PLANSPONSOR spoke to Bradford P. Campbell, former assistant secretary of the Labor for the Employee Security Administration (EBSA) and currently counsel of the Employee Benefits & Executive Compensation Practice Group at Drinker Biddle & Reath LLP, to get a better understanding about whether plan sponsors can provide the mandated disclosures to employees electronically, or if they need to be issued via paper disclosures.
According to Campbell, the DOL has made it rather difficult for plan sponsors to use electronic disclosures. “The reality is the DOL is really behind the times. There are several different methods you might be able to use, however, at the end of the day, the DOL is taking a position that is rooted in the past,” said Campbell. He added that it isn’t that plan sponsors can’t use electronic disclosures, it is just something that is difficult and isn’t easy to comply with.
Campbell said there has been several rounds of DOL guidance on the electronic disclosures, which has further confused the issue for employers (see “DoL Will Allow for Electronic Disclosure to Participants”).
Campbell said the guidance provided by the DOL puts doubt on when a plan sponsor can use electronic disclosures. According to the DOL guidance, participants and beneficiaries will need to provide e-mail addresses if they would like to receive their plan disclosures electronically. Campbell however said there will be a number of participants that will not reply to the initial request for employees to opt-into electronic disclosure, therefore costs will be higher for employers.
“It would be much easier if you can turn it around and have electronic disclosure be the default,” said Campbell.
He adds that the DOL fears participants may not receive the disclosures if they are automatically sent electronically. “They [DOL] are concerned about people who do not have access to electronic communication,” said Campbell.
Companies that have their entire workforce on computers can easily use electronic disclosures, Campbell said. However, the DOL has made it more difficult for workers who do not have an immediate connection to the Internet in the workplace. “You are going to have to get an affirmative opt-in for these employees,” said Campbell. “It is expensive and difficult.”
Campbell said he thinks the default should be electronic disclosure and if employees would prefer the paper version they can opt-in for paper. “You can send everyone a letter that you are going to go electronic unless you tell us you don’t want to,” said Campbell.
The employer will want to have electronic disclosures because it will save the plan money and be efficient for everyone, said Campbell.
Campbell said there are a lot of plan sponsors requesting that the DOL clarify the electronic disclosure rule slightly. “Whether the DOL will do that or not is hard to predict,” said Campbell.
PLANSPONSOR requested an update from the DOL, and was told by the Department Technical Release 2011-03, which was published September 2011, will be the policy plan sponsors should follow.
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