Default Electronic Disclosure by Employee Pension Benefit Plans Under ERISA

Published date23 October 2019
Record Number2019-22901
SectionProposed rules
CourtEmployee Benefits Security Administration
Federal Register, Volume 84 Issue 205 (Wednesday, October 23, 2019)
[Federal Register Volume 84, Number 205 (Wednesday, October 23, 2019)]
                [Proposed Rules]
                [Pages 56894-56923]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2019-22901]
                [[Page 56893]]
                Vol. 84
                Wednesday,
                No. 205
                October 23, 2019
                Part IIDepartment of Labor-----------------------------------------------------------------------Employee Benefits Security Administration-----------------------------------------------------------------------29 CFR Part 2520Default Electronic Disclosure by Employee Pension Benefit Plans Under
                ERISA; Proposed Rule
                Federal Register / Vol. 84 , No. 205 / Wednesday, October 23, 2019 /
                Proposed Rules
                [[Page 56894]]
                -----------------------------------------------------------------------
                DEPARTMENT OF LABOR
                Employee Benefits Security Administration
                29 CFR Part 2520
                RIN 1210-AB90
                Default Electronic Disclosure by Employee Pension Benefit Plans
                Under ERISA
                AGENCY: Employee Benefits Security Administration, Department of Labor.
                ACTION: Proposed rule and request for information.
                -----------------------------------------------------------------------
                SUMMARY: The Department of Labor is proposing in this document a new,
                additional safe harbor for the use of electronic media by employee
                benefit plans to furnish information to participants and beneficiaries
                of plans subject to the Employee Retirement Income Security Act of 1974
                (ERISA). The proposal, if adopted, would allow plan administrators who
                satisfy specified conditions to provide participants and beneficiaries
                with a notice that certain disclosures will be made available on a
                website. Individuals who prefer to receive these disclosures on paper
                will be able to request paper copies and to opt out of electronic
                delivery entirely. The Department expects that the proposal, if
                adopted, would improve the effectiveness of the disclosures and
                significantly reduce the costs and burden associated with furnishing
                many of the recurring and most costly ERISA disclosures. This document
                also contains, in section D of the preamble, a Request for Information
                that explores whether and how any additional changes to ERISA's general
                disclosure framework, focusing on design, delivery, and content, may be
                made to further improve the effectiveness of ERISA disclosures.
                DATES: Comments on the proposal and on the Request for Information, in
                section D of the preamble, must be submitted on or before November 22,
                2019.
                ADDRESSES: You may submit written comments, identified by RIN 1210-AB90
                to either of the following addresses:
                 Federal eRulemaking Portal: https://www.regulations.gov.
                Follow the instructions for submitting comments.
                 Mail: Office of Regulations and Interpretations, Employee
                Benefits Security Administration, Room N-5655, U.S. Department of
                Labor, 200 Constitution Avenue NW, Washington, DC 20210, Attention:
                Electronic Disclosure by Employee Benefit Plans, RIN 1210-AB90.
                 Instructions: All submissions received must include the agency name
                and Regulatory Identifier Number (RIN) for this rulemaking. Persons
                submitting comments electronically are encouraged not to submit paper
                copies. Comments will be available to the public, without charge,
                online at https://www.regulations.gov and https://www.dol.gov/agencies/ebsa and at the Public Disclosure Room, Employee Benefits Security
                Administration, Suite N-1513, 200 Constitution Avenue NW, Washington,
                DC 20210.
                 Warning: Do not include any personally identifiable or confidential
                business information that you do not want publicly disclosed. Comments
                are public records posted on the internet as received and can be
                retrieved by most internet search engines.
                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) Current 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.
                ---------------------------------------------------------------------------
                 \1\ See 29 CFR 2520.104b-1.
                 \2\ See 29 CFR 2520.104b-1(b)(1).
                ---------------------------------------------------------------------------
                (i) 2002 Electronic Disclosure Safe Harbor
                 Based on developing technology, such as email and the internet, the
                Department of Labor (Department) amended the general standards for
                delivery of required disclosures in 2002 by establishing a safe harbor
                for the use of electronic media (the 2002 safe harbor).\3\ The 2002
                safe harbor is not the exclusive means by which a plan administrator
                may use electronic media to satisfy the general standard. Plan
                administrators may find that other procedures will allow them to meet
                ERISA's general delivery requirements. However, administrators who
                satisfy the conditions of the safe harbor are assured that the general
                delivery requirements have been satisfied.
                ---------------------------------------------------------------------------
                 \3\ See 29 CFR 2520.104b-1(c).
                ---------------------------------------------------------------------------
                 The 2002 safe harbor, which is set forth in paragraph (c) of Sec.
                2520.104b-1, is available only if: First, 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; second,
                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; third, 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 fourth, upon request, the participant, beneficiary or other
                individual is furnished a paper version of the electronically furnished
                documents.\4\
                ---------------------------------------------------------------------------
                 \4\ 29 CFR 2520.104b-1(c)(1)(i) through (iv).
                ---------------------------------------------------------------------------
                 The 2002 safe harbor applies only to two categories of individual
                recipients. The first category includes those 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. This group is sometimes referred to as
                being ``wired at work.'' The second category includes participants,
                beneficiaries, and other persons who are entitled to documents under
                Title I of ERISA who do not fit into the first category, but who
                affirmatively consent to receive documents electronically. For this
                category, the safe harbor assumes the use of electronic information
                systems beyond the control of the plan or plan sponsor; therefore,
                relief is available for the second category of individuals only if they
                affirmatively consent to receive documents electronically.
                 In general, the affirmative consent condition requires plan
                administrators to ensure that an individual has affirmatively
                consented, in electronic or
                [[Page 56895]]
                non-electronic form, to receiving documents through electronic media
                and has not withdrawn such consent. Alternatively, in the case of
                documents furnished through the internet or other electronic
                communication networks, the individual must have affirmatively
                consented or confirmed consent electronically. The manner in which an
                individual confirms consent must reasonably demonstrate 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 the individual must have provided an address for the
                receipt of electronically furnished documents.
                 In addition, before consenting, the individual must be provided, in
                electronic or non-electronic form, a clear and conspicuous statement
                indicating: First, the types of documents to which the consent would
                apply; second, that consent can be withdrawn at any time without
                charge; third, 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;
                fourth, 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 fifth, 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: First, is provided with a statement of the revised hardware
                or software requirements for access to and retention of electronically
                furnished documents; second, 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 third, again consents in accordance with the requirements above.\5\
                ---------------------------------------------------------------------------
                 \5\ See 29 CFR[thinsp]2520.104b-1(c)(2)(ii).
                ---------------------------------------------------------------------------
                (ii) Field Assistance Bulletin 2006-03
                 Although the 2002 safe harbor remains in effect, the Department
                occasionally has issued guidance in limited circumstances addressing
                electronic delivery methods other than the method permitted by the 2002
                safe harbor. For example, in 2006, the Department issued Field
                Assistance Bulletin 2006-03 (FAB 2006-03) to help administrators and
                their service providers comply with amendments to ERISA's pension
                benefit statement requirements made by the Pension Protection Act of
                2006.\6\ FAB 2006-03, in relevant part, provides that when pension
                plans give participants continuous access to benefit statement
                information through one or more secure websites, ``the Department will
                view the availability of pension benefit statement information through
                such media as good faith compliance with the requirement to furnish
                benefit statement information, provided that participants and
                beneficiaries have been furnished notification that explains the
                availability of the required pension benefit statement information and
                how such information can be accessed by the participants and
                beneficiaries.'' In addition, the notification ``must apprise
                participants and beneficiaries of their right to request and obtain,
                free of charge, a paper version of the pension benefit statement
                information required under section 105.'' \7\
                ---------------------------------------------------------------------------
                 \6\ Public Law 109-280, 120 Stat. 780 (2006).
                 \7\ Field Assistance Bulletin No. 2006-03 (Dec. 20, 2006).
                ---------------------------------------------------------------------------
                (iii) Field Assistance Bulletin 2008-03
                 On April 29, 2008, the Department issued Field Assistance Bulletin
                2008-03 (FAB 2008-03), which provides guidance on the Department's
                final regulation providing relief from certain fiduciary
                responsibilities under ERISA for investments made on behalf of
                participants or beneficiaries who fail to direct the investment of
                assets in their individual accounts.\8\ The qualified default
                investment alternative (QDIA) regulation requires plans that choose to
                offer a QDIA to provide participants and beneficiaries with an initial
                and annual notice thereafter of the QDIA.\9\ FAB 2008-03 explains that,
                absent subsequent guidance to the contrary, plans that wish to use
                electronic means to satisfy their notice requirements may rely on
                either the regulations issued by the Department of Labor at 29 CFR
                2520.104b-1(c) 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.\10\ FAB
                2008-03 gives administrators additional flexibility and complements the
                Department's position that an administrator may use one consolidated
                notice to satisfy both the QDIA regulation and the notice requirements
                in Internal Revenue Code (Code) sections 401(k)(13)(E) and 414(w)(4)
                for automatic contribution arrangements.
                ---------------------------------------------------------------------------
                 \8\ See 29 CFR 2550.404c-5.
                 \9\ 29 CFR 2550.404c-5(c)(3).
                 \10\ See Field Assistance Bulletin No. 2008-03, (Q&A7), quoting
                72 FR 60458 (Oct. 24, 2007).
                ---------------------------------------------------------------------------
                (iv) Technical Release 2011-03R
                 On December 8, 2011, the Department issued Technical Release 2011-
                03R (TR 2011-03R), which sets forth an interim enforcement policy
                regarding the use of electronic media to satisfy the disclosure
                requirements under 29 CFR 2550.404a-5, the participant-level disclosure
                regulation. Under TR 2011-03R, a plan administrator may furnish Sec.
                2550.404a-5 disclosures through electronic media (including through a
                continuous access website) if participants voluntarily provide the
                employer, plan sponsor, or plan administrator (or its designee) with an
                email address; if the administrator furnishes initial and annual
                notices; and if other conditions are satisfied. TR 2011-03R establishes
                a temporary enforcement policy until the Department issues further
                guidance in this area. Under this policy, the Department will not take
                any enforcement action against a plan administrator who complies with
                the conditions in TR 2011-03R. TR 2011-03R is specifically limited to
                the obligation to furnish required disclosures under 29 CFR 2520.104b-
                1(b)(1), as it applies to the disclosures under 29 CFR 2550.404a-5.
                (2) 2011 Request for Information
                 The Department's Request for Information Regarding Electronic
                Disclosure by Employee Benefit Plans, published April 7, 2011 (the 2011
                Request for Information), explained in detail what is required for an
                administrator to establish ``affirmative consent'' by an
                individual.\11\ The Department published the 2011 Request for
                Information in response to Executive Order 13563, ``Improving
                Regulation and Regulatory Review,'' issued by the President on January
                18, 2011. The Executive Order stressed the importance of achieving
                regulatory goals through the most innovative and least burdensome tools
                available, and the Department was mindful of this directive when
                issuing the Request for Information to assist its approach to
                electronic disclosure by employee benefit plans. The Department
                received approximately 78 comments in response to the 2011 Request for
                Information; the responses to this Request continue to inform the
                Department's understanding
                [[Page 56896]]
                and analysis of electronic delivery and other disclosure issues.\12\
                ---------------------------------------------------------------------------
                 \11\ 76 FR 19286 (Apr. 7, 2011).
                 \12\ The comments on the 2011 Request for Information are
                available at https://www.dol.gov/agencies/ebsa/laws-and-regulations/rules-and-regulations/public-comments/1210-AB50.
