt of an NOIA on a periodic, essentially annual, basis. The Department did not receive any comments disagreeing with this approach or arguing that different timing requirements would be preferable.

The Department also reminds plan administrators that if they choose to furnish a consolidated NOIA once a year under paragraph (i) of the rule, doing so will not change the date on which the covered documents must be made available on the website. Each covered document described in the consolidated NOIA must be made available on the website no later than the date it must be furnished to participants and beneficiaries by law.

(ii) Content of Notice of Internet Availability

Paragraph (d)(3)(i) through (vii) of the proposal listed the content requirements for the NOIA. Paragraph (d)(3)(i) of the proposal required a prominent statement, for example as a title, legend, or subject line that reads, “Disclosure About Your Retirement Plan.” Paragraph (d)(3)(ii) required this statement: “Important information about your retirement plan is available at the website address below. Please review this information.” Paragraph (d)(3)(iii) required a brief description of the covered document. Paragraph (d)(3)(iv) required “the internet website address where the covered document is available.” Paragraph (d)(3)(v) required a statement of the right to request and obtain a paper version of the covered document, free of charge, and an explanation of how to exercise this right. Paragraph (d)(3)(vi) required a statement of the right to opt out of receiving covered documents electronically, and an explanation of how to exercise this right. Finally, paragraph (d)(3)(vii) required a telephone number to contact the plan administrator or other designated representative of the plan.

The Department requested comments on these content requirements and whether the NOIA would adequately serve its intended purpose, which is to provide very concise and clear notification to covered individuals about covered documents available on the website. As a general matter, some commenters believe that the content requirements are excessive, while others merely stated that the Department should be less prescriptive about the content requirements, and allow plan administrators greater flexibility for innovation. Commenters also provided significant feedback on specific content provisions in the proposal. Although not all of these suggestions were implemented in the final rule, the Department is persuaded by commenters that its intention for the NOIA may be better achieved by adopting some revisions to the NOIA's content requirements. Due to these revisions, the Department also restructured paragraph (d)(3), making non-substantive changes to the lettering and numbering of subsections. The following paragraphs set forth commenters' views with respect to each of the specific NOIA content provisions and, where applicable, changes that have been made for purposes of the final rule.

The Department has adopted the first two content requirements today with only minor revision from the proposed rule. As in paragraph (d)(3)(i) of the proposal, now (d)(3)(i)(A) in the final rule, the NOIA must include a prominent statement—for example as a title, legend, or subject line—that reads: “Disclosure About Your Retirement Plan.” Commenters did not object to this statement or its prominence. The statement required by paragraph (d)(3)(ii) of the proposal, now (d)(3)(i)(B) in the final rule, has been revised to be technologically neutral. As finalized, the NOIA must include the following statement: “Important information about your retirement plan is now available. Please review this information.” A few commenters disagreed with the use of the word “Important” and the Department's provision of required language for this statement. As one commenter explained, the word “important” may become meaningless as NOIAs are regularly received. The Department disagrees that the use of the word “Important” is problematic. Even as covered individuals become accustomed to this framework for disclosure and receive notices over time, there is no harm in highlighting what the Department believes to be “important” retirement plan information; federal law, after all, does require disclosure of this information for a reason. The Department also is not persuaded that the rule's required language for the statement in (d)(3)(i)(B) is problematic, especially as revised to more broadly apply to different electronic delivery methods. Very few commenters objected to this language, and a number of commenters expressly stated that they would not object to model language for some of the safe harbor's notice requirements. The statement is brief and straightforward, and plan administrators often prefer to have specific guidance when making such statements to reduce risk that language drafted at their discretion will be insufficient.

The Department has decided to make a few revisions to paragraph (d)(3)(iii) of the proposal, now (d)(3)(i)(C), in response to public comments. An NOIA, under the final rule, must include “[a]n identification of the covered document by name (for example, a statement that reads: `your Quarterly Benefit Statement is now available') and a brief description of the covered document if identification only by name would not reasonably convey the nature of the covered document.” Many commenters on the proposal requested additional guidance on what would be expected as a “brief description” of a covered document and worried that this

requirement could result in too much information on what is supposed to be a very short notice. Suggestions included requiring that the brief description be limited to no more than a sentence or two, or even consolidating the first few content requirements and merely requiring identification of the covered document. The Department agrees that it may not always be necessary, to the extent the nature of a covered document is clear by its name, to include a brief description and that inconsistent application of the standard could result in longer, and more complex, NOIAs. The final rule requires a brief description only when identifying a covered document by name would not reasonably convey the nature of the covered document. Otherwise, only identification of the covered document by name is required. For example, an NOIA for a quarterly benefit statement ordinarily would not need a brief description. Quarterly benefit statements are furnished every three months and their content, which includes periodic personalized benefit account information for a covered individual, generally is well understood by individuals. Alternatively, the Department expects that a plan administrator furnishing an NOIA for a blackout notice would need to include a brief description to comply with this requirement. Blackout notices typically are not furnished on a recurring basis, and the circumstances surrounding the provision of a blackout notice may not be clear to many covered individuals. It is not unlikely, for example, that some covered individuals will have never before received a blackout notice. The Department believes that these modifications are responsive to commenters' concerns without undercutting the important message NOIAs are intended to convey.

