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Case of the Week: Electronic Delivery of Plan Participant Notices

The ERISA consultants at the Columbia Management Retirement Learning Center Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs and qualified retirement plans. A recent call with a financial advisor in Minnesota is representative of a common question relating the delivery of required plan notices to participants. The advisor asked:

“The rules related to delivering 401(k) plan notices such as rollover distribution and 401(k) safe harbor notices electronically confuse me. Could you give me a succinct summary of the requirements?”

Highlights of Discussion

  • The IRS dictates the rules for electronic delivery (Treas. Reg. §1.401(a)-21) that apply to rollover distribution notices under Internal Revenue Code Section 402(f) and 401(k) safe harbor notices under Treas. Reg. §1.401(k)-3(d), as well as certain other notices.
  • In contrast, DOL has jurisdiction over other plan notices, such as the summary plan description and summary annual reports, and has issued its own electronic notice rules (DOL Reg. §2520.104b-1(c)). 
  • While the IRS’ and DOL’s rules for electronic delivery of plan notices are similar, there are important differences. Therefore, it is important to be cognizant of which governmental administrative branch has jurisdiction over the particular notice to be provided: the IRS or the DOL.
  • To address the case at hand, the IRS provides two methods for electronic deliver of the “402(f)” rollover distribution notice and 401(k) safe harbor notices: the “consent” method and the “effective access” method. A general description of the two methods follows. Please refer to the regulations for complete details and requirements.
  • Under the consent method, a participant must affirmatively consent to receive an electronic notice before the notice is sent. Consent must be in a manner (either electronically or in hard-copy form) that reasonably demonstrates that the participant can access the notice in the electronic form that will be used to provide the notice.
  • Before a participant may consent to electronic delivery, the plan sponsor must provide the participant with a disclosure statement that describes the:
  • scope of the consent;
  • the right to withdraw consent to receive the notice electronically;
  • the right to receive a paper copy upon request;
  • hardware and software requirements; and
  • procedures for updating information to contact the participant electronically.
  • The effective access method is an alternative method to the consent method, and is satisfied if at the time the applicable notice is provided, the participant is:
  • effectively or readily able to access the electronic medium used to provide the notice (for example, through his or her personal computer workstation); and
  • advised that he or she may request that the notice be sent in written form at no charge.

Conclusion

In this highly digital age, it is not surprising that plan sponsors can satisfy certain plan notice requirements electronically if they follow the rules. The trick for plan sponsors and their service providers is to make sure they look to the appropriate governing entity (i.e., the IRS or DOL) for the specific guidelines to follow with respect to a particular notice.

The Columbia Management Retirement Learning Center Resource Desk is staffed by the Retirement Learning Center, LLC, a third-party industry consultant that is not affiliated with Columbia Management. For informational purposes only. Please consult a tax advisor or attorney for specific tax or legal needs. © 2014 Columbia Management Investment Advisers, LLC. Used with permission.


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