                ---------------------------------------------------------------------------
                 Since publication of the 2011 Request for Information, the
                Department continues to consider whether there are more effective ways
                to regulate the disclosure and delivery of information to participants
                and beneficiaries. Questions have been raised in connection with many
                of the Department's rulemaking and other initiatives. Stakeholders on
                these initiatives increasingly request that the Department recognize
                changes in technology as some other Federal agencies have done, and
                take advantage of those changes by updating and modernizing ERISA's
                electronic delivery standards. Many stakeholders believe the Department
                should promote electronic delivery of information to the greatest
                extent possible, and contend that electronic delivery is more
                efficient, less burdensome, and less costly than delivery of paper
                disclosures. Other stakeholders state that electronic delivery is not
                necessarily appropriate for all individuals, or for all ERISA
                disclosures. The Department agrees that electronic delivery generally
                can be as effective as paper based communication, and that it can
                reduce plan costs and increase the timeliness and accuracy of
                information that is disclosed. The Department also understands,
                however, that some of America's workers and retirees do not have
                reasonable access to the internet, and that some workers and retirees
                prefer, and may benefit from, traditional (paper) delivery for
                important financial information, including ERISA plan disclosures.
                (3) Purpose of Regulatory Action
                 The Department believes that caution is warranted before taking
                regulatory action to change the longstanding electronic delivery
                standard under ERISA. The Department has spent considerable time
                analyzing the issue, both internally and by consulting other Federal
                departments and agencies with disclosure requirements that may affect
                the employee benefit plan marketplace. The Department consistently
                strives to reconcile competing policy goals when considering the best
                framework for delivering ERISA disclosures--a framework that
                appropriately balances the innovations and reduced costs that may be
                achieved through enhanced use of electronic communication with suitable
                safeguards for participants and beneficiaries who may be harmed or
                disadvantaged by such enhanced use.
                 Since publication of the 2011 Request for Information--and, before
                then, publication of the current electronic delivery safe harbor rule
                in 2002--the Department has recognized the importance of the ever-
                evolving changes in technology affecting individuals at home and at
                work. Examples include the expansion of broadband internet access
                through cable, fiber optic and wireless networks; internet-connected
                applications (apps); hardware improvements to servers and personal
                computers improving storage, memory, recovery, and computing power;
                introduction of smartphones, net books and other personal computing
                devices; and social networking (e.g., LinkedIn, Facebook, and Twitter).
                 Evidence suggests substantial access to and use of electronic
                media:
                 A 2017 survey by the U.S. Census Bureau, for instance,
                found that 87 percent of the United States population lives in a home
                with a broadband internet subscription.\13\
                ---------------------------------------------------------------------------
                 \13\ ``Types of Internet Subscriptions by Selected
                Characteristics,'' U.S. Census Bureau American Community Survey 1-
                Year Estimates (Table S2802) (2017).
                ---------------------------------------------------------------------------
                 A 2018 study concluded that 93 percent of households
                owning defined contribution accounts had access to, and used, the
                internet in 2016.\14\
                ---------------------------------------------------------------------------
                 \14\ 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.
                ---------------------------------------------------------------------------
                 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.\15\
                ---------------------------------------------------------------------------
                 \15\ 2015 Telephone Survey Conducted by Greenwald & Associates
                for the SPARK Institute. A total of 1,000 randomly-selected plan
                participants nationwide were administered a 10-minute telephone
                survey. Data collection was done by Greenwald & Associations and its
                affiliate National Research. To qualify for the survey, respondents
                needed to be employed either full or part time and participate in an
                employer retirement plan. Sample was weighted by age and gender to
                reflect demographics of plan participants in the United States, as
                reported in the Current Population Survey. See Also, Quantria
                Strategies for the SPARK Institute, Improving Outcomes with
                Electronic Delivery of Retirement Plan Documents, (June 2015).
                ---------------------------------------------------------------------------
                 A 2015 report observes 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.\16\
                ---------------------------------------------------------------------------
                 \16\ Aaron Smith, Smartphone Use in 2015, Pew Research Center
                (April 1, 2015).
                ---------------------------------------------------------------------------
                 The Department believes that these access and usage rates, to date
                and as they continue in the future, may increase the number of
                individuals for whom electronic delivery of ERISA disclosures is
                appropriate or preferred. Further, increased technological capabilities
                may enable plan administrators, their service and investment providers,
                and the Department to monitor and ensure the effectiveness of the
                safeguards in place for all participants and beneficiaries.
                Accordingly, and in response to Executive Order 13847, discussed in the
                next section, the Department is now prepared to propose a new
                electronic delivery framework, as a safe harbor, for ERISA disclosures.
                The proposed safe harbor would be in addition to the 2002 safe harbor.
                Thus, plan sponsors and administrators could choose between the two
                safe harbors, or use both safe harbors, selecting the best approach for
                their plan population.
                (4) Executive Order 13847
                 On August 31, 2018, President Trump issued Executive Order 13847,
                affirming the Federal Government's policy to expand access to workplace
                retirement plans for American workers, ensuring that workers will be
                financially prepared to retire.\17\ The Order focused on the concern
                that costly and complex regulations may discourage employers,
                especially small businesses, from sponsoring retirement plans for their
                employees. Specifically, the Order instructs the Department to review
                whether regulatory or other actions could be taken to improve the
                effectiveness of required notices and disclosures and reduce their cost
                to employers, promoting retirement security by expanding access to
                workplace retirement plans. The Order also emphasizes that reducing the
                number and complexity of ERISA notices and disclosures currently
                required would ease regulatory burdens.
                ---------------------------------------------------------------------------
                 \17\ E.O. 13847, 83 FR 45321 (Sept. 6, 2018).
                ---------------------------------------------------------------------------
                 Specifically, Executive Order 13847 directs that within 1 year of
                the date of the Order, the Secretary of Labor shall, in consultation
                with the Secretary of the Treasury, ``complete a review of actions that
                could be taken through regulation or guidance, or both, to make
                retirement plan disclosures required under ERISA
                [[Page 56897]]
                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.'' In addition, the Order
                specifically emphasizes that this review ``shall include an exploration
                of the potential for broader use of electronic delivery as a way to
                improve the effectiveness of the disclosures and to reduce their
                associated costs and burdens.'' The Order directs that, if the
                Secretary of Labor finds that action should be taken, the Secretary
                shall, in consultation with the Secretary of the Treasury, consider
                proposing appropriate regulations or guidance, consistent with
                applicable law and policy set forth in the Order.\18\
                ---------------------------------------------------------------------------
                 \18\ See id.
                ---------------------------------------------------------------------------
                 Since issuance of the Order, the Department has undertaken a
                comprehensive review of actions that may be taken in response to the
                Order's policy mandates. In doing so, the Department consulted with not
                only staff of the Treasury Department, as to notices required under the
                Code, but also the Securities and Exchange Commission (Commission),
                banking regulators, and others concerning their electronic disclosure
                requirements and practices. The Department also has reviewed recent
                studies focusing on changes in internet access and usage across
                different populations and met with stakeholders to hear about specific
                experiences with electronic delivery. Having completed this review as
                set forth in the Order, the Department decided to publish a proposed
                regulation on electronic disclosure that it believes will reduce the
                costs and burdens imposed on employers and other plan fiduciaries,
                while at the same time creating the opportunity for disclosures that
                are more useful to participants and beneficiaries. The Department has
                also concluded that it needs further information from stakeholders
                before proposing any substantive regulatory additions, deletions, or
                changes to ERISA's disclosures themselves, as opposed to delivery of
                such disclosures. Therefore, this document includes, below, a Request
                for Information comprising a series of questions to elicit views from
                all interested parties on additional ways to enhance the usefulness and
                effectiveness of ERISA disclosures.
                (5) Review of Other Agencies' Electronic Disclosure Practices and
                Standards
                 The Department has reviewed other agencies' practices and standards
                regarding electronic delivery of required information. Although the
                Executive Order only directed the Department to consult with the
                Treasury Department, the Department of Labor believed it prudent to
                explore a wider variety of approaches to electronic delivery.
                (i) Social Security Statements
                 For budgetary reasons, the Social Security Administration
                effectively eliminated paper as the primary method of furnishing
                benefits statements.\19\ Individuals now are entitled to register on
                the Administration's website for a ``my Social Security'' account to
                access their statements and other information. The Social Security
                Administration does, however, mail paper statements to individuals age
                60 and older if they don't yet receive Social Security benefits and
                they have not yet set up a ``my Social Security'' account on the
                website and to other individuals upon request.\20\ In fiscal year 2018,
                the Administration mailed 14.5 million paper statements to
                individuals.\21\ More than 45 million individuals have established ``my
                Social Security'' online accounts and the Administration sends an
                annual email reminding individuals that their statement is available
                online. In 2018, nearly 17 million registered users checked their
                online statements.\22\
                ---------------------------------------------------------------------------
                 \19\ Office of the Inspector General Social Security
                Administration, Issuance of Social Security Statements (Report No.
                A-03-18-50724, Feb. 14, 2019), p. 4-5.
                 \20\ See https://www.ssa.gov/myaccount/.
                 \21\ See fn. 19 at p. 6.
                 \22\ Id.
                ---------------------------------------------------------------------------
                (ii) Federal Thrift Savings Plan
                 The Federal Thrift Savings Plan (TSP) is a retirement savings plan
                similar to a 401(k) plan, covering Federal civilian employees and
                members of the uniformed services. The TSP has approximately 5.5
                million participant accounts \23\ with approximately 3.3 million
                participants contributing through payroll deduction and approximately
                $559 billion in investment assets at fair market value.\24\ Effective
                December 31, 2003, the TSP uses electronic delivery as the default for
                quarterly benefit statements, unless an individual requests mail
                delivery.\25\ The TSP notifies new participants of the internet
                availability of their account information through an initial welcome
                package followed by two separate mailings containing a web password and
                personal identification number for accessing the website and automated
                telephone system.\26\ Annual statements are available on the website
                and delivered by mail, unless an individual requests only electronic
                annual statements.\27\ Among the 3.5 million TSP participants who are
                covered under the Federal Employee Retirement System (FERS),\28\ a
                large majority, or 81 percent, appear to be in default status,
                receiving only annual statements (and not quarterly statements) in
                paper by mail. Of these, 57 percent have accessed their account online
                at least once since January of 2018. A very small fraction of all FERS-
                covered TSP participants, or just 3 percent, have opted for no paper/
                mail delivery. Of these, 95 percent have accessed their account online.
                ---------------------------------------------------------------------------
                 \23\ This includes Federal employees covered under Federal
                Employee Retirement Systems (FERS), the Civil Service Retirement
                System (CSRS), or equivalent retirement systems for the uniformed
                services.
                 \24\ Federal Thrift Savings Fund, Financial Statement for
                December 31, 2018, available at https://www.frtib.gov/ReadingRoom/FinStmts/TSP-FS-Dec2018.pdf.
                 \25\ 5 CFR 1640.6 (``The TSP will furnish the information
                described in this part to participants by making it available on the
                TSP website. A participant can request paper copies of that
                information from the TSP by calling the ThriftLine, submitting a
                request through the TSP website, or by writing to the TSP record
                keeper.''). See also U.S. Government Accountability Office, Federal
                Thrift Savings Plan: Customer Service Practices Adopted by Private
                Sector Plan Managers Should Be Considered, GAO-05-38 (Jan. 2005) at
                12, n. 21, available at https://www.gao.gov/new.items/d0538.pdf
                (providing statistics on cost savings experience with TSP).