Paragraph (d)(3)(iv) of the proposal, now (d)(3)(i)(D) in the final rule, also reflects limited revision in response to commenters' questions about whether plan administrators could use a hyperlink on an NOIA, rather than simply a website address. The Department did not intend to limit NOIAs to including only website address citations: Plan administrators are encouraged to use hyperlinks that take covered individuals directly to a website address. The rule has been revised explicitly to include hyperlinks.
39

39
The Department did not adopt one commenter's recommendation that final guidance require hyperlinks or the ability to hover over words that previously have been defined. Although the rule now explicitly includes hyperlinks in addition to website addresses, the Department is not persuaded that hyperlinks should be mandatory; further, it is unclear whether the commenter's suggestion that covered individuals must be able to hover over defined terms is meant to apply to notices (which are intended to be concise, clear documents notifying of internet availability, rather than substance) or more likely to the covered documents themselves. This rule is not intended to change substantive requirements of covered documents, such as the use of (and hyperlink capabilities associated with) defined terms.

A few commenters addressed the standard in paragraph (d)(3)(iv) of the proposal, now (d)(3)(i)(D), that the required internet website address must be “sufficiently specific” to provide ready access to the covered document (or, in the case of a combined NOIA, covered documents).
40

A website address (or hyperlink) will satisfy this requirement if it leads the covered individual directly to the covered document. A website address (or hyperlink) also will satisfy the “sufficiently specific” standard if the address leads the covered individual to a login page that provides, or immediately after a covered individual logs on provides, a prominent link to the covered document. Most commenters did not respond with suggestions for how to improve the “sufficiently specific” standard, except for requesting minor clarifications. The very few commenters that did address the standard disagreed with each other on the problem; for example, one commenter believed that the “sufficiently specific” standard is too prescriptive and should allow more flexibility, especially to accommodate future technology, whereas another commenter argued that the standard is not sufficiently protective of covered individuals and that the notice should take individuals straight to the disclosure (following a secure login, as applicable). Similarly, very few commenters addressed whether additional or different security procedures or information about login or similar procedures should be included in the notice. Most believe this additional information will only further clutter the notice and detract from key information, and that security procedures and protocols may become quickly outdated. One commenter asked the Department to require a separate notice including login and security information, but did not offer specific commentary on security or privacy language that should be required. Following its review of commenters' views, the Department decided to retain the “sufficiently specific” standard, which now applies whether the notice includes a website address or a hyperlink to such address, and made other non-substantive revisions to simplify the paragraph.

40

See, e.g.,
29 CFR 2550.404a-5(d)(v), which similarly requires disclosure of specified information at “[a]n internet website address that is
sufficiently specific
to provide participants and beneficiaries access to” such information (emphasis added). The Department is not aware of any evidence that plan administrators need further clarification or that this standard is ineffective. The proposal nonetheless included, and the final rule continues to include, two non-exclusive methods for website access that satisfy this standard.

The next two content requirements proposed in paragraphs (d)(3)(v) and (vi), which are now contained in paragraphs (d)(3)(i)(E) and (F) of the final rule, have been adopted with only minor amendment to clarify that requests for a specific paper version, and requests to opt out are both fulfilled free of charge. An NOIA must include a statement of the right to request and obtain a paper version of the covered document, free of charge, and an explanation of how to exercise this right (under (d)(3)(i)(E)); and a statement of the right, free of charge, to opt out of electronic delivery and receive only paper versions of covered documents, and an explanation of how to exercise this right (under (d)(3)(i)(F)). Commenters overall did not object to requiring that the notice explain covered individuals' rights to request paper or opt out of electronic delivery. The Department continues to believe these are vitally important and protective rights for covered individuals and is not persuaded by the one commenter who requested that these statements be removed. A couple of commenters suggested that these rights should be “prominently” displayed and that the notice should include detailed instructions about how to opt out and any timelines for doing so. The Department did not adopt these suggestions. Given the very limited content of the NOIA, nearly everything arguably is “prominent,” and adding more and more content and specifications would only undermine the intended brevity and simplicity of the notice.

The final rule includes one additional content requirement, in paragraph (d)(3)(i)(G), to respond to several commenters' suggestion that covered individuals should be made aware that covered documents may not always be available online. The Department agrees that covered individuals would benefit from such a warning or reminder, so that they can take any desired action to print or save covered documents, or possibly request a paper copy of a covered document. As discussed below in detail, plan administrators are not required to maintain covered documents online indefinitely for purposes of

satisfying this electronic delivery safe harbor. Thus the final rule now requires an NOIA to include a cautionary statement that the covered document is not required to be available on the website for more than one year or, if later, after it is superseded by a subsequent version of the covered document. This requirement will ensure that covered individuals understand that covered documents will not be available online indefinitely. Plan administrators could, for example, draft the cautionary statement in a manner that encourages covered individuals to print, save, or otherwise preserve covered documents.

A few commenters found paragraph (d)(3)(vii) of the proposal, now (d)(3)(i)(H), requiring a contact telephone number to be deficient, for example suggesting that the rule should mandate toll-free telephone numbers both for the employer or plan administrator and for the Department. The Department did not adopt a requirement that the telephone number must be toll-free, because such a requirement would place a costly and unnecessary burden on plan sponsors, particularly for sponsors of small plans that might be located in the vicinity of most of their participants without the need for any long-distance calling. Further, the Department is unaware of any problems or objections from plan participants with the telephone number that is required as contact information in the participant-level fee disclosure regulation (which similarly does not require a toll-free number).
41

In any event, the safe harbor does not preclude plan administrators from providing (and including on the NOIA) a toll-free number. The Department was not persuaded that this final content requirement from the proposal should be revised. Paragraph (d)(3)(i)(H) of the final rule continues to require a telephone number to contact the plan administrator or other designated representative of the plan.

41

See
29 CFR 2550.404a-5(d)(2)(i)(A).

