The Pension Rights Center is calling on the Treasury Department and Internal Revenue Service to reject a request to issue guidance indicating that a retirement plan administrator will satisfy its obligations to deliver notices if it does so in accordance with the Department of Labor's recently enacted electronic disclosure rule.
In May, the Labor Department finalized a rule, which went into effect in late July, that provides a safe harbor for employers that want to make retirement plan disclosures accessible on a website, rather than sending volumes of paper documents through the mail.
Retirement plan administrators have the option to use email to send disclosures directly to participants, but participants who prefer printed disclosures can opt out of electronic delivery. Moreover, a plan administrator may not default a participant into electronic delivery unless the participant has an email address and notifies the participant by paper that retirement documents will be furnished electronically.
The Labor Department's safe harbor weakens protections for participants and beneficiaries, the Pension Rights Center said Monday in a letter to Treasury and IRS officials. The Washington-based nonprofit has voiced concern over the Labor Department's rule saying that participants without reliable internet access and those less technologically savvy will likely have problems.
The SPARK Institute, a major proponent of electronic disclosure, in a December letter to Treasury and IRS officials urged regulators to issue guidance, stating that plan administrators that adhere to the Labor Department electronic disclosure rule also satisfy Treasury rules adopted in 2006 on providing electronic notices.
Alternatively, the SPARK Institute called on regulators to identify the circumstances under which disclosures delivered to a "covered individual" — those with a valid electronic address, like an email address or smart phone number — in accordance with Labor Department regulation will also be delivered in accordance with Treasury regulations.
"SPARK members are currently designing and implementing delivery systems that will satisfy DOL's new safe harbors for electronically delivering documents required by the Employee Retirement Income Security Act," SPARK wrote in its letter.
"However, until Treasury and IRS release additional guidance, it will be challenging for plan sponsors and their record keepers to commit to a single, comprehensive, and long-term solution for furnishing all retirement plan notices and disclosure required by ERISA and the (IRS) code," the letter said.
Compliance with the SPARK Institute's request "would hasten what has become a race to the bottom in consumer protections for retirement plan participants and beneficiaries," the Pension Rights Center said in its letter, "If anything, Treasury/IRS should strengthen the requirements in 2006 regulations to better protect participants and beneficiaries in this era of data overload and digital inequality to counterbalance the dramatic weakening of protections represented by DOL's new regime."
In November, Treasury published its "2020-2021 Priority Guidance Plan" in which it mentioned "regulations updating electronic delivery rules for providing applicable notices and making participant elections" would be forthcoming.