                 \26\ See TSP enrollment form, Form TSP-1; See also Summary of
                the Thrift Savings Plan at https://www.tsp.gov/PDF/formspubs/tspbk08.pdf.
                 \27\ Summary of the Thrift Savings Plan, p.24, available at
                https://www.tsp.gov/PDF/formspubs/tspbk08.pdf.
                 \28\ This generally includes Federal civilian employees hired in
                1984 or later.
                ---------------------------------------------------------------------------
                (iii) Treasury Department, Internal Revenue Service
                 On October 20, 2006, the Treasury Department and the IRS published
                26 CFR 1.401(a)-21, setting forth rules relating to the use of an
                electronic medium to provide applicable notices and to make participant
                elections, with respect to a retirement plan, an employee benefit
                arrangement, or an individual retirement plan.\29\ These regulations
                provide that an applicable notice \30\ required to be in writing or in
                written form \31\ can be provided to a recipient electronically only if
                the requirements of 26 CFR 1.401(a)-
                [[Page 56898]]
                21(a)(5) \32\ are satisfied and either the requirements of 26 CFR
                1.401(a)-21(b) (relating to the consumer consent requirements) or 26
                CFR 1.401(a)-21(c) (providing an exemption from the consumer consent
                requirements) are satisfied.\33\ Under the consumer consent
                requirements, the recipient must affirmatively consent to the
                electronic delivery of the notice in accordance with the requirements
                of section 101(c) of the Electronic Signatures in Global and National
                Commerce Act, Public Law 106-229 (114 Stat. 464) (2000) (E-SIGN Act).
                Under the exemption from consumer consent requirements, the electronic
                medium used to provide the applicable notice must be a medium that the
                recipient has the effective ability to access, at the time the
                applicable notice is provided, the recipient must be advised that he or
                she may request and receive the applicable notice in writing on paper
                at no charge, and upon request the notice must be provided to the
                recipient at no charge. In the past, some parties have encouraged the
                Department to allow providers to rely on these rules for providing
                electronic notices, which they interpreted to be more flexible than the
                Department's 2002 safe harbor.\34\ And from time to time, in temporary
                guidance, the Department has allowed administrators to rely on these
                regulations under the Code for electronic delivery of disclosures as an
                alternative to reliance on the Department's regulation.\35\
                ---------------------------------------------------------------------------
                 \29\ T.D. 9294, 71 FR 61877 (Oct. 20, 2006).
                 \30\ An applicable notice is any notice, report, statement, or
                other document required to be provided to a recipient under a
                retirement plan, employee benefit arrangement, or individual
                retirement plan. See 26 CFR 1.401(a)-21(e)(1).
                 \31\ For notices that are not required to be in writing or in
                written form, 26 CFR 1.401(a)-21(a)(1)(iii) provides that the rules
                are a safe harbor method for using an electronic medium to provide
                the notice.
                 \32\ 26 CFR 1.401(a)-21(a)(5) contains requirements relating to
                the design of the electronic system used to deliver applicable
                notices. The requirements are that the electronic system must be
                reasonably designed to provide the information in the notice to a
                recipient in a manner that is no less understandable than a written
                paper document and that the system must be designed to alert the
                recipient, at the time the applicable notice is provided, to the
                significance of the information in the notice and to provide
                instructions needed to access the notice, in a manner that is
                readily understandable.
                 \33\ See, however, the special electronic delivery requirements
                for providing a section 204(h) notice to an applicable individual,
                which are described in 26 CFR 54.4980F-1, Q&A-13(c). A section
                204(h) notice may be provided electronically if certain requirements
                are satisfied: (a) The notice is provided using an electronic method
                (other than an oral communication or a recording of an oral
                communication) that satisfies the requirements in 26 CFR 1.401(a)-
                21, and (b) either the notice is actually received by the applicable
                individual or the plan administrator takes appropriate and necessary
                measures reasonably calculated to ensure that the electronic method
                results in actual receipt. There are special safe harbor rules on
                the actual receipt rule in 26 CFR 54.4980F-1, Q&A-13(c)(3).
                 \34\ 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.
                 \35\ 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] section 1.401(a)-21,
                as good faith compliance with the requirement to furnish pension
                benefit statements to participants and beneficiaries'' under ERISA.
                ---------------------------------------------------------------------------
                (iv) Securities and Exchange Commission
                 The mission of the U.S. Securities and Exchange Commission (SEC) is
                to protect investors; maintain fair, orderly, and efficient markets;
                and facilitate capital formation. The SEC oversees the key participants
                in the securities marketplace, including securities exchanges,
                securities brokers and dealers, investment advisers, and mutual fund
                companies. These participants very often are service providers to
                ERISA-covered retirement plans.
                 On June 22, 2018, the SEC adopted a new rule, 30e-3, under the
                Investment Company Act of 1940.\36\ Subject to conditions, rule 30e-3
                provides certain registered investment companies with an optional
                method to satisfy their obligation to transmit shareholder reports by
                making such reports and other materials accessible at a website address
                specified in a notice to investors. The new rule incorporates a set of
                protections so that investors who prefer to receive reports on paper
                will continue to receive them in that format. These protections
                include, among others, a minimum length phase-in period that ends no
                earlier than December 31, 2020, and notice requirements that must be
                implemented and followed beginning January 1, 2019, or the date shares
                are first publicly offered, if a registered investment company wants to
                use new rule 30e-3 as of January 1, 2021. The rule requires that a
                paper notice be sent to an investor each time a current shareholder
                report is accessible online.\37\
                ---------------------------------------------------------------------------
                 \36\ 83 FR 29158 (Jun. 22, 2018).
                 \37\ See 17 CFR 270.30e-3. The D.C. Circuit Court of Appeals
                denied a Petition for Review regarding the electronic delivery
                method permitted in the SEC's rule 30e-3. Twin Rivers Paper Co. v.
                SEC 934 F.3d 607 (D.C. Cir. Aug. 16, 2019). The Department further
                notes that this proposal includes a notice and access structure
                similar to the SEC rule, but also contains many differences. The
                structure and purposes of ERISA are different from the structure and
                purposes of the Investment Company Act of 1940.
                ---------------------------------------------------------------------------
                 Similarly, in 2007 the SEC adopted amendments to the proxy rules
                under the Securities Exchange Act of 1934 that provide an alternative
                method for issuers and other persons to furnish proxy materials to
                shareholders by posting them on an internet website and providing
                shareholders with notice of the availability of the proxy materials.
                Under the amendments, issuers must make copies of the proxy materials
                available to shareholders on request, at no charge to shareholders. The
                amendments put into place processes that provide shareholders with
                notice of, and access to, proxy materials while taking advantage of
                technological developments and the growth of the internet and
                electronic communication. The amendments were phased-in over a two-year
                period.\38\
                ---------------------------------------------------------------------------
                 \38\ 72 FR 4148 (Jan. 29, 2007).
                ---------------------------------------------------------------------------
                 On January 26, 2009, the SEC adopted amendments to the form used by
                mutual fund companies to register under the Investment Company Act of
                1940 and to offer their securities under the Securities Act of 1933 in
                order to enhance the disclosures that are provided to mutual fund
                investors. The amendments require key information to appear in plain
                English in a standardized order at the front of a mutual fund statutory
                prospectus. The amendments also permit persons to satisfy their mutual
                fund prospectus delivery obligations under Section 5(b)(2) of the
                Securities Act by sending or giving the key information directly to
                investors in the form of a summary prospectus and providing the
                statutory prospectus on an internet website. Upon an investor's
                request, mutual fund companies are also required to send the statutory
                prospectus to the investor.\39\ Under these rules, paper copies of the
                prospectus must be sent at no charge to shareholders requesting them.
                ---------------------------------------------------------------------------
                 \39\ 74 FR 4546 (Jan. 26, 2009). In addition, in 2018, the SEC
                proposed a rule that permits a person to satisfy its prospectus
                delivery obligations for a variable annuity or variable life
                insurance contracts by sending a summary prospectus to investors and
                making the prospectus available online. Securities and Exchange
                Commission, 17 CFR parts 230, 232, 239, 240, 270 and 274. ``Updated
                Disclosure Requirements and Summary Prospectus for Variable Annuity
                and Variable Life Insurance Contracts.'' 83 FR 61730 (Nov. 30,
                2018).
                ---------------------------------------------------------------------------
                 Apart from these three document-specific rules, the SEC has a
                longstanding position that governs the use of electronic media for
                other investor disclosures by issuers of all types, including operating
                companies, investment companies, and municipal securities issuers, as
                well as market intermediaries. In general, issuers and market
                intermediaries must assess their compliance with legal disclosure
                delivery requirements in terms of notice, access, and evidence of
                delivery. One method for satisfying the evidence-of-delivery standard
                is to obtain an informed consent from an investor to
                [[Page 56899]]
                receive information through a particular electronic medium.\40\
                ---------------------------------------------------------------------------
                 \40\ SEC Release 34-42728 (2000). See also Release No. 33-7288
                (1996).
                ---------------------------------------------------------------------------
                (v) Office of the Comptroller of the Currency.
                 The Office of the Comptroller of the Currency (OCC) charters,
                regulates, and supervises all national banks and Federal savings
                associations as well as Federal branches and agencies of foreign banks.
                The OCC is an independent bureau of the Treasury Department. The
                mission of the OCC is to ensure that national banks and Federal savings
                associations operate in a safe and sound manner, provide fair access to
                financial services, treat customers fairly, and comply with applicable
                laws and regulations. These businesses very often are service providers
                to ERISA-covered retirement plans. On January 23, 2017, as part of its
                review under the Economic Growth and Regulatory Paperwork Reduction Act
                of 1996, the OCC revised certain of its rules to remove outdated or
                otherwise unnecessary provisions. The OCC found that the use of
                electronic communications has become widespread and is provided for in
                state and Federal law, such as the E-SIGN Act, which allows for
                electronic communications with customers. The OCC, consequently,
                removed 12 CFR 12.102 and 151.110 which required, among other things,
                that customers must agree to electronic instead of hard-copy
                notifications.\41\ In a separate regulatory action, the OCC now treats
                the posting of certain collective-investment-fund information on a
                bank's website as satisfying the bank's obligation to furnish such
                information to customers on request.\42\
                ---------------------------------------------------------------------------
                 \41\ 82 FR 8082 (Jan. 23, 2017).
                 \42\ See 12 CFR 9.18(b)(1), permitting banks to make copies of
                their investment fund plan available on their websites and to
                furnish electronic copies upon request.
                ---------------------------------------------------------------------------
                (6) Other Recommendations to the Department
                 The actions taken today are responsive not only to Executive Order
                13847, but to recommendations made to the Department by the Employee
                Benefits Security Administration's ERISA Advisory Council, the U.S.
                Government Accountability Office (GAO), and other parties.
                (i) ERISA Advisory Council Recommendations
                 The ERISA Advisory Council (the Advisory Council) has repeatedly
                made recommendations to the Department concerning possible changes to
                the electronic delivery rules for ERISA disclosures. Most recently, in
                its November 2017 report, the Advisory Council recommended that to ease
                burdens on plans and improve understandability for participants, an
                ideal disclosure protocol would implement both paper and electronic
                delivery.\43\ In making its recommendation, the Advisory Council cited
                to witness testimony that a majority of participants do not read paper
                documents sent to them, and participants who do read the documents find
                them difficult to understand, noting that ``SPDs were becoming
                increasingly detailed and using legalistic language to mitigate the
                litigation risks.'' \44\ The Council also noted that home internet and
                computer use for adults over age 50, individuals with less than $25,000
                in annual income, those without a college degree, and those living in
                rural areas is lower than for other demographic groups.\45\ The Council
                further recommended that a new disclosure called a ``Quick Reference
                Guide'' could be distributed annually to participants that would
                provide answers to basic questions about the plan.\46\
                ---------------------------------------------------------------------------
                 \43\ Mandated Disclosure for Retirement Plans--Enhancing
                Effectiveness for Participants and Sponsors, ERISA Advisory Council,
                p.27 (Nov. 2017).
