Daily Rules, Proposed Rules, and Notices of the Federal Government
On July 19, 1977, the Department of Labor (Department) adopted general standards governing the delivery of all information required to be furnished to participants, beneficiaries, and other specified individuals under title I of ERISA.
On January 18, 2011 the President issued Executive Order 13563, “Improving Regulation and Regulatory Review.” Executive Order 13563 reaffirms the importance of achieving regulatory goals through the most innovative and least burdensome tools available. It also emphasizes the importance of public participation in the regulatory process (in section 2) and retrospective consideration of existing regulatory policies (in section 6).
In light of these goals, and in consideration of Administration-wide policies encouraging electronic dissemination of information to the public by federal government agencies consistent with the principles of transparency, participation, and collaboration, EBSA is issuing this RFI to facilitate consideration of its approach to electronic disclosure by employee benefit plans. The Department is aware that electronic disclosure can be as effective as paper based communications, and that it can lower costs and administrative burdens and increase timeliness and accuracy for all involved. The Department also is aware that some of America's workers may not have reasonable access to the Internet, and others may prefer traditional (paper) disclosure methods for important financial interactions regarding their pensions and other employee benefits.
The Department recognizes that there have been substantial changes in technology since over time, both in the workplace and at home, including: The expansion of broadband through cable, fiber optic and wireless networks; hardware improvements to servers and personal computers improving storage, memory, recovery, and computing power; introduction of smart phones, net books and other personal computing devices; and social networking (
At least some evidence suggests that these changes have resulted in a substantial increase in access to and utilization of electronic media. For instance, the 2009 U.S. Census Bureau Current Population Survey (Census) found that 76.7% of the households in the United States have access to the Internet from some location.
Over the past few years, the Department has engaged in various rulemakings and other initiatives involving disclosures to participants and beneficiaries. Examples include the qualified default investment alternative regulation (29 CFR 2550.404c-5), the participant-level fee disclosure regulation (29 CFR 2550.404a-5, 75 FR 64910), the pension benefit statement initiative (FAB 2006-03), the annual funding notice regulation (29 CFR 2520.101-4; FAB 2009-01; proposed § 2520.101-5, 75 FR 70625), and the target date fund initiative (75 FR 73987).
In light of these differing views and the significance of the issues surrounding the use of electronic disclosure, the Department has decided to explore whether and how to expand or modify the current standards under ERISA applicable to the electronic distribution of required plan disclosures. To that end, the Department, through this RFI, is soliciting the views of the public on this important issue. Set forth below are a list of questions.
In considering the questions set forth in this RFI, commenters are encouraged to take into account the following information:
As noted above, on April 9, 2002, the Department established its electronic disclosure safe harbor.
The safe harbor is available only if: (1) The plan administrator takes appropriate and necessary measures reasonably calculated to ensure that the system for furnishing documents results in actual receipt of transmitted information and protects the confidentiality of personal information relating to the individual's accounts and benefits; (2) the electronically delivered documents are prepared and furnished in a manner that is consistent with the style, format and content requirements applicable to the particular document; (3) notice is provided to each participant, beneficiary or other individual, in electronic or non-electronic form, at the time a document is furnished electronically, that apprises the individual of the significance of the document when it is not otherwise reasonably evident as transmitted and of the right to request and obtain a paper version of such document; and (4) upon request, the participant, beneficiary or other individual is furnished a paper version of the electronically furnished documents. § 2520.104b-1(c)(1)(i) through (iv).
The safe harbor applies only for two categories of individual recipients. The first category consists of participants who have the ability to effectively access documents furnished in electronic form at any location where the participant is reasonably expected to perform his or her duties as an employee and with respect to whom access to the employer's or plan sponsor's electronic information system is an integral part of those duties.