The Department declined to adopt a number of additional content requirements suggested by some commenters.
42

For example, one commenter on paragraph (d)(3)(vii) of the proposal, now (d)(3)(i)(H), argued that the notice's content should be expanded to include an explanation that the number may be used for paper and opt-out requests as well as other questions, with a required response time of no more than 72 hours. Covered individuals will not necessarily be better informed by, and are more likely to ignore, a long and detailed notice that they receive repeatedly. The purpose of the NOIA is to highlight for covered individuals that a retirement plan document is available online, not to become a new and comprehensive disclosure of ERISA rights and responsibilities in itself.

42
Examples of additional statements that commenters suggested for the NOIA include that it is the covered individual's responsibility to notify the plan administrator of a new electronic address; where historical versions of documents can be obtained; the significance of the covered document and what has changed since the last version; that there will be no retaliation for choosing paper; that notices and covered documents should be printed and saved for personal records; the right to print covered documents at an employer's place of business; and the availability of the plan administrator to assist with passwords.

Based on additional feedback from commenters and analysis of the circumstances that may in fact warrant additional content on an NOIA, however, the Department adopted one more provision to the final safe harbor in paragraph (d)(3)(ii). As opposed to the preceding content requirements for the notice in paragraph (d)(3)(i), the information described in paragraph (d)(3)(ii) (ii) is not required. An NOIA furnished pursuant to the safe harbor may (but is not required to) contain a statement as to whether action by the covered individual is invited or required in response to the covered document and how to take such action, or that no action is required, provided that such statement is not inaccurate or misleading. The Department included this new provision because it was persuaded by commenters that covered individuals may find it advantageous to be notified whether some action on their part is (or is not) invited or required in response to the notice. The rule does not preclude plan administrators' discretion to include this information, although it is not required. Plan administrators, however, must ensure that any statement about action that may or must be taken, or that no action is needed, is not inaccurate or misleading. For example, in the Department's view, it would ordinarily be inaccurate and misleading for a plan administrator to state on an NOIA for a benefits claim denial under section 503 of ERISA that no action is invited or required. Even if a covered individual chooses to ignore the NOIA and not initiate an appeal, a benefits claim denial, by its very nature, is an invitation to take action, and requires such action within a specific timeframe or else the claimant may forfeit a right to a benefit.

Finally, as to the content required for the NOIA, the Department requested comments on whether affected parties believed that a model NOIA would be useful, and asked that parties submit sample models for the Department's consideration. Although a few commenters stated that they did not necessarily object to the provision of a model NOIA, many commenters responded that a model is not necessary, for example because the NOIA content and other requirements are sufficiently clear, or more explicitly that the Department should not adopt a model, because, given the large variety in retirement plan features and designs, a model could be insufficiently flexible and ultimately interfere with the ability of plan administrators to appropriately prepare NOIAs for their plans.
43

The public record, therefore, did not demonstrate a meaningful level of interest in having a model NOIA published with the final rule. The Department also did not receive any sample models from commenters. Given this overall lack of interest, and in light of changes made to improve the required content of the NOIA in response to commenters' concerns, the Department has not included a model NOIA in the final rule.
44

43
One commenter supported the Department's development of a model notice, and explained that to do so properly would require as long as six months. For the reasons stated herein, however, the Department has declined to adopt a model NOIA at this time.

44
The Department similarly did not adopt a model for the initial notification required under paragraph (i) of the rule, discussed in detail below. As with the NOIA, commenters did not necessarily object to a model, but there was not consistent or strong support for a model for either notice.

(iii) Form and Manner of Furnishing Notice of Internet Availability

The Department intends the NOIA to be a succinct, understandable disclosure that will convey its importance and easily call the recipient's attention to the availability of a covered document. With this goal in mind, paragraphs (d)(4)(i) through (iv) of the proposed rule set forth standards for the form and manner of furnishing the notice. As proposed, an NOIA had to first, be furnished electronically to the address referred to in paragraph (b) of the proposal; second, contain only the content specified in paragraph (d)(3) of the proposal, except that the plan administrator could include pictures, logos, or similar design elements, so long as the design was not inaccurate or misleading; third, be furnished separately from any other documents or disclosures furnished to covered individuals, except as permitted under paragraph (i) of the proposal (which addressed the consolidation of certain notices of internet availability on an annual basis); and fourth, be written in a manner calculated to be understood by

the average plan participant. The proposal elaborated on this fourth condition, explaining that a notice that uses short sentences without double negatives, everyday words rather than technical and legal terminology, active voice, and language that results in a Flesch Reading Ease test score of at least 60 would satisfy the fourth requirement.
45

45

See, e.g.,
general information about this formula for writing in plain English, at
https://web.archive.org/web/20160712094308/http://www.mang.canterbury.ac.nz/writing_guide/writing/flesch.shtml
(Rudolf Flesch).

The proposal required that the NOIA be furnished by itself. The NOIA contains important information alerting covered individuals that retirement plan disclosures are available online. This information should not be obscured by commercial advertisements or even other ERISA-required disclosures. The second and third requirements in paragraph (d)(4) of the proposal were intended to achieve this objective. Any additional information or content had to be limited; to permit otherwise would have frustrated the Department's goal of a clear, concise notice. To the extent design elements could enhance the appearance of the NOIA and possibly increase the likelihood that it would draw the desired attention of covered individuals, however, the proposal did not exclude the use of pictures, logos, and similar design elements, so long as the design was not inaccurate or misleading and the required content was clear.

Plan administrators must write clear and understandable notices of internet availability, and to that end the proposal relied on the standard measure for readability of ERISA disclosures—that the annual notice be “written in a manner calculated to be understood by the average plan participant.” Due to the concise nature of the NOIA, however, paragraph (d)(4)(iv) of the proposal included additional guidelines for plan administrators to satisfy the readability requirement, and plan administrators were encouraged to apply the plain language concepts described above (including the Flesch Reading Ease test). The Department incorporated these concepts to further improve individuals' comprehension of the information on the NOIA and to provide plan administrators a safe harbor, essentially, to satisfy the readability standard for purposes of the proposed safe harbor.