                 \44\ Id at p.7 (referring to the 2005 ERISA Advisory Council
                Report).
                 \45\ Id at p.26
                 \46\ Id at p.7.
                ---------------------------------------------------------------------------
                 2009 Advisory Council Report.\47\ In July and September of 2009,
                the Advisory Council held public hearings to study the efficacy of
                ERISA's reporting and disclosure requirements, as well as problems and
                costs related to such disclosures. Upon completion of testimony from 18
                witnesses, the Advisory Council issued its report recommending that the
                Department allow administrators to rely on the IRS regulations. In
                support of this recommendation, the Council stated this rationale:
                ---------------------------------------------------------------------------
                 \47\ See 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.
                 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 (emphasis added).
                The Council's report further explains:
                 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.
                 2007 Advisory Council Report.\48\ Another public hearing was held
                by a working group of the Advisory Council in July and September of
                2007, in this case to hear thirteen witnesses testify about the new
                pension benefit statement requirements in the Pension Protection Act of
                2006.\49\ In its report issued following the hearing, the Advisory
                Council recommended that ``the Department of Labor should update its
                regulations regarding electronic communication to a `reasonable access'
                standard more similar to the Department of Treasury safe harbor,
                recognizing the continued advancement in Web-based communication and
                the increase in its use by participants.'' The Advisory Council also
                cautioned that many participants would nonetheless be better served
                with paper when managing their plan assets. In any event, the Advisory
                Council recommended that the Department reexamine the use of electronic
                communication for benefit statements to recognize the changes in
                technology and participants' use of such technology.
                ---------------------------------------------------------------------------
                 \48\ See 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.
                 \49\ Public Law 109-280, 120 Stat. 949-952.
                ---------------------------------------------------------------------------
                 2006 Advisory Council Report.\50\ An Advisory Council working group
                held hearings at which it heard testimony from thirteen witnesses in
                August and September of 2006 on a variety of issues pertaining to the
                management of plan assets, including the use of electronic media for
                furnishing disclosures
                [[Page 56900]]
                required by ERISA section 404(c). The Council's subsequent report
                recommended that the Department reconsider the efficacy of its 2002
                safe harbor. Given the growth in access to and use of the internet
                since the 2002 safe harbor was adopted, the working group recommended
                that the Department relax the conditions in the 2002 safe harbor,
                especially the ``integral part of the employee's duties'' condition.
                ---------------------------------------------------------------------------
                 \50\ See ERISA Advisory Council Report Working Group on Prudent
                Investment Process, available at https://www.dol.gov/agencies/ebsa/about-ebsa/about-us/erisa-advisory-council/2006-prudent-investment-process.
                ---------------------------------------------------------------------------
                (ii) U.S. Government Accountability Office
                 In its 2013 report, ``Private Pensions: Clarity of Required Reports
                and Disclosures Could Be Improved,'' the GAO recommended requiring
                plans to include the summary plan description (SPD) and any summaries
                of material modifications (SMMs) on a continuous access website.\51\
                Furthermore, the GAO recommended that the Department focus on the
                readability standard for required disclosures by adding ``clear,
                simple, brief highlights'' \52\ of required disclosures, noting that
                ``the quantity of information diminishes the positive effects it can
                have for participants.'' \53\
                ---------------------------------------------------------------------------
                 \51\ GAO-14-92, Private Pensions: Clarity of Required Reports
                and Disclosures Could Be Improved, p. 40, GAO (Nov. 2013), available
                at https://www.gao.gov/assets/660/659211.pdf.
                 \52\ Id at p. 41.
                 \53\ Id at p. 29.
                ---------------------------------------------------------------------------
                (iii) Congressional Activity
                 The Department also observes that in recent years there has been
                continued Congressional interest in expanding the use of electronic
                media for ERISA disclosures.\54\ In 2018, the Secretary of Labor
                testified before the Senate Appropriations Subcommittees on Labor,
                Health and Human Services, Education, and related Agencies' Senate
                Appropriations on the Department's FY 2019 budget request.\55\ In
                response to the hearing, U.S. Senator Jeanne Shaheen (D-NH) submitted a
                question for the record to the Secretary, explaining her view that the
                Department's rules for employees to receive required information on
                their retirement plan are out of date. She believes that furnishing
                disclosures electronically should be the default method of delivery for
                retirement savers, because electronic delivery will reduce costs for
                retirement savers, save countless amounts of wasted paper, protect the
                environment, and help connect savers with a wealth of online tools and
                resources to help put them on a better path to a secure retirement. In
                2017, 38 bipartisan cosponsors introduced the Receiving Electronic
                Statements to Improve Retiree Earnings Act (RETIRE Act), which would
                have amended ERISA and the Code to give employers the option of
                furnishing required information to participants and beneficiaries
                electronically, while preserving their right to choose to receive
                disclosures in hard copy.\56\ In 2018, a bipartisan group of six
                Senators introduced the RETIRE Act, but the bill failed to pass before
                the close of the 115th Congress.\57\ To date, no further Congressional
                action has taken place with respect to the RETIRE Act.
                ---------------------------------------------------------------------------
                 \54\ See, e.g., 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'').
                 \55\ 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.
                 \56\ See H.R. 4610 (Dec. 11, 2017).
                 \57\ S. 3795 (Dec. 19, 2018).
                ---------------------------------------------------------------------------
                B. Proposed Rule--Alternative Method for Disclosure Through Electronic
                Media--Notice and Access
                 In this document, the Department proposes to amend part 2520 by
                adding a new section, Sec. 2520.104b-31, entitled ``Alternative method
                for disclosure through electronic media--Notice and access.'' This
                proposed safe harbor method for electronic disclosure is an additional
                method and would not change the Department's current safe harbor for
                electronic delivery in Sec. 2520.104b-1(c). As proposed, plan
                administrators who wish to continue to rely on the existing safe harbor
                for electronic delivery, or to furnish paper documents by hand-delivery
                or by mail, are free to continue to do so. The Department requests
                comments on whether it should make a technical amendment to Sec.
                2520.104b-1(c) to direct readers to the newly proposed safe harbor, or
                whether affected parties would know to consider both possible options
                without such a technical amendment.\58\ The proposed Sec. 2520.104b-31
                provides a new, optional method for compliance with ERISA's general
                standard for delivery of disclosures to participants and beneficiaries.
                Specifically, proposed paragraph (a) provides that the administrator of
                an employee benefit plan may satisfy Sec. 2520.104b-1(b)(1) with
                respect to covered individuals and covered documents, as described
                below, by complying with the notice, access, and other requirements of
                the proposal.\59\
                ---------------------------------------------------------------------------
                 \58\ The Department may have to make a number of technical
                amendments to other sections of the Code of Federal Regulations
                (CFR) if the proposal in this document becomes a final rule. Certain
                other CFR sections currently cross reference the 2002 safe harbor
                and may need to cross reference Proposed Rule Sec. 2520.104b-31 as
                well. See, e.g., 29 CFR 2560.503-1(g)(1) (where the provision
                stating that any electronic notification of benefit determination
                ``shall comply with the standards imposed by 29 CFR 2520.104b-
                1(c)(1)(i), (iii), and (iv)'' may have to reference the new safe
                harbor as well). Commenters are encouraged to identify other CFR
                sections that would need conforming edits of this type.
                 \59\ When certain material, including reports, statements,
                notices and other documents, is required under Title I of ERISA or
                regulations issued thereunder, to be furnished either by direct
                operation of law or on individual request, a plan administrator
                ``shall use measures reasonably calculated to ensure actual receipt
                by plan participants, beneficiaries and other specified
                individuals.'' 29 CFR 2520.104b-1(b)(1).
                ---------------------------------------------------------------------------
                 After reviewing and analyzing a variety of electronic disclosure
                standards and other related information, and discussions with various
                regulators, the Department has determined that its policy objectives
                may be best advanced through adoption of a ``notice and access''
                structure, similar to that previously adopted by the Department in FAB
                2006-03 and by the Commission for certain investor disclosures.\60\ The
                Department proposes to extend this structure to all required ERISA
                disclosures for pension benefit plans, as discussed below, and has
                adapted the structure to reflect the nature and context of disclosures
                required by ERISA from administrators, as plan fiduciaries, to
                participants and beneficiaries. The Department anticipates that
                permitting administrators to post ERISA disclosures online will create
                significant efficiencies in disclosing information by affording
                participants and beneficiaries the convenience of continuous access to
                their ERISA disclosures using an internet connected device.
                Administrators also have flexibility, within the framework provided by
                the proposed rule, to take advantage of existing and developing
                technology and to create internet-based experiences that result in a
                better understanding of the disclosed information. Online access
                enables a layered approach to disclosure that can be designed not only
                to reduce the time and expense of disclosure, but to more effectively
                communicate information. The Department believes the ``notice and
                access'' structure proposed in this document answers the directive of
                Executive Order 13847 ``to
                [[Page 56901]]
                make retirement plan disclosures required under ERISA . . . more
                understandable and useful for participants and beneficiaries, while
                also reducing the costs and burdens they impose on employers and other
                plan fiduciaries[.]'' \61\
                ---------------------------------------------------------------------------
                 \60\ Although the proposed safe harbor would have no impact on
                the current regulatory safe harbor at Sec. 2520.104b-1(c), it
                would, if adopted as a final rule, supersede the relevant portions
                of FAB 2006-03 (Dec 20, 2006), FAB 2008-03 (Q&A 7) (April 29, 2008),
                and Technical Release 2011-03R (Dec. 8, 2011).
                 \61\ E.O. 13847 (emphasis added).
                ---------------------------------------------------------------------------
                 In addition to the specific conditions of the proposed rule, the
                Department invites commenters to submit general views on the proposed
                ``notice and access'' disclosure framework. For example, the Department
                is interested in comments on the desire for enhanced internet
                availability of required disclosures, from the plan's and from the
                participants' perspective; how many plans (or sponsoring employers)
                already have and use websites to make information available to
                employees; whether administrators or service providers for small plans
                are more or less likely to have and use websites, and whether and what
                other disclosure rules may be more appropriate for small plans; and
                whether the Department should reconsider the existing electronic
                delivery rules in Sec. 2520.104b-1(c)(2), including the consent
                requirement, instead of or in addition to the proposed framework.
                Although the proposed safe harbor provides for access to required
                disclosures on a ``website,'' the Department invites comments on
                whether, and how, the proposal should be modified to explicitly include
                other internet-based mechanisms, such as multimedia messaging and
                mobile applications. When feasible and sufficiently protective of plan
                participants, the Department does not want to inhibit innovation in the
                delivery of required disclosures, especially as forms of internet-based
                communication continue to expand. In this sense, the Department wishes
                to explore whether the proposal would require revision to promote
                technical neutrality. Commenters should explain not only their views on
                the use of other internet-based mechanisms, but also their (or plan
                participants') experiences with such mechanisms.