In general, the affirmative consent condition requires plans to ensure that an individual has affirmatively consented, in electronic or non-electronic form, to receiving documents through electronic media and has not withdrawn such consent. Alternatively, in the case of documents to be furnished through the Internet or through other electronic communication networks, the individual must have affirmatively consented or confirmed consent electronically, in a manner that reasonably demonstrates the individual's ability to access information in the electronic form that will be used to provide the information that is the subject of the consent, and must have provided an address for the receipt of electronically furnished documents. In addition, prior to consenting, the individual must be provided, in electronic or non-electronic form, a clear and conspicuous statement indicating: (1) The types of documents to which the consent would apply; (2) that consent can be withdrawn at any time without charge; (3) the procedures for withdrawing consent and for updating the participant's, beneficiary's or other individual's address for receipt of electronically furnished documents or other information; (4) the right to request and obtain a paper version of an electronically furnished document, including whether the paper version will be provided free of charge; and (5) any hardware and software requirements for accessing and retaining the documents. Further, following consent, if a change in such hardware or software requirements creates a material risk that the individual will be unable to access or retain electronically furnished documents, the individual: (1) Is provided with a statement of the revised hardware or software requirements for access to and retention of electronically furnished documents; (2) is given the right to withdraw consent without charge and without the imposition of any condition or consequence that was not disclosed at the time of the initial consent; and (3) again consents in accordance with the requirements above. See § 2520.104b-1(c)(2)(ii).
The Department of Treasury and the Internal Revenue Service (IRS) have issued guidance relating to the use of electronic media of notices or elections with respect to a retirement plan. In 2000, final regulations were issued relating to the use of electronic media for the delivery of certain participant notices and consents that are required to be provided in connection with distributions from retirement plans.
In 2003, the Department of Treasury and IRS published final regulations under section 4980F under the Internal Revenue Code (Code) that also apply for purposes of section 204(h) of ERISA (2003 section 4980F regulations).
On October 20, 2006, the Department of Treasury and IRS published final regulations under the Code setting forth standards for electronic systems that make use of an electronic medium to provide a notice to a recipient, or to make a participant election or consent, generally with respect to a retirement plan, an employee benefit arrangement, or an individual retirement plan.
In 2007, the Securities and Exchange Commission (SEC) amended its rules under the Securities Exchange Act of 1934 to provide a method to furnish proxy materials by posting them on an Internet Web site and providing shareholders with notice of the availability of the proxy materials.
On August 9, 2006, and September 21, 2006, a working group of the ERISA Advisory Council held a hearing on numerous issues pertaining to the management of plan assets, including the use of electronic media for disclosures required by regulations under section 404(c) of ERISA. Thirteen witnesses testified at this hearing. In response to this hearing, the working group issued the “Report of the Working Group on Prudent Investment Process.” With respect to the Department's electronic disclosure safe harbor as applied to defined contribution pension plans, the Report states:
The Working Group would like to recommend to the Department of Labor that the Department should reconsider its rules for electronic transfer of notices and the delivery of `sufficient information.' The Working Group heard extensive testimony regarding the growth of the internet and its use by plan participants. Access to and use of the internet has grown significantly since the DOL first considered electronic delivery. The Working Group recommends that the electronic delivery standard should be relaxed from the `integral part of the employee's duties' standard currently employed to a `reasonable access' standard.
On July 12, 2007 and September 18, 2007, a working group of the ERISA Advisory Council held a public hearing on the pension benefit statement requirements under section 105 of ERISA, as amended by section 508 of the Pension Protection Act of 2006, Public Law 109-280, 120 Stat. 949-952. Thirteen witnesses testified at this hearing. In response to this hearing, the working group issued the “Report of the Working Group on Participant Benefit Statements.” In this Report, the Working Group recommended that “the Department of Labor should update its regulations regarding electronic communication to a `reasonable access' standard as in the Department of Treasury safe harbor regulation in recognition of the continued advancement in Web-based communication and the increase in its use by participants.” In support of this recommendation, the Report explains:
Following an animated discussion, the Working Group came to a consensus that although the American workforce is becoming more computer literate, it is not yet appropriate to make electronic delivery of participant statements the norm. In addition to access and ability to use issues, many participants who are computer literate are better served with paper when managing their plan asset. However, the Treasury rules regarding communication provide incentive for plan sponsors to migrate to electronic delivery. In any event, the new regulations should reexamine the use of electronic communication for benefit statements to recognize the changes in technology and the participant group's use of it.