Commenters had a variety of general observations about the form and manner by which an NOIA must be furnished. For example, some commenters asked the Department to provide flexibility in how the notice may be furnished, not just by email but by text messages, mobile application notifications, and future innovations. Alternatively, some commenters requested that the rule be revised to allow plan administrators to furnish the NOIA in paper form, or electronic form, based on a determination by the plan administrator. Allowing paper disclosure would, these commenters explained, somewhat alleviate their concerns about the revocation of FAB 2006-03, discussed below in the section titled “
Transition Issues.”
Other commenters argued that allowing paper would reduce their concern that disclosures may not be received by covered individuals, winding up in a spam folder or otherwise buried.

The Department notes that, similar to the discussion below with respect to the concept of a “website,” the final rule is intended to apply to a broad range of technologies in addition to emails and internet browser websites. Indeed, the Department specifically designed the rule to accommodate future technological innovations that can be used in compliance with the standards of the safe harbor. By its terms, the rule does not limit furnishing of the NOIA to email; the notice could, for example, be sent by text message. The Department did not, however, adopt certain commenters' suggestion that plan administrators should be able to furnish the NOIA in paper form.
46

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 electronic 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.

46
The Department believes that commenters' support for paper NOIAs was due, in part, to the fact that some plan administrators currently rely on Field Assistance Bulletin 2006-03, which permits a paper notice, to furnish pension benefit statements. The Department understands that for these administrators, reliance on this final rule will require them to modify their procedures with respect to notices for benefit statements and consequently is providing an 18-month transition period during which plan administrators can implement such modifications. FAB 2006-03 and the transition period are discussed further below, under the heading “
Transition Issues.
”

The Department also received more specific comments on the requirements of section (d)(4) of the proposal. In response to paragraph (d)(4)(ii) of the proposal, limiting the content of the NOIA but permitting specified design elements, a few commenters requested clarification that covered individuals will not be forced to wade through what are essentially marketing communications as purported “design” elements that could overtake the actual content of the notice. And more importantly to these commenters, covered individuals should not be confused by suggestible endorsements and advertising. The Department appreciates commenters' concern that the content of the required NOIA must be clear and direct, and that the NOIA should not be used as marketing or sales material to the extent the NOIA is prepared by a plan service provider. However, the Department believes that these concerns are mitigated by the requirement in paragraph (d)(4)(ii) that design elements not be inaccurate or misleading and that the required content be clear. The purpose of the notice is to communicate the availability of an online disclosure, and plan administrators are responsible for ensuring that this purpose is not obscured.

Paragraph (d)(4)(iii) of the final rule requires that an NOIA must be furnished separately from any other documents or disclosures except as permitted, and discussed below, by paragraph (i) of the final rule. Some commenters questioned whether the NOIA must be furnished separately if it accompanies the covered document (
e.g.,
an email notice with an attached PDF version of the covered document); this matter is addressed by the addition to the final rule of paragraph (k), discussed below, permitting such direct delivery of covered documents.

The Department received significant commentary on the readability standard in paragraph (d)(4)(iv) of the proposal with its references to short sentences, active voice, and the Flesch reading ease score. Most commenters strenuously objected to the inclusion of these additional, more specific measurements to assess the readability of NOIAs. These commenters argued that the Department's existing standard, “written in a manner calculated to be understood by the average plan participant,” is sufficient and well understood. They asserted that, in their

view, including additional standards, particularly standards based on the application of a Flesch reading ease score, would increase the costs of compliance with the safe harbor without obvious benefits. Even though the new standards were proposed as examples of compliance with the general standard, rather than as independent requirements, the commenters argued that there is a good chance the standards would be interpreted as a new legal standard, not only for this final rule's notices but for other ERISA disclosures, such as the SPD. The Flesch reading ease score was especially problematic for commenters, who suggested that perhaps it could be used as a goal, but is not appropriate as a required score.
47

If the Department retained this standard, they argued, it would have to be clear that it applied only in the context of this safe harbor, even though such a statement would not necessarily preclude its expected application in other contexts. Only one commenter supported these additional criteria, and that commenter suggested that their inclusion should only be a first step and that additional standards, including for the design and layout of notices, should be included. The same commenter cautioned that the Department should also test NOIAs to ensure they are understandable.

47
One commenter suggested that, if the Department wishes to include additional standards for plan administrators to achieve “readability,” the final rule should include only the Flesch reading ease score, an objective standard.

In response to commenters' concerns, the Department has removed from paragraph (d)(4)(iv) the more detailed guidelines for meeting the general readability standard. The final rule requires that the NOIA must be written in a manner calculated to be understood by the average plan participant. Although those additional guidelines may be helpful tools suitable for drafting clear and simple notices under this rule, the Department agrees with commenters that it would not be desirable to imply that these guidelines are mandatory for ERISA disclosures or notices in general. The Department also acknowledges some of the more specific objections that commenters raised. For example, it may not be possible to consistently achieve a Flesch reading ease test score of at least 60, especially for NOIAs that consolidate content for more than one covered document, as permitted by paragraph (i) of the rule. Some experts posited that using “one-size-fits-all” scoring programs does not always result in effective communications.
48

Although the Department has declined to include the proposal's specific guidelines in the final rule, it will continue to analyze readability and other measures in connection with the responses to the RFI on general disclosure issues that was published with the proposed rule. In the meantime, plan administrators may look to the Department's SPD regulations for guidance on the meaning of “written in a manner calculated to be understood by the average plan participant.”
49

48

See, e.g.,
Janan, D., Wray, D., “Readability: The limitations of an approach through formulae” (2012) (readability formulae found to be inadequate), at
http://www.leeds.ac.uk/educol/documents/213296.pdf. See also
Crossley, S.A., Allen, D., & McNamara, D. S., “Text readability and intuitive simplification: A comparison of readability formulas” (Apr. 2011, Vol. 21, No. 1, pp. 84-101) (traditional readability formulas weak due to reliance on overly simplistic mechanisms), at
http://nflrc.hawaii.edu/rfl. But compare
Federal Plain Language Guidelines, (March 2011, Rev. 1, May 2011
)
(federal agencies should apply user testing techniques to aid compliance with The Plain Writing Act of 2010 (P.L. 111-274) (Oct. 13, 2010),)), at
https://plainlanguage.gov/guidelines/.