                 In light of Executive Order 13847 requiring consultation with the
                Treasury Department, this proposal is intended to align with Treasury's
                electronic media regulation for applicable notices at Sec. 26 CFR
                1.401(a)-21(c). Commenters are invited to share their views on whether
                this objective is desirable and what other steps might be needed to
                achieve it.
                (1) Covered Individual
                 The proposed rule begins by defining the individuals to whom
                disclosure may be made under the new safe harbor. Paragraph (b) defines
                a ``covered individual'' for purposes of the rule as a participant,
                beneficiary, or other individual entitled to covered documents and who,
                as a condition of employment, at commencement of plan participation, or
                otherwise, provides the employer, plan sponsor, or administrator (or an
                appropriate designee of any of the foregoing) with an electronic
                address, such as an email address or internet-connected mobile-
                computing-device (e.g., smartphone) number. Alternatively, 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.\62\ The existence of an electronic address by which
                a covered individual can be notified as to the availability of required
                disclosures is critical to the effective implementation of the proposed
                notice and access framework, much like a mailing address is critical to
                delivery of a paper document. The Department believes it is
                appropriate, therefore, to require as a condition of reliance on the
                safe harbor that an administrator receives an electronic address or
                number with which to communicate with a covered individual. The
                Department intends to provide a sufficient level of flexibility to
                administrators, and to covered individuals, as to how to institute this
                condition. In many cases, for employees who are given a company-
                provided email address upon employment, the Department anticipates that
                satisfying this condition will be fairly simple, without significant
                burden. The proposal also allows an employee to provide a different,
                personal email address to the administrator; often employers obtain
                electronic addresses from new employees' application materials or from
                other human resource documents. Alternatively, an administrator or plan
                service provider may request an electronic address in plan enrollment
                paperwork or to establish a plan participant's online access to plan
                documents and account information. A company-issued mobile smartphone
                (with a data plan) and corresponding mobile phone number also may be
                used to satisfy this condition.
                ---------------------------------------------------------------------------
                 \62\ The Department requests comment on whether an employer-
                provided electronic address, as distinguished from a personal
                electronic address, would necessitate additional or different
                conditions, and if so, why. For example, is there a heightened need
                to ensure covered individuals' awareness of the electronic address
                and the notice and access method of delivery, or to prevent
                unauthorized access, email compromise, or other malicious activity
                in the case of inactive employer-provided addresses?
                ---------------------------------------------------------------------------
                 While the proposal conditions ``covered individual'' status on the
                provision of an electronic address, which may include an address or
                number associated with an internet-based mobile-computing device, such
                as a smartphone, tablet, or laptop computer, the proposal does not
                impose any specific requirements or limitations on the type of device
                that a person must have in order to be a covered individual under the
                safe harbor. The Department intends to avoid favoring any particular
                technology that is considered advanced today but could be outdated
                tomorrow. On prior rulemaking initiatives under ERISA, many commenters
                have cautioned the Department against inadvertently stifling innovation
                by sanctioning particular technologies considered state-of-the-art at
                the time, especially in matters of digital technology. The Department
                invites comments on this analysis and whether different types of
                mobile-computing devices, or technologies, warrant different conditions
                to ensure that covered individuals are able to receive, review, and
                take appropriate actions in response to a notice of internet
                availability.
                (2) Covered Documents
                (i) Employee Pension Benefit Plans
                 Paragraph (c) of the proposal goes on to define the ``covered
                documents'' to which the rule applies. The safe harbor may be used, for
                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 upon request.\63\ This includes
                documents that, pursuant to ERISA's disclosure provisions, must be
                furnished solely because of the passage of time, such as pension
                benefit statements or summary annual reports. This also includes
                documents that must be furnished because of a specific triggering event
                [[Page 56902]]
                other than the passage of time, such as an SMM or a blackout notice. A
                plan administrator is not required to furnish all of these documents,
                as applicable for a particular plan, pursuant to the safe harbor if the
                administrator prefers a different method of furnishing for some of the
                documents. The Department requests 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.
                ---------------------------------------------------------------------------
                 \63\ Under ERISA, some documents must be furnished automatically
                and others only upon request by an eligible person. The proposed
                safe harbor does not apply to documents that are furnished only upon
                request. 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 summary plan description, 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.
                ---------------------------------------------------------------------------
                (ii) Employee Welfare Benefit Plans
                 The safe harbor, as proposed, does 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. Paragraph (c)(2)
                of the proposal, instead, is reserved so that the Department can study
                the future application of the new safe harbor to documents that must be
                furnished to participants and beneficiaries of employee welfare benefit
                plans. This reservation follows the directive of Executive Order 13847,
                which focuses the Department's review on retirement plan disclosures.
                Although the Department does not interpret the Order's directive as
                limiting the Department's ability to take 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, this
                proposal is limited to retirement plan disclosures. 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 want to consult with these other Departments. Accordingly,
                focusing its attention first on retirement disclosures is a sound and
                efficient use of the Department's resources.
                (3) Notice of Internet Availability
                 As a general rule, the proposed method for delivery through
                electronic media requires that administrators furnish to each covered
                individual a notice of internet availability for each covered document,
                in accordance with the requirements of this section. Thus, for example,
                if a particular plan is required to furnish to all of its covered
                individuals eight different covered documents in a given year, the
                proposed safe harbor's general rule would require that the plan's
                administrator instead furnish to covered individuals eight notices of
                internet availability (subject to the more specific rule in paragraph
                (i), which allows an administrator to combine notices for certain
                covered documents). Paragraph (d) sets forth the conditions for
                satisfying this first requirement of the safe harbor.
                (i) Timing of Notice of Internet Availability
                 Paragraph (d)(2) provides that the administrator must furnish a
                notice of internet availability at the time the covered document that
                is the subject of the notice is made available on the website. For
                example, if section 105 of ERISA requires a plan administrator to
                furnish to covered individuals their pension benefit statements no
                later than April 15th of a given year, the administrator could satisfy
                that obligation by furnishing to these individuals a notice of internet
                availability on April 15th and ensuring that the covered document is
                accessible on the internet website on this date.
                 If, however, the administrator furnishes a combined notice of
                internet availability for more than one covered document, pursuant to
                paragraph (i) of the proposal, discussed below, the requirement to
                furnish a notice of internet availability will be treated as satisfied
                if the combined notice of internet availability is furnished each plan
                year, and, if the combined notice was furnished in the prior plan year,
                no more than 14 months following the date the prior plan year's notice
                was furnished. The proposal provides administrators with a 14-month
                period in which to comply with the annual notice requirement to ensure
                adequate flexibility to the extent the date of furnishing may vary
                slightly from year to year. Further, the Department does not want
                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. The Department intends that the proposed two-month grace
                period will offer sufficient administrative flexibility without
                compromising participants' and beneficiaries' receipt of a notice on a
                periodic, and essentially annual, basis. The Department requests
                comments on these timing requirements, and whether different timing
                requirements would be more likely to ensure prompt and efficient
                delivery to participants and beneficiaries.
                 The proposal also requires, as discussed below, that a covered
                document must be made available on the website no later than the date
                on which the covered document otherwise must be furnished in accordance
                with the applicable section of ERISA or regulation thereunder. This
                proposal is not intended to alter the substance or timing of any of
                ERISA's required disclosures for pension benefit plans. Rather, this
                ``notice and access'' structure merely provides a possible method of
                delivery for disclosures by concluding that a website posting, in
                conjunction with a properly-timed notice of internet availability,
                constitutes ``furnishing'' for purposes of ERISA pension plan
                disclosures. An administrator who chooses to rely on this safe harbor
                would continue to be subject to the content, timing, and other
                provisions that apply to any particular disclosures. Further, if an
                administrator chooses to furnish a consolidated notice of internet
                availability under paragraph (i) of this section, once a year, doing so
                will not change the date on which the covered documents must be made
                available on the website. Each covered document contained in the
                consolidated notice of internet availability must be made available on
                the website no later than the date it must be furnished to participants
                and beneficiaries by law. It is only the timing for the combined notice
                of internet availability that would be altered to furnish one each
                year, rather than furnishing a separate notice for each of the covered
                documents at the time it otherwise would be required.
                (ii) Content of Notice of Internet Availability
                 Paragraph (d)(3) lists the proposed content requirements for the
                notice of internet availability: A prominent statement, for example as
                a title, legend, or subject line that reads, ``Disclosure About Your
                Retirement Plan;'' a statement that, ``Important information about your
                retirement plan is available at the website address below. Please
                review this information;'' a brief description of the covered document;
                the internet website address where the covered document is available; 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; a statement of the right to opt out of receiving covered
                documents electronically, and an explanation of how to exercise this
                right; and a telephone number to contact the
                [[Page 56903]]
                administrator or other designated representative of the plan.
                 The rule provides 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 notice of internet
                availability, covered documents).\64\ A website address will satisfy
                this requirement if it leads the covered individual directly to the
                covered document. A website address 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. The term ``website address'' in paragraph (d)(3)(iv) of the
                proposed safe harbor includes links and hyperlinks, as appropriate. The
                Department invites comments on whether the notice of internet
                availability should also address secure login procedures, such as how
                participants can securely receive and recover login information.
                ---------------------------------------------------------------------------
                 \64\ 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). To date, the Department has not been made aware by
                plan fiduciaries, administrators, or service or investment providers
                that this ``sufficiently specific'' standard requires further
                interpretation or is ineffective in ensuring that individuals are
                able to access information online. However, to assist administrators
                and their service providers in complying with this standard, the
                proposal includes two methods for website access that satisfy this
                standard. These methods are not the exclusive means by which a
                website address will be ``sufficiently specific.''
                ---------------------------------------------------------------------------
                 An administrator must ensure that the ``brief description'' of a
                covered document communicates key information about its importance. The
                Department does not intend this ``brief description'' to be a technical
                summary of the content of the underlying disclosure. The Department
                encourages comments on the content requirements for the notice,
                including views as to the most critical information that should be
                included in a ``brief description'' of a covered document. Although the
                current requirement provides a level of flexibility to administrators
                in how they draft the ``brief description,'' the Department may
                consider providing more explicit guidelines or models for
                administrators to use in drafting these descriptions. Commenters may
                address whether additional guidelines or models would be useful, and
                the specific issues it would be most helpful to address.
                 One of the Department's goals in establishing the proposed
                framework was to be certain that, regardless of the delivery method
                chosen by a plan administrator, covered individuals who wish to receive
                paper copies of covered documents would be able to do so without undue
                burden. Paragraphs (d)(3)(v) and (vi) set forth two significant
                protections for such covered individuals. First, any time a participant
                prefers to receive a paper copy of any of the covered documents, he has
                the right to request and receive a paper copy, free of charge. For
                example, a participant who receives a notice of internet availability
                of the plan's SPD, but prefers to have a paper copy of the SPD to keep
                in his personal finance files at home, will be able to request a paper
                copy of the SPD in accordance with the explanation of how to exercise
                his right to do so. Further, a covered individual who prefers to
                receive all covered documents in paper may opt out of receiving any
                covered documents electronically. This global opt out provision enables
                a participant who wants to have all of her disclosures in paper,
                without having to make repeated elections to do so; she will receive
                all covered documents in paper, unless and until she later consents to
                receive covered documents electronically.
                 The Department requests comments on these proposed content
                requirements and whether the notice of internet availability will
                adequately serve its intended purpose. Commenters are encouraged to
                focus on whether the content requirements are sufficient or excessive.
                Specifically, the Department requests comments regarding whether a
                toll-free number should be used or whether specific website, login or
                password reset features should be described in the notice.