On July 23, 2009 and September 15, 2009, the ERISA Advisory Council, in furtherance of its focus on the issue of promoting retirement literacy and security by streamlining disclosures to participants and beneficiaries, held a public hearing to study the efficacy of ERISA's reporting and disclosure schemes, as well as problems and costs related to such disclosures. Approximately 18 witnesses testified at this hearing. Upon conclusion of the hearing, the full ERISA Advisory Council reached consensus and issued a report entitled “Promoting Retirement Literacy and Security by Streamlining Disclosures.” In this Report, the Council recommended that:
[T]he Department of Labor permits plan administrators to rely on the IRS Regulations in order to comply with ERISA's disclosure requirements. The Council believes that the IRS Regulations will adequately protect the rights of those participants who are actively employed because it will generally be very simple for administrators to determine whether active employees have reasonable access to the electronic medium used to furnish the disclosure. The Council believes that administrators will not furnish those individuals who are not working actively—such as retirees or beneficiaries—with electronic disclosure unless the administrator has a working electronic mail address for such individuals. In that way, participants who are not actively employed and plan beneficiaries will be protected.
Electronic communications have enormously improved the retirement system for both plans covered by ERISA and their participants. They have improved participant education, retirement planning, and plan participation. Electronic communications have allowed plans to furnish more information to participants and beneficiaries for less cost. They have simplified plan administration and improved plan recordkeeping. All of these benefits of electronic communication have improved retirement security, which was and remains an underlying goal of ERISA. The Council believes that this goal of retirement security would be better served if the DOL would expand the array of electronic media that plan administrators may use to satisfy ERISA's disclosure requirements.
The Electronic Signatures in Global and National Commerce Act (E-SIGN), 17 U.S.C. 7001-7021, generally provides that electronic records and signatures have the same legal effect as their paper counterparts.
The purpose of this RFI is to solicit views, suggestions and comments from plan participants and beneficiaries, employers and other plan sponsors, plan administrators, plan service providers, health insurance issuers, and members of the financial community, as well as the general public on whether, and possibly how, to expand or modify the Department's current electronic disclosure safe harbor. To facilitate consideration of the issues, the Department has set forth below a number of questions. Respondents need not answer every question, but should identify, by its number, each question addressed. Interested persons are also encouraged to address any other matters they believe germane to the general topic of the RFI.
1. What percentage of people in this country has access to the Internet at work or home? Of this percentage, what percentage has access at work versus at home? Does access vary by demographic groups (
2. What percentage of participants and beneficiaries covered by an ERISA plan has access to the Internet at work or home? Of this percentage, what percentage has access at work, at home, or both? Does access vary by demographic groups (
3. What percentage of pension benefit plans covered by ERISA currently furnish some or all disclosures required by ERISA electronically to some or all participants and beneficiaries covered under these plans? Please be specific regarding types of plans (
4. What percentage of employee welfare benefit plans covered by ERISA currently furnish some or all disclosures required by ERISA electronically to some or all participants and beneficiaries covered under these plans? Please be specific regarding types of welfare plans (
5. What are the most common methods of furnishing information electronically (
6. What are the most significant impediments to increasing the use of electronic media (
7. Is there evidence to suggest that any increase in participant and beneficiary access to, and usage of, the Internet and similar electronic media in general equates to an increased desire or willingness on the part of those participants and beneficiaries to receive employee benefit plan information electronically? If so, what is it?
8. Are there any new or evolving technologies that might impact electronic disclosure in the foreseeable future?
9. Should the Department's current electronic disclosure safe harbor be revised? If so, why? If not, why not?
10. If the safe harbor should be revised, how should it be revised? Please be specific.
11. Should a revised safe harbor have different rules or conditions for different types of employee benefit plans (
12. Should a revised safe harbor have different rules or conditions for different types of disclosures (
13. Should a revised safe harbor have different rules or conditions for different recipients entitled to disclosures (active employees, retirees, COBRA Qualified Beneficiaries,
14. To what extent should the Department encourage or require pension and welfare benefit plans to furnish some or all disclosures required under title I of ERISA through a continuous access Web site(s)? In responding to this question, please address whether and how frequently participants and beneficiaries should be notified of their ability to access benefit information at the Web site(s) and the most appropriate means to provide such notice. For example, should participants and beneficiaries receive a monthly notification of their ability to access benefit information or should they receive a notification only when an ERISA-required disclosure is added to the Web site? How should such notifications be furnished (
15. Who, as between plan sponsors and participants, should decide whether disclosures are furnished electronically? For example, should participants have to opt into or out of electronic disclosures?