49

See
29 CFR 2520.102-2(a) (“The summary plan description shall be written in a manner calculated to be understood by the average plan participant and shall be sufficiently comprehensive to apprise the plan's participants and beneficiaries of their rights and obligations under the plan. In fulfilling these requirements, the plan administrator shall exercise considered judgment and discretion by taking into account such factors as the level of comprehension and education of typical participants in the plan and the complexity of the terms of the plan. Consideration of these factors will usually require the limitation or elimination of technical jargon and of long, complex sentences, the use of clarifying examples and illustrations, the use of clear cross references and a table of contents.”).

(iv) Standards for Internet Website

The proposed safe harbor included minimum standards concerning the availability of covered documents on a website, which were set forth in paragraphs (e)(1) through (3) of the proposal. Generally these standards remain intact. The principal changes, discussed below, include revisions to the website retention requirement, in paragraph (e)(2)(ii) of the final rule, and a new provision, in paragraph (e)(4), to address the application of the safe harbor to mobile apps.

Paragraph (e)(1) of the proposal stated the general requirement that plan administrators must ensure the existence of an internet website at which covered individuals are able to access covered documents. This provision is adopted without change. This paragraph holds the plan administrator responsible for ensuring the establishment and maintenance of the website. The Department understands that, in many cases, some or all of the responsibilities associated with the website may be delegated to plan service or investment providers or other third parties, as frequently occurs now for other aspects of plan administration. Any such delegation is subject to the plan administrator's compliance with paragraph (j) of the safe harbor, “Reasonable procedures for compliance,” discussed below, and the plan administrator's general obligation as a plan fiduciary under ERISA section 404 to prudently select and monitor such parties.
50

50
One commenter specifically expressed concern about service providers' potential misuse of plan and account information, for example covered individuals' personal financial information, that is obtained in connection with their provision of plan services, including furnishing information and disclosures, or maintaining a website, to comply with this rule. The commenter suggested that the Department should prohibit the use of any such information to market or sell non-plan products and services to covered individuals. This commenter's concern is beyond the scope of this safe harbor, which addresses only a plan administrator's compliance with ERISA's standard for the furnishing of covered documents to covered individuals.

A few commenters argued that paragraph (e)(1) of the proposal sets a higher, strict liability, standard for plan administrators that is not appropriate. The Department disagrees with these commenters. The existence of an internet website is integral to the successful execution of the notice-and-access framework adopted in the final rule. Without an accessible website that includes the covered document, the plan administrator has not effectively “furnished” the document under the notice-and-access portion of this safe harbor.
51

Consequently, the Department cannot accept a lesser standard, for example that the plan administrator must “take measures reasonably calculated” to ensure the website's existence, as was suggested by a few commenters. The Department also disagrees that this standard results in strict liability. The final rule explicitly provides relief in paragraph (j), discussed below, for reasonable events that may interrupt the availability of covered documents on the website. Temporary interruptions due to internet connectivity problems, routine maintenance, or network disturbances do not necessarily mean that the plan administrator failed to ensure the existence of the website pursuant to this safe harbor.

51
Other methods of furnishing covered documents electronically do not require the existence of a website.
See
paragraph (k) of the final rule.

One commenter requested that the Department modify paragraph (e)(1) of the proposal to prohibit website addresses from changing for at least

some specified period of time, because website addresses can shift over time. The Department declines to adopt this suggestion. The final rule, in paragraph (e), relating to minimum standards for the website, contains a new provision requiring that covered documents remain available on the website for a specified time. In addition, paragraph (d)(3)(i)(D) of the final rule requires each NOIA to contain a sufficiently specific website address or hyperlink to provide ready access to the covered document. Collectively, these two provisions provide for easily locatable content available for a long enough time. At this time, the Department therefore declines to establish additional prescriptive mandates on website management or website maintenance, such as hyperlink redirects or hyperlink expiration rules, in response to this comment.

Paragraph (e)(2) of the proposal contained six paragraphs. Paragraph (e)(2)(i) of the proposal provided that the covered document must be available on the website no later than the date on which the covered document must be furnished under ERISA. Paragraph (e)(2)(ii) required that a covered document remain available on the website until it is superseded by a subsequent version of the covered document. Paragraph (e)(2)(iii) required that a covered document be presented on the website in a manner calculated to be understood by the average plan participant. Paragraph (e)(2)(iv) of the proposal provided that the covered document must be presented on the website in a widely-available format or formats that are suitable to be both read online and printed clearly on paper. Paragraph (e)(2)(v) provided that the covered document must be searchable electronically by numbers, letters, or words. Finally, under paragraph (e)(2)(vi) of the proposal, the covered document must be presented on the website in a widely-available format or formats that allow the covered document to be permanently retained in an electronic format that satisfies the requirements of paragraph (e)(2)(iv) (requiring a format that can be read online and printed clearly on paper). Paragraph (e)(2)(vi) of the proposal was included to enable covered individuals to keep a copy of the covered document, for example, by saving it to a file in electronic format, on a personal computer.