                (iii) Form and Manner of Furnishing Notice of Internet Availability
                 The Department intends the notice of internet availability to be a
                concise, clear disclosure that will convey its importance and easily
                call the recipient's attention to its content. With this goal in mind,
                paragraph (d)(4) describes standards for the form and manner of
                furnishing the notice. To satisfy the safe harbor, a notice of internet
                availability must: 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
                administrator may include pictures, logos, or similar design elements,
                so long as the design is not inaccurate or misleading and the required
                content is clear; third, be furnished separately from any other
                documents or disclosures furnished to covered individuals, except as
                permitted under paragraph (i) of the proposal (which deals with
                consolidation of certain notices of internet availability); and fourth,
                be written in a manner calculated to be understood by the average plan
                participant. 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 will satisfy the fourth requirement.\65\
                ---------------------------------------------------------------------------
                 \65\ 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).
                ---------------------------------------------------------------------------
                 Because the notice of internet availability contains important
                information alerting covered individuals to the online disclosures
                available to them with respect to their plan, the Department believes
                it is essential that the notice be furnished by itself and not be
                obscured by other information, including other information that is
                required to be disclosed under ERISA. The second and third requirements
                in paragraph (d)(4) are intended to achieve this objective. Any
                additional information or content must be limited; to permit otherwise
                may frustrate the Department's goal of a clear, concise notice.
                However, to the extent design elements may enhance the appearance of
                the notice of internet availability and possibly increase the
                likelihood that it will draw the desired attention of covered
                individuals, the proposal does not exclude the use of pictures, logos,
                and similar design elements, so long as the design is not inaccurate or
                misleading and the required content is clear.
                 Plan administrators must write clear and understandable notices of
                internet availability. The proposal relies 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[.]'' However, because the content of this notice is so
                concise, and because the information is so critical to the
                effectiveness of covered documents, paragraph (d)(4)(iv) includes
                additional guidelines for administrators to satisfy the readability
                requirement. Administrators are encouraged to apply the plain language
                concepts described above. The Department believes that use of these
                concepts may improve individuals' comprehension of the information on
                the notice of internet availability. Administrators who apply these
                concepts will satisfy the readability
                [[Page 56904]]
                standard for purposes of the proposed safe harbor.
                 The Department is mindful of the additional cost and burden
                associated with any additional disclosure, especially when it must be
                furnished separately. In this case, however, the Department believes
                that the additional cost and burden associated with the required notice
                of internet availability will be more than offset by the reductions in
                cost and burden available to administrators who rely on this safe
                harbor to make disclosures available online instead of furnishing them
                directly to covered individuals. The Department invites commenters to
                discuss these relative costs, as well as the other standards in
                paragraph (d)(4). The Department also is interested in views on whether
                additional or different content should be required, or permitted, on
                the notice, and whether commenters have other ideas about how to ensure
                the notice is clear and understandable to an average plan participant,
                consistent with the notice's intended purpose. If commenters believe
                that a model notice of internet availability would be useful, the
                Department requests that they submit a sample ``model notice'' for the
                Department's consideration, along with any reason(s) to believe that
                such a model notice would be used and would be helpful.
                (4) Standards for Internet Website
                 The proposed safe harbor also includes minimum standards concerning
                the availability of the covered documents on a website. Paragraph
                (e)(1) of the proposal begins by stating the general requirement that
                the administrator must ensure the existence of an internet website at
                which a covered individual is able to access covered documents. This
                paragraph holds the plan administrator responsible for ensuring the
                establishment and maintenance of the website. The Department
                understands that in some cases the administrator may not establish and
                maintain a website himself or herself. Some responsibilities associated
                with websites may be assumed by plan service or investment providers or
                other third parties. The proposed safe harbor does not preclude the
                assignment of website-related activities to parties other than the
                administrator, subject to the administrator's compliance with paragraph
                (j) of the safe harbor, ``Reasonable procedures for compliance,''
                discussed below, and the administrator's general obligation as a plan
                fiduciary under ERISA section 404 to prudently select and monitor such
                parties.
                 A plan administrator also must take measures reasonably calculated
                to ensure that the specific standards for the internet website, listed
                in paragraph (e)(2), have been satisfied. First, paragraph (e)(2)(i)
                requires that the covered document be available on the website no later
                than the date on which the covered document must be furnished under
                ERISA. As discussed above, the proposed safe harbor does not alter the
                substantive or timing requirements for covered documents. Even if an
                administrator chooses to consolidate a notice of internet availability
                for certain disclosures and furnish a combined notice pursuant to
                paragraph (i) of the proposal, a covered document (as opposed to the
                notice for such document) must be made available on the website on a
                timely basis consistent with when it would otherwise be required to be
                furnished under the relevant statute or regulation. For example, if the
                administrator of a participant-directed individual account plan wishes
                to rely on the safe harbor to make its comparative investment chart for
                participants available on the website, the administrator must look to
                the timing requirements in 29 CFR 2550.404a-5(d)(1) to determine when
                the annual investment chart must be furnished; the comparative
                investment chart must be made available on the website no later than
                that date.
                 Second, the covered document must remain available on the website,
                pursuant to paragraph (e)(2)(ii) of the rule, until it is superseded by
                a subsequent version of the covered document. In the preceding example,
                the participant-level fee disclosure regulation requires an updated
                investment chart to be furnished ``at least annually''--an
                administrator would need to adhere to the definition of ``at least
                annually'' in 29 CFR 2550.404a-5(h)(1) to determine when the next
                year's investment chart would have to be made available on the website.
                Requiring the covered document to remain available on the internet site
                until it is superseded is intended to ensure that covered individuals
                have readily available the information they need to protect and enforce
                their rights under ERISA and the plan. The Department requests comments
                on 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. Comments also are invited 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 ceases to have continued
                relevance to covered individuals. For instance, as opposed to the
                investment chart referenced earlier in this paragraph, blackout notices
                typically are not superseded by subsequent blackout notices, but they
                do lack relevance after the temporary restriction ends. Would a final
                rule be clearer on this point if it provided that a covered document
                must remain available on the website until it is superseded by a
                subsequent version of the covered document or, if applicable, until it
                ceases to have continued relevance?
                 Paragraphs (e)(2)(iii) through (vi) of the proposed safe harbor
                address the presentation of covered documents on the website. Paragraph
                (e)(2)(iii) requires that a covered document be presented on the
                website in a manner calculated to be understood by the average plan
                participant. This standard is identical to the readability standard for
                the notice of internet availability in paragraph (d)(4)(iv), which is
                discussed above. Next, the covered document must, pursuant to paragraph
                (e)(2)(iv), 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. An administrator may be able to comply with this requirement,
                for example, by posting the document in a portable document format
                (PDF) or similar widely-used format on the website. The covered
                document also must be searchable electronically by numbers, letters, or
                words, to satisfy paragraph (e)(2)(v). The Department believes that an
                electronic searching capability for covered documents will contribute
                significantly to making disclosures more effective for participants,
                enabling them to use keywords to quickly and easily find specific
                information about a particular topic or benefits question.
                 Finally, under paragraph (e)(2)(vi), 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). This requirement is intended to enable covered individuals and
                plans to keep a copy of the covered document, for example, by saving it
                to a file in electronic format, on a personal computer.
                [[Page 56905]]
                 Several studies observe that some individuals access the internet
                only through hand-held devices, such as smartphones. Some of these
                individuals may not have full access to the enhanced functionality of
                plan websites and may find the presentation of covered documents to be
                less effective. What, if any, additional actions are needed to ensure
                that an effective and useful presentation of covered documents is
                available to hand-held-device-only individuals? Should such actions be
                mandatory for administrators who wish to comply with the proposal? What
                are the likely cost implications of these actions?
                 The final standard for the internet website is based on the fact
                that, in some cases, covered documents contain personal information
                about covered individuals and their benefits. In order to protect this
                information, paragraph (e)(3) of the proposal requires the
                administrator to take measures reasonably calculated to ensure that the
                website protects the confidentiality of personal information relating
                to any covered individual. For example, a pension benefit statement
                includes individualized information about a specific person's accrued
                benefit and should not be accessible to others without authority.\66\
                Given the employee benefit plan industry's increasing reliance on and
                use of electronic technology, the Department expects that many
                administrators, or their service or investment providers, already have
                secure systems in place to protect covered individuals' personal
                information, as is generally required by section 404 of ERISA. The
                Department requests comments on whether this standard is sufficient to
                protect covered individuals' personally identifiable information,
                including whether more specific security guidelines or best practice
                protocols would be helpful and appropriate.\67\
                ---------------------------------------------------------------------------
                 \66\ The Department invites comments on whether additional
                standards for account authorization are necessary, for example,
                whether the proposed safe harbor should specifically prohibit
                automatic authentication of user identification, password, or other
                similar information.
                 \67\ See, e.g., National Cybersecurity Center of Excellence
                Practice Guide and related materials, at https://www.nccoe.nist.gov/projects/use-cases/access-rights-management.
                ---------------------------------------------------------------------------
                (5) Right to Copies of Paper Documents or To Opt Out of Electronic
                Delivery
                 As part of any increase in electronic disclosure permitted under
                ERISA, the Department believes it is essential to respect the wishes of
                participants and beneficiaries who prefer to receive covered documents
                on paper, mailed or delivered to them in accordance with 2520.104b-
                1(b). To that end, the proposed safe harbor, in paragraph (f), provides
                two safeguards for these covered individuals. First, paragraph (f)(1)
                provides that, upon request from a covered individual, the
                administrator must furnish to such individual, free of charge, a paper
                copy of a covered document. The Department expects that the copy will
                be furnished to the covered individual as soon as reasonably
                practicable after receiving the request.\68\ Covered individuals also
                can request more than one covered document pursuant to this provision.
                For instance, a participant could contact the 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. Only one paper copy of any covered
                document must be provided free of charge, however, under this
                provision. Beyond that, whether the plan charges for additional copies
                of the same covered document depends on the terms of the particular
                plan and other provisions of ERISA and regulations thereunder.
                ---------------------------------------------------------------------------
                 \68\ See, e.g., 29 U.S.C. 1132(c)(1).
                ---------------------------------------------------------------------------
                 The Department expects that some covered individuals, however, may
                want all of their covered documents in paper and, accordingly,
                paragraph (f)(2) of the proposal provides covered individuals with a
                broad opt out right. Specifically, the administrator must give covered
                individuals the ability to opt out of electronic delivery and receive
                only paper versions of some or all covered documents. If a covered
                individual elects to opt out, the administrator must promptly comply
                with the individual's election. This provision may be referred to as a
                ``global'' opt out, in the sense that an individual can opt out of
                electronic delivery entirely. All future covered documents must be
                furnished to the electing covered individual in paper, unless and until
                the covered individual expresses the desire to ``opt back in'' to
                electronic delivery. Covered individuals may opt out pursuant to this
                provision at any time in accordance with the plan's reasonable
                procedures for doing so. The two provisions operate together to give
                covered individuals a good deal of flexibility in how they receive
                their disclosures. A participant who does not wish to opt out entirely
                but, for a variety of potential reasons, would like a paper copy of a
                covered document, may request a copy under paragraph (f)(1).
                Alternatively, the global opt out provision in paragraph (f)(2)
                provides a more comprehensive option for a covered individual who truly
                prefers paper in all circumstances. The Department requests that
                commenters address whether these two safeguards are sufficiently
                protective of covered individuals who do not always want to receive
                information electronically. Commenters are invited to suggest
                additional or different safeguards that they believe may be more
                effective.