16. Should a revised safe harbor contain conditions to ensure that individuals with disabilities are able to access disclosures made through electronic media, such as via continuous access Web sites? If so, please describe the conditions that would be needed. Also, please identify whether such conditions would impose any undue burdens on employee benefit plans, including the costs associated with meeting any such conditions. What burden and difficulty would be placed on employees with disabilities if the Web sites and/or other electronic communication were not accessible?
17. If a plan furnishes disclosures through electronic media, under what circumstances should participants and beneficiaries have a right to opt out and receive only paper disclosures?
18. The Department's current regulation has provisions pertaining to hardware and software requirements for accessing and retaining electronically furnished information. In light of changes in technology, are these provisions adequate to ensure that participants and beneficiaries, especially former employees with rights to benefits under the plan, have compatible hardware and software for receiving the documents distributed to their non-work e-mail accounts?
19. Some have indicated that the affirmative consent requirement in the Department's current electronic disclosure safe harbor is an impediment to plans that otherwise would elect to use electronic media. How specifically is this requirement an impediment? Should this requirement be eliminated? Is the affirmative consent requirement a substantial burden on electronic commerce? If yes, how? Would eliminating the requirement increase a material risk of harm to participants and beneficiaries? If yes, how?
20. In general, the E-SIGN Act permits electronic disclosure of health plan materials but does not apply to cancellation or termination of health insurance or benefits electronically. Are there special considerations the Department should take into account for group health plan disclosures (including termination of coverage and privacy issues)?
21. Many group health plan disclosures are time-sensitive (
22. Do spam filters and similar measures used by non-workplace (personal) e-mail accounts, pose particular problems that should be taken into consideration?
23. What is the current practice for confirming that a participant received a time-sensitive notice that requires a participant response?
24. What are current practices for ensuring that the e-mail address on file for the participant is the most current e-mail address? For example, what are the current practices for obtaining and updating e-mail addresses of participants who lose their work e-mail address upon cessation of employment or transfer to a job position that does not provide access to an employer provided computer?
Executive Order 12866 (EO 12866) requires an assessment of the anticipated costs and benefits to the government and the public of a significant rulemaking action, and of the alternatives considered, using the guidance provided by the Office of Management and Budget. Under EO 12866, a determination must be made whether implementation of this rule will be economically significant. A rule that has an annual effect on the economy of $100 million or more is considered economically significant.
In addition, the Regulatory Flexibility Act may require the preparation of an analysis of the impact on small entities of proposed rules and regulatory alternatives. A regulatory flexibility analysis must generally include, among other things, an estimate of the number of small entities subject to the regulations (for this purpose, plans, employers, and issuers and, in some contexts small governmental entities), the expense of the reporting, recordkeeping, and other compliance requirements (including the expense of using professional expertise), and a description of any significant regulatory alternatives considered that would accomplish the stated objectives of the statute and minimize the impact on small entities. For this purpose, the Agency considers a small entity to be an employee benefit plan with fewer than 100 participants.
The Paperwork Reduction Act requires an estimate of how many “respondents” will be required to comply with any “collection of information” requirements contained in regulations and how much time and cost will be incurred as a result. A collection of information includes recordkeeping, reporting to governmental agencies, and third-party disclosures.
The Department is requesting comments that may contribute to the analyses that will be performed under these requirements, both generally and
25. What costs and benefits are associated with expanding electronic distribution of required plan disclosures? Do costs and benefits vary across different types of participants, sponsors, plans, or disclosures? Are the printing costs being transferred from plans to plan participants and beneficiaries when information is furnished electronically?
26. If electronic disclosure were the default method for distributing required plan disclosures, and assuming “opting out” were an option, what percentage of participants would likely “opt-out” of electronic disclosure in order to receive paper disclosures? Should participants be informed of increased plan costs, if any, attendant to furnishing paper disclosures at the time they are afforded the option to opt out or into an electronic disclosure regime?
27. Do participants prefer receiving certain plan documents on paper rather than electronically (
28. What impact would expanding electronic disclosure have on small plans? Are there unique costs or benefits for small plans? What special considerations, if any, are required for small plans?
29. Is it more efficient to send an e-mail with the disclosure attached (e.g., as a PDF file) versus a link to a Web site? Which means of furnishing is more secure? Which means of furnishing would increase the likelihood that a worker will receive, read, retain and act upon the disclosure?
30. Employee benefit plans often are subject to more than one applicable disclosure law (