A significant number of commenters focused on the requirement, in paragraph (e)(2)(ii) of the proposal, relating to how long covered documents must remain available on the website. This provision in the proposal required that a document must remain available until “it is superseded by a subsequent version of the covered document.” This provision was intended to ensure that covered individuals have readily available the information they need to protect and enforce their rights under ERISA and the plan, especially the SPD for example. The Department requested comments as to whether there are circumstances when a superseded document may still be relevant to a covered individual's claims or rights under the plan and, if so, whether additional or different conditions are needed to address such circumstances. The Department also invited comments on whether a final rule should explicitly address the category of covered documents that technically do not become superseded by reason of a subsequent version of the covered document, but instead cease to have continued relevance to covered individuals (
e.g.,
a blackout notice).

The Department received a wide range of comments on paragraph (e)(2)(ii) of the proposal. A few commenters, who were generally opposed to the new safe harbor, argued that all covered documents should be retained on the website indefinitely, regardless of continued relevance. Many more commenters, however, supported the proposed retention provision, but even these commenters suggested a need for a clearer standard for the category of covered documents that technically do not become superseded by reason of a subsequent version of the covered document, such as blackout notices under section 101(i) of ERISA or notices of the right to divest employer securities under section 101(m) of ERISA. For this subset of covered documents, commenters offered a variety of suggestions for how long such documents should be retained on the website. A number of commenters, for example, suggested that such documents should be retained on the website “until they cease to have relevance,” leaving it to the plan administrator to determine whether and when a document ceases to be relevant. Other commenters, however, strongly preferred that the Department set a defined length of time, with comments ranging from one to three years. These commenters emphasize that there is a benefit to having a bright line standard for compliance purposes.

After considering the comments received, the Department has decided a one-year posting requirement strikes the appropriate balance between ensuring participants have reasonable electronic access to current documents and the appropriate scope of this regulation, which provides a safe harbor for
furnishing
requirements, not underlying
retention
requirements. The one-year period in paragraph (e)(2)(ii) of the final rule is responsive to both of the principal observations by most commenters: First, by specifically addressing the fact that not all covered documents are in fact superseded by another version; and second, by providing clear time limits for website retention of these covered documents. Affected parties will benefit from the administrative simplicity and consistency of a bright-line test to follow when managing, or accessing, covered documents on a website. Accordingly, paragraph (e)(2)(ii) of the final rule now provides that a covered document must remain available on the website until it is superseded by a subsequent version of the covered document, if applicable, but in no event less than one year after the date the covered document is made available on the website pursuant to paragraph (e)(2)(i) of the rule.
52

Under this standard, all covered documents must remain on the website for at least one year from the date they were first posted on a website. This will protect participants from confusion and uncertainty about how long their documents will be available on a website. Some covered documents, for example, the SPD, must remain on a website until they are superseded by a subsequent version of themselves, even if longer than one year from the date they were originally posted on a website.

52
These safe harbor requirements are not retroactive. Plan administrators are not required to go back and post historical versions of covered documents, dated prior to the effectiveness of this final rule, on the website. The Department intends these website retention provisions to be prospective in nature.

The following examples illustrate how paragraph (e)(2)(ii) of the final rule applies to several different covered documents.

Example 1.
A plan's SPD is furnished under the new safe harbor on January 1, 2025 (“2025 SPD”). Thus, it is first posted on the website on the same date. The plan is materially amended in 2026, and a summary of material modifications (SMM) was timely furnished. A new SPD is furnished via posting on the website on January 1, 2030 (“2030 SPD”), reflecting the 2026 amendment. The 2025 SPD must remain on the website at least until January 1, 2030, the date the updated 2030 SPD is furnished superseding the 2025 SPD. In this example, the 2025 SPD is superseded by a subsequent covered document more than one year after the

date it was first made available on the website.

Example 2.
A pension benefit statement for a participant in a defined benefit pension plan is furnished on January 1, 2030 (“2030 PBS”), via posting it on the website on the same date. Subsequently, the plan furnished the same participant the next pension benefit statement on January 1, 2033 (“2033 PBS”), via posting it on the website on the same date. The 2030 PBS must remain on the website until January 1, 2033, when it is superseded by the 2033 PBS. In this example, the 2030 PBS was superseded by a subsequent covered document more than one year after the date it was first made available on the website.

Example 3.
A pension benefit statement for a participant in a participant-directed defined contribution pension plan was furnished on January 1, 2030, via posting it on the website on the same date (“Q1 Benefit Statement”). Subsequently, the plan furnishes the same participant the next pension benefit statement on April 1, 2030, via posting it on the website on the same date (“Q2 Benefit Statement”). The Q1 Benefit Statement must remain on the website until January 1, 2031, one year after it was first posted to the website. In this example, even though the Q1 Benefit Statement was superseded on April 1, 2030, the date on which the Q2 Benefit Statement is posted, the Q1 Benefit Statement must remain on the website for at least one year,
i.e.,
at least until January 1, 2031.

Example 4.
A blackout notice is furnished to all plan participants on January 1, 2029, via posting it on the website. The blackout notice, among other things, announced an upcoming 30-day blackout period ending on March 15, 2029. The blackout notice must remain on the website until at least January 1, 2030. In this example, even though the blackout period ended on March 15, 2029, the blackout notice must remain on the website for at least one year,
i.e.,
at least until January 1, 2030.

The Department does not agree that covered documents must be available online indefinitely, as suggested by several commenters, but paragraph (e)(2)(ii) of the final rule reflects the Department's determination that covered documents must, at a minimum, be available on the website for at least one year. Covered individuals will benefit from having covered documents available to them for a reasonable period of time. For example, participants in a participant-directed individual account plan will, at any time, have access to at least a year's worth of quarterly pension benefit statements, which may be accessed throughout the year for a variety of reasons, including to verify contributions, review and revise asset allocations, or otherwise manage their retirement assets. This also provides ample time for covered individuals who wish to print or download covered documents to do so.