                 To further protect the rights of covered individuals who want paper
                copies of covered documents, the rule requires administrators to
                carefully manage requests for paper copies or requests to opt out of
                electronic delivery under the safe harbor. Specifically, paragraph
                (f)(3) provides that the administrator must establish and maintain
                reasonable procedures governing requests or elections under paragraphs
                (f)(1) and (2) of the safe harbor. 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.
                 Finally, paragraph (f)(4) requires that the system for furnishing
                the notice of internet availability must be designed to alert the plan
                administrator of an invalid or inoperable electronic address. In the
                event that a plan administrator becomes aware of an invalid or
                inoperable electronic address, such as if an email is returned as
                undeliverable and the problem is not promptly cured, the administrator
                must treat the covered individual as if he or she had elected to opt
                out of electronic delivery. One way to cure the problem would be to
                keep a secondary electronic address for the covered individual on file
                and send the notice of internet availability to the secondary address
                when alerted of the invalidity or inoperability of the primary
                electronic address. Another way to cure the problem would be to
                promptly obtain a new electronic address for the covered individual.
                Certainly other cures exist depending on the particular facts and
                circumstances surrounding the un-deliverability of the notice of
                internet availability. If the problem is not promptly cured, however,
                the deemed election would persist until the administrator is able to
                obtain a valid and operable electronic address for the covered
                individual.
                 This provision is intended to ensure that covered individuals
                actually receive their pension documents by guarding against invalid or
                inoperable electronic addresses. So long as the plan administrator is
                not alerted to an invalid or inoperable address, and the other
                [[Page 56906]]
                conditions of the proposed safe harbor are satisfied, the administrator
                is considered to have furnished the pension documents required under
                Title I of ERISA. This provision does not address issues such as
                whether a covered individual read, understood, or had actual knowledge
                of the contents of the covered documents accessed. Nor does this
                provision impose an affirmative obligation on the plan administrator to
                monitor whether covered individuals visit the specified website or
                login at the website. The Department requests comments on whether the
                protections in paragraph (f)(4) are excessive or sufficient to ensure
                covered individuals have access to covered documents.
                (6) Initial Notification of Default Electronic Delivery and Right To
                Opt Out
                 The Department believes it is important for all participants and
                beneficiaries, who are accustomed to the current ERISA delivery rules,
                to be notified, on paper, that the administrator will be adopting a new
                method of electronic delivery. At this point in time, before a
                participant or beneficiary receives disclosures in accordance with the
                proposed safe harbor, the individual must be apprised that he or she
                will receive future retirement plan information electronically, through
                a notice and access model in which the notice will be furnished to an
                electronic address (e.g., email), and that he or she has a legal right
                to request paper copies or to opt out of electronic delivery. Paragraph
                (g) therefore requires an administrator to furnish to each person for
                whom the new safe harbor is to be used, an initial notification on
                paper that some or all covered documents will be furnished
                electronically to an electronic address, of the right to request paper
                copies of some or all of the covered documents or to opt out of
                electronic delivery altogether, and the procedures for exercising such
                rights. The Department intends that each such person receive this
                notification one time; a paper copy is required because of the
                importance of advising participants at the outset how covered documents
                will be furnished and their rights described in the notification. For
                transition purposes, an administrator who wants to rely on the safe
                harbor, if finalized, would have to send this notification to existing
                employees before the administrator could rely on the safe harbor for
                such existing employees. Thereafter, an administrator must send this
                notification to all new employees who would be covered by the new safe
                harbor. This notification must be sent to an employee even if that
                employee is currently receiving electronic disclosures under the
                existing safe harbor at 29 CFR 2520.104b-1(c), for example because he
                previously provided affirmative consent to receive disclosures
                electronically, if an administrator wishes to rely on the safe harbor
                for that employee. If the employer does not wish to rely on this new
                safe harbor for a group of employees, however, the employer does not
                need to send this initial notification to that group of employees. To
                illustrate, assume that an existing defined contribution plan covers
                three participants, only one of whom is covered under the 2002 safe
                harbor as an employee who is ``wired at work.'' This plan could take
                advantage of the new safe harbor for all three participants, in which
                case each participant would have to be furnished the initial
                notification, even the employee who is ``wired at work.''
                Alternatively, this plan could take advantage of the new safe harbor
                only with respect to the two participants who are not covered under the
                2002 safe harbor, in which case only these two participants would have
                to be furnished the initial notification. The Department requests
                comments on whether this initial notification is sufficiently
                protective of employees to make sure they understand their rights with
                respect to electronic delivery. Additionally, the Department requests
                comments on whether a model would be useful. If commentators believe a
                model would be useful, they are encouraged to submit a model notice for
                the Department's consideration along with their reason(s) for its
                helpfulness.
                (7) Special Rule for Severance From Employment With Plan Sponsor
                 The Department appreciates that, as part of the framework proposed
                today, covered individuals may continue to receive and need access to
                certain ERISA disclosures even after they sever their employment with
                the employer sponsoring the plan. To ensure that this severance does
                not interrupt a covered individual's access to important ERISA
                information if he or she continues to participate in the plan,
                paragraph (h) of the proposal provides a special rule for severance
                from employment. At the time a covered individual who is an employee
                severs from employment, the administrator must take measures reasonably
                calculated to ensure the continued accuracy of the covered individual's
                electronic address or number, described in paragraph (b), or to obtain
                a new electronic address that enables receipt of covered documents
                following the individual's severance from employment. This provision
                focuses on circumstances in which there is special cause for concern
                about the accuracy of contact information in connection with an
                employee's severance from employment, and does not diminish or alter
                plan fiduciaries' ongoing obligation to keep accurate records on plan
                participants.
                 The Department requests comments as to whether this requirement
                will be effective in ensuring a seamless transition with respect to the
                dissemination of ERISA plan information when an employee has a
                severance from employment. For example, commenters may submit views on
                whether any unique issues arise in the context of terminated vested
                participants after severance from employment, for example as to
                updating and validating changes to contact or similar information, and
                whether these issues warrant additional safeguards in the proposal.
                This provision may ensure not only effective electronic delivery in the
                future for such individuals, but may also serve as a protection against
                these individuals becoming missing participants. Further, commenters
                should raise any other relevant transition issues that may arise for
                employees severing employment under the notice and access framework of
                this proposal.
                 When an email address was previously provided by the employer, the
                employer could (as part of its severance from employment procedures)
                ask the participant for another means of electronic communication for
                future notifications. The Department requests comments as to whether
                such information is currently requested or provided at severance from
                employment. The Department also requests comments on whether employers
                envision relying on this safe harbor for participants who have severed
                from employment.
                 The words ``severance from employment'' in paragraph (h) are
                intended to have their ordinary meaning. Thus, for example, a severance
                from employment occurs when an employee dies, retires, is dismissed, or
                otherwise terminates employment with the employer that maintains the
                plan, including when the employee continues on the same job for a
                different employer as a result of a liquidation, merger, consolidation
                or other similar corporate transaction. Whether a severance from
                employment has occurred is determined based on the facts and
                circumstances of the particular situation. The Department
                [[Page 56907]]
                solicits comments on whether further clarity is needed on this point.
                 As noted above, the proposed safe harbor would be available to all
                pension benefit plans, including multiemployer pension plans. The
                Department solicits comments on whether the requirements in paragraph
                (h) accommodate routine practices of multiemployer pension plans. For
                example, will the administrator of a multiemployer pension plan
                typically have knowledge of a covered individual's severance from
                employment from a contributing employer = ``at the time'' of the
                individual's severance? Commenters are encouraged to identify whether
                there are unique circumstances in this setting that warrant
                modifications or adjustments to the approach taken in paragraph (h) of
                the proposal, or with respect to any other provision in the safe
                harbor, (including paragraph (b) permitting the administrator to use an
                electronic address assigned by an employer).
                (8) Special Rule for Consolidation of Certain Notices of Internet
                Availability
                 Although the proposal generally requires, in paragraph (d)(1), that
                an administrator furnish a notice of internet availability for each
                covered document, a special rule in paragraph (i) of the proposal
                allows an administrator to furnish one notice of internet availability,
                subject to the timing requirements in paragraph (d)(2), that
                incorporates or combines the content required by paragraph (d)(3) with
                respect to one or more of a subset of covered documents. These
                documents include, as applicable: (1) A summary plan description; (2) a
                summary of material modifications; (3) a summary annual report; (4) an
                annual funding notice; (5) an investment-related disclosure under 29
                CFR 2550.404a-5(d); (6) a qualified default investment alternative
                notice; and (7) a pension benefit statement. These covered documents
                represent the most common and recurring disclosures that are made to
                pension plan participants, and which are triggered by no event other
                than the passage of time.\69\
                ---------------------------------------------------------------------------
                 \69\ While the SMM does not technically fit under the passage of
                time descriptor, the document's timing requirement sets it apart
                from, and warrants different treatment than, other event-triggering
                disclosures, the timing for which more closely corresponds to the
                particular event. See 29 CFR 2520.104b-3(a) (requiring the plan
                administrator to furnish the SMM ``not later than 210 days after the
                close of the plan year in which the modification or change was
                adopted'').
                ---------------------------------------------------------------------------
                 The Department excluded other required documents, for example,
                because they are event-specific disclosures and might communicate
                information that requires or invites specific and timely action on
                behalf of a participant or beneficiary. In other cases, this special
                rule excludes contingent or irregular documents that are furnished
                based on an individual transaction or plan status basis, or that are
                not regularly furnished to participants and beneficiaries. For example,
                a participant who receives notice of a blackout period, as required by
                ERISA section 101(i), may consider changing her investment directions
                and, if so, must do so within the timeline specified. Similarly, a
                participant who receives notice of an adverse benefit claim
                determination, as required by ERISA section 503(1), may wish to appeal
                or take other action following such determination, in which case he too
                must act within defined periods of time. Additional examples include a
                qualified domestic relations order determination under ERISA section
                206(d)(3)(G)(i)(II), a notice of the right to divest under ERISA
                section 101(m), a notice of failure to meet minimum funding standards
                under ERISA section 101(d), and a notice of significant reduction in
                future benefit accruals under ERISA 204(h).
                 In short, the Department excluded documents that it believes do not
                lend themselves, primarily because of their timing, irregularity, or
                requirement of potentially timely action by a covered individual, to a
                framework that permits consolidation into one annual notice. The
                Department solicits comments on whether, and why, the subset of covered
                documents eligible for paragraph (i) should be expanded or narrowed,
                and the criteria that would justify an expansion or narrowing. In
                addition, the Department solicits comments on whether, instead of an
                explicit list of the covered documents to which paragraph (i) applies,
                a final rule should adopt a principle-based or categorical approach,
                describing the type or nature of covered documents that may be
                consolidated?
                 Paragraph (d)(2), as discussed above, requires that a combined
                notice of internet availability for more than one covered document
                under paragraph (i) be furnished at least once each plan year, and, if
                the combined notice was used for the prior plan year, no more than 14
                months following the prior year's notice. The Department intends that
                this combined notice of internet availability be an annual disclosure;
                however, to provide flexibility to administrators and avoid potential
                foot faults associated with a strict 12-month standard, the rule
                provides that an ``annual'' notice of internet availability may be
                furnished up to 14 months following the prior ``annual'' notice.