The new website retention provision in paragraph (e)(2)(ii) of the final rule does not preclude the ability of plan administrators to retain historical documents on the website longer than the minimum term required, if they choose.
53

Plan administrators may prefer to archive or similarly preserve prior covered documents on the website for a longer period of time than is required by paragraph (e)(2)(ii). Nor do these new website retention requirements alter a plan administrator's general recordkeeping requirements under ERISA. For example, ERISA sections 107 (retention of records) and 209 (recordkeeping and reporting requirements) separately specify retention periods.
54

Thus, participants may continue to request covered documents that are older than one year. Plan terminations, benefit determinations, and many other circumstances and events naturally will arise during, and following, an employer's sponsorship of a pension benefit plan that require special attention to the proper management and retention of documents.
55

Plan administrators' (and other plan fiduciaries') responsibilities with respect to retaining plan records and documents and responding to participant requests are unchanged from existing law. The new safe harbor adopted today is not meant to alter ERISA obligations with respect to the maintenance of plan records or otherwise. This is an optional safe harbor available to plan administrators that provides a new method for plan administrators to furnish covered documents to plan participants.

53
One commenter argued that including numerous historical documents on the website could create unnecessary confusion. The Department disagrees. Any such confusion should be minimal to the extent that the current version of any covered document must be presented on the website in a manner calculated to be understood by the average plan participants pursuant to paragraph (e)(2)(iii) of the final rule. A covered document that is buried or obscured on the website is not, in the Department's view, presented on the website in a manner that satisfies this standard.

54
29 U.S.C. 1027, 1059.

55
As one commenter pointed out, maintaining historical versions of covered documents not only is necessary for plan administrators to satisfy their ERISA recordkeeping obligations and this final rule, but may be in plan sponsors' own interest to the extent they wish to rely on such covered documents in later litigation or enforcement matters.

Some commenters asked the Department to include standards for the design of the website, such as requiring that information be presented in a simple and direct form, and that the rule should prevent covered individuals from having to click through various levels to find documents. The Department disagrees that any changes to the rule are necessary to manage these concerns. The rule already requires, in paragraph (e)(2)(iii), that covered documents must be presented on the website in a manner calculated to be understood by the average plan participant. Further, the rule requires, in paragraph (d)(3)(i)(D), that a website address or hyperlink must be “sufficiently specific” to provide ready access to a covered document. A link that requires a covered individual to click through an unreasonable number of web pages to find a covered document would not satisfy the standard. The Department also believes that plan administrators and their service providers, rather than the Department, are better equipped to address the technicalities involved in designing websites to disclose required information.

Paragraph (e)(3) of the proposal required that the plan administrator take measures reasonably calculated to ensure that the website protects the confidentiality of personal information that could be included in covered documents. The Department explained that given the industry's increasing reliance on and use of electronic technology, many plans already have secure systems in place to protect covered individuals' personal information, as is generally required by section 404 of ERISA. The Department requested comments on whether this standard is sufficient to protect covered individuals' personally identifiable information. Commenters disagreed on the sufficiency of this standard. Some commenters asserted that the proposal adequately addressed information privacy and security concerns and that the approach taken in the proposal, which included a principles-based standard, is preferable to specific standards, requirements, and certifications, which can quickly become obsolete with rapidly-changing technology. Other commenters do not believe the Department sufficiently addressed privacy concerns in the proposal, especially for inactive or unused electronic addresses, which, in the view of some commenters, are likely to result for participants who are

assigned an electronic address by their employer. These commenters suggested that the more devices on which the Department allows electronic delivery of information, the more complex security issues become, and that security requirements may need to vary from covered document to covered document.

The Department in the final rule has maintained the principles-based standard included in the proposal, agreeing with commenters that efforts to establish specific, technical requirements would be difficult to achieve, given the variety of technologies, software, and data used in the retirement plan marketplace. The commenters requesting more specific standards themselves point to this difficulty, insofar as these issues become more complex as innovations occur and the same standards may not be appropriate for all covered documents, all systems, or in all circumstances. Therefore, the final rule continues to require that the plan administrator, possibly in coordination with plan service providers, take measures reasonably calculated to protect the security and privacy of covered individuals' information.
56

56
Some commenters raised issues regarding liability for security breaches. This safe harbor only establishes an optional method for delivery of covered documents. Issues pertaining to liability for security breaches are beyond the scope of this safe harbor.

Paragraph (e)(4) of the final rule is new. It was added in response to a range of questions from commenters about what constitutes a “website” for purposes of the safe harbor. In the preamble to the proposed rule, the Department explicitly asked for commenters' views on whether, and how, the rule should be modified to include other web-based mechanisms, such as messaging and mobile “apps.” Although some commenters recommended a narrow application of the rule to traditional websites accessed with a browser, most commenters on this issue encouraged the Department to broadly define what constitutes a website, or at least to clarify that the term covers any appropriate electronic source for accessing information. These commenters want to ensure that the rule accommodates advances in technology and permits the use of mobile applications, texting, and other internet-based mechanisms and, in some cases, these commenters suggested specific language for the rule or that the Department adopt a good faith or similar standard in the rule to allow plan administrators to use new technology without having to revisit the regulatory process. The Department agrees that the rule should more clearly state its inclusion of additional and new technologies, as long as those technologies are not inconsistent with a plan administrator's ability to satisfy the requirements of the safe harbor. The Department does not want to inhibit innovation in the delivery of required ERISA disclosures, especially as forms of communication improve and expand. Thus, for purposes of the safe harbor, the term “website” means an internet website, or other internet or electronic-based information repository, such as a mobile application, to which covered individuals have been provided reasonable access.

(4) Right to Copies of Paper Documents or To Globally Opt Out of Electronic Delivery

The Department believes that it is essential that any enhanced use of electronic disclosure permitted under ERISA respects the preferences of covered individuals who want to receive covered documents on paper, mailed or delivered to them. To that end, the proposal contained two safeguards, in paragraph (f), for these covered individuals.

The first safeguard, in paragraph (f)(1) of the proposal, provided that upon request from a covered individual, the plan administrator must promptly furnish to such individual, free of charge, a paper copy of a covered document. Commenters overwhelmingly supported protecting covered individuals' rights to request a free paper copy of a required ERISA disclosure. A few commenters focused on the number of paper copies a covered individual could request, and receive, free of charge. These commenters were concerned about potentially abusive practices in which a covered individual makes several requests for different covered documents. The Department is not persuaded that this is a legitimate concern. The 2002 safe harbor permits paper copies, free of charge, and the Department is unaware of abusive practices of this nature. The final rule allows covered individuals to request more than one covered document pursuant to this provision. For instance, a participant could contact the plan administrator for a participant-directed individual account plan and request paper copies of the plan's comparative investment chart required by 29 CFR 2550.404a-5(d)(2) as well as a copy of the participant's most recent quarterly pension benefit statement. In response to commenters concerns about repeated requests for the same version of the covered document, however, paragraph (f)(1) of the final rule clarifies that only one paper copy of any specific covered document must be provided free of charge under this safe harbor. Beyond that, whether the plan charges for additional copies of the same covered document depends on the terms of the particular plan and other applicable provisions of ERISA and regulations thereunder, and is outside the scope of this regulation.

A few commenters focused on how quickly plan administrators must respond to requests under the safe harbor. Some suggested time limits for responses, like those adopted by the SEC for shareholder reports,
i.e.,
within three business days.
57

The Department is not persuaded that strict time limits are needed. The 2002 safe harbor does not contain time limits for responses and the Department is unaware of harm or exploitation in this area. The safe harbor requirement to respond to requests rests with the ERISA plan administrator. The Department expects that the plan administrator will furnish the copy to the covered individual as soon as reasonably practicable after receiving the request. This overarching standard of reasonableness is sufficient to protect covered individuals' right to paper. The statute itself also provides a civil enforcement remedy, when appropriate.
58

57
17 CFR 270.30e-3(e).

58
29 U.S.C. 1132(c)(1).

The second safeguard, in paragraph (f)(2) of the proposal, provided covered individuals with the right to opt out of electronic delivery and receive some or all covered documents in paper form. Commenters overwhelmingly supported this provision and, thus, it was adopted with only two minor changes. As proposed, this provision allowed covered individuals to “globally” opt out, in the sense that individuals would be able to opt out of electronic delivery entirely. In addition, the provision granted covered individuals the right to opt out of electronic delivery on a document-by-document, à la carte basis. Commenters universally supported the right of covered individuals to globally opt out of electronic delivery. Many commenters, however, objected to requiring plan administrators to offer a document-by-document opt-out right. Current recordkeeping systems, they explained, generally apply an “all or nothing” approach to paper versus electronic delivery. An à la carte system, by contrast, would require difficult and costly system modifications to keep track of paper preferences on a document-by-document basis for each covered individual. Commenters

explained that it is highly atypical for plan administrators to offer a “pick-and-choose” approach to opting out of electronic delivery. It would be rather cumbersome and complicated for plan administrators to track opt-outs participant-by-participant, and document-by-document, over time, they added. In addition, the fact that the rule permits plan administrators to provide a combined annual NOIA for multiple covered documents would exacerbate this problem, and potentially create confusion for covered individuals. For example, the commenters question whether an NOIA would have to include an explanation that a covered individual can opt out for one, more than one, or all of the combined covered documents and a detailed explanation of how to do so for each possible opt-out variation. Commenters also pointed out that even if the rule were limited to a global opt out, covered individuals under the rule always may request a paper copy of any specific covered document. Thus, according to these commenters, accommodating an à la carte opt-out right would be burdensome and result in costs that could deter plan administrators from using the safe harbor. At least one comment letter can be interpreted as support for requiring plan administrators to offer a document-by-document opt out right, in that it identifies practices showing that some participants might prefer a combination of paper and electronic communications.

The Department is persuaded that the critical protection for covered individuals is the right to globally opt out of electronic delivery. Therefore, the final rule strikes the phrase “some or all” from paragraph (f)(2), retaining (and making clearer by adding the term “globally”) only the global opt-out as a requirement. This global opt-out requirement in paragraph (f)(2) of the final rule is the minimum; plan administrators may offer additional opt-out election options, such as a document-by-document opt out or one based on categories or classifications of covered documents. For example, some participants might be comfortable knowing that certain documents, such as the SPD, are available on the website, but prefer to receive paper versions of other documents, such as their quarterly pension benefit statements. This provision also was revised to include the words “free of charge,” clarifying that covered individuals may not be charged an opt-out fee.

Paragraph (f)(3) of the proposal required that the plan administrator establish and maintain reasonable procedures governing requests or elections under paragraphs (f)(1) and (2) of the safe harbor. This provision also provided that the procedures are not reasonable if they contain any provision, or are administered in a way, that unduly inhibits or hampers the initiation or processing of a request or election. This paragraph is adopted without change in the final rule, although a few commenters raised concerns with this provision.

The principal concerns related to the provision's lack of specificity, lack of prescriptiveness, and level of discretion afforded p

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2020-10951. Public record. Not legal advice.