                (9) Reasonable Procedures for Compliance
                 The Department understands that, for a variety of technical and
                other reasons beyond the control of the administrator, there may be
                temporary interruptions to the availability of covered documents on a
                website. For example, in spite of reasonable diligence by an
                administrator, its information technology staff, and service and
                internet providers, there may be network outages or connectivity
                problems due to utility interruptions, force majeure, or other factors
                reasonably beyond these parties' control. To prevent administrators
                from violating their disclosure obligations under ERISA in such limited
                circumstances, the proposal includes relief for administrators if
                reasonable compliance procedures are in place. Paragraph (j) explains
                that if certain requirements are satisfied, the conditions of the safe
                harbor are satisfied, notwithstanding the fact that covered documents
                are temporarily unavailable for a period of time in the manner required
                by Sec. 2520.104b-31 due to unforeseeable events or circumstances
                beyond the control of the administrator. The administrator must have
                reasonable procedures in place to ensure that the covered documents are
                available in the manner required by Sec. 2520.104b-31. In the event
                that covered documents are temporarily unavailable, the administrator
                must take prompt action to ensure that the documents become available
                in the manner required by Sec. 2520.104b-31 as soon as practicable
                following the earlier of the time at which the administrator knows or
                reasonably should know that the documents are temporarily unavailable.
                The Department believes that paragraph (j) fairly balances the reality
                of temporary disruptions to website accessibility in modern times with
                the protection of participants and beneficiaries by expecting that
                administrators act reasonably in preparing for, and reacting to, such
                disruptions. The Department requests comments on whether this is a
                suitable standard that is practical and realistic, but also
                sufficiently rigorous to make sure that, as a general matter, important
                ERISA information is available to participants and beneficiaries when
                they need it.
                (12) Effective and Applicability Dates
                 The Department proposes effective and applicability dates for the
                safe harbor in paragraph (k). Specifically, paragraph (k)(1) provides
                that the new alternative method for disclosure
                [[Page 56908]]
                through electronic media, as finalized, will be effective 60 days
                following publication of a final rule in the Federal Register. In
                establishing an applicability date, the Department wants to make the
                safe harbor in new 29 CFR 2520.104b-31 available to administrators as
                soon as possible. Because it is a safe harbor, rather than a required
                method for disclosure, administrators will not have to be in compliance
                with all of the conditions as of the applicability date--administrators
                are free to begin taking advantage of the safe harbor at any time on or
                after the applicability date. Thus, the Department proposes that the
                new safe harbor apply to employee benefit plans on the first day of the
                first calendar year following the publication of the final rule in the
                Federal Register. The Department requests comments on the extent to
                which this applicability date should be sooner, given that the
                provision is optional, or later, if necessary to safeguard plan
                participants and beneficiaries from potential harm if administrators
                rely on the safe harbor too soon.
                C. E-SIGN Act
                 Under this proposed regulation, for the reasons discussed below,
                the covered documents would be exempt from the consumer consent
                requirements of the E-SIGN Act and would provide an alternative method
                of complying with the requirement that covered documents be furnished
                in writing. Section 101(c) of the E-SIGN Act sets forth special
                protections that apply when a statute, regulation, or other rule of law
                requires that information relating to a transaction be provided or made
                available to a consumer in writing. Section 101(e) of the E-SIGN Act
                provides that if a statute, regulation, or other rule of law requires
                that a contract or other record relating to a transaction in or
                affecting interstate or foreign commerce be in writing, the legal
                effect, validity, or enforceability of an electronic record of the
                contract or other record may be denied if the contract or other record
                is not in a form that is capable of being retained and accurately
                reproduced for later reference by all parties or persons who are
                entitled to retain the contract or other record.
                 Under section 104(d)(1) of the E-SIGN Act, a Federal regulatory
                agency may exempt, without condition, a specified category or type of
                record from the consumer consent requirements in section 101(c) if the
                exemption is necessary to eliminate a substantial burden on electronic
                commerce and will not increase the material risk of harm to consumers.
                If finalized, this proposed regulation would be an alternative method
                of compliance which would satisfy section 104(d)(1) of the E-SIGN Act.
                In accordance with section 104 of the E-SIGN Act, the Department
                believes that there is substantial justification for this proposed
                regulatory exemption from the consent requirements of the E-SIGN Act
                because the rule is necessary to eliminate a substantial burden on
                electronic commerce and the proposal would not pose a material risk of
                harm to consumers. The Department requests comments as to whether there
                are additional, or different, steps it could take to ensure that these
                proposed rules are consistent with the requirements of section
                104(d)(1) of the E-SIGN Act. The Department is particularly interested
                in receiving comments that provide suggestions or evidence related to
                whether these proposed rules would (or would not) impose unreasonable
                costs on the acceptance and use of electronic records. The Department
                believes that, as proposed, these regulations would not require (or
                accord greater legal status, or effect to) the use of any specific
                technology. The Department requests comments, however, on whether there
                are any changes to the proposal that would better ensure the proposal
                does not require (or in any way endorse) any specific technology.
                D. Request for Public Comments and Information
                (1) Request for Comments on Proposed Regulation
                 The Department invites comments from interested persons on all
                facets of the proposed alternative method for disclosure through
                electronic media--i.e., the ``notice and access'' safe harbor.
                Commenters are free to express their views not only on the specific
                provisions of proposed 29 CFR 2520.104b-31, as set forth in this
                document, but on other issues germane to the subject matter of the
                proposal. This may include, for example, comments, questions, or ideas
                on how the proposed safe harbor interrelates with the 2002 safe harbor,
                or improvements to that safe harbor. Comments should be submitted in
                accordance with the instructions at the beginning of this document. The
                Department believes that this period of time will afford interested
                persons an adequate amount of time to analyze the proposed safe harbor
                and submit comments. This comment solicitation, which focuses on the
                electronic delivery framework in proposed 29 CFR 2520.104b-31, is
                distinguished from the Request for Information, in section D-(2) of
                this document.
                (2) Request for Information on Effectiveness of ERISA Disclosures
                 As discussed earlier in this document, Executive Order 13847 called
                on the Department to explore not only reducing burdens and costs
                associated with ERISA disclosures, in particular through the use of
                electronic media, but also enhancing the effectiveness of ERISA's
                disclosures for participants and beneficiaries. The Department is
                confident that the electronic delivery safe harbor proposed in 29 CFR
                2520.104b-31 would, without more, substantially respond to both prongs
                of the Executive Order, including the directive pertaining to improving
                the effectiveness of plan disclosures. As discussed in the Regulatory
                Impact Analysis section of this document, a notice and access framework
                has the potential to significantly reduce plan costs. 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. These features may
                be used to improve participants' and beneficiaries' disclosure
                experiences.
                 Nevertheless, pursuant to the Executive Order's directive
                pertaining to improving the effectiveness of plan disclosures, the
                Request for Information solicits information, data, and ideas on
                additional measures (beyond the electronic delivery safe harbor
                proposed in 29 CFR 2520.104b-31) 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. To foster consideration of
                these issues, the Department sets forth below a number of questions for
                consideration. Commenters need not answer every question, but should
                identify by number the questions that are addressed. Although the rule,
                as proposed in this document, does not include employee welfare benefit
                plans, commenters should feel free, as relevant, to respond to these
                questions for both pension and welfare benefit plans. Commenters also
                are encouraged to address any other matters they believe to be relevant
                to the effectiveness of ERISA disclosures and, when relevant, to submit
                samples or
                [[Page 56909]]
                models of information, disclosures, or formats that they believe to be
                particularly effective.
                 1. What is the best way to measure the effectiveness of a
                disclosure? Should participant engagement or attentiveness to plan
                affairs be a measure of the effectiveness of mandated disclosures? If
                so, how can the Department have the most meaningful impact on
                engagement through mandated disclosures? Are there factors other than
                design, delivery, and content that should be considered by the
                Department? Please direct the Department's attention to relevant
                research and evidence that illuminates how and to what degree plan
                disclosures can be made more effective, and how regulation (or
                deregulation) can best promote effective disclosure.
                 2. How do or could plan sponsors and administrators assess the use,
                effectiveness, and impact of disclosures? What are the findings of
                these assessments? What actions are taken in response to such
                assessments? Should assessments and responses be required by
                regulation, either together with or as an alternative to prescriptive
                standards for disclosures?
                 3. Please identify any currently mandated routine retirement plan
                disclosures for which effectiveness and efficiency could be improved
                and set forth recommendations for improvement. Please explain why the
                particular disclosure needs improvement.
                 4. Would more personalized disclosure enhance engagement? If so,
                how?
                 5. Are there ways through regulation or appropriate sub-regulatory
                guidance to require, incentivize, or facilitate plan administrators to
                organize information within the required disclosures to reflect life
                events so that information is available as the need arises?
                 6. Some people have indicated that at least some ERISA documents
                may be too voluminous, complex, or both. These individuals highlight a
                need to strike a balance between providing too little information for
                participants to gain an adequate understanding of what the disclosure
                is trying to convey and providing too much information, which can
                become overwhelming and confusing. Please identify each ERISA document
                in these categories.
                 7. With respect to each document identified in the previous
                question, state whether the Department should encourage or require, as
                an alternative to furnishing the entire document, that the plan
                administrator furnish a brief, clear, and accurate summary of key
                information from the document, for example not to exceed one or two
                pages, coupled with access to more detailed information online, on
                request, or both. Also identify what should be considered ``key'' for
                this purpose. To illustrate this concept, readers are directed to the
                2017 ERISA Advisory Council Report.
                 8. Does ERISA require disclosure of any information that has become
                obsolete, for example as a result of the passage of time or changes in
                the regulatory, business, or technological environment? If so, what
                information? Is there information that would be important to disclose
                instead of the obsolete information?
                 9. Is there redundant or inconsistent information disclosed to
                participants under current rules? If so, which information?
                 10. Is the problem that there are too many disclosures, or that
                there is too much information that is disclosed, or both? Would it be
                feasible, and advisable, to condense and streamline information into
                fewer disclosures or less voluminous disclosures, rather than
                eliminating disclosure of certain information?
                 11. To what degree does the design of disclosures (as opposed to
                their content) impact the likelihood that participants will read and
                understand the information disclosed? Are there design elements or
                tools that are particularly effective? For example, should certain
                information be presented in a question-and-answer (Q&A) format? Are
                larger font sizes, greater use of white spaces, colors, or visuals, or
                the use of audio or video potentially helpful? Would it be appropriate
                for the Department to require particular design elements for all plans
                (e.g., including small plans, retirement and welfare plans, defined
                contribution and defined benefit plan, etc.)?
                 12. Are there additional or better standards for improving the
                readability of the content in disclosures than the Department's general
                standard--i.e., that documents must be written in a manner calculated
                to be understood by the average plan participant?
                 13. How can the Department best assess the views of plan
                participants themselves on the frequency, content, design, delivery,
                and other aspects of ERISA disclosures? Although commenters who
                represent plan participants are well positioned to evaluate
                participants' understanding of, and opinions on, ERISA disclosures,
                would the Department be better served by supplementing these
                commenters' point of view with feedback from individuals directly? If
                so, what would be an effective approach (e.g., surveys, focus groups),
                factoring in the resources necessary to administer such an approach?
                What, precisely, do commenters believe the Department should measure,
                and how? Specific suggestions, including sample outreach materials if
                relevant, are requested.
                 14. Do the timing requirements for various ERISA disclosures
                increase or decrease the likelihood that participants will pay
                attention to them? Should the Department consider changing when
                information is disclosed to participants and, if so, how? Explain how
                such changes would enhance the likelihood that participants would pay
                attention to the disclosure or disclosures or otherwise improve the
                disclosure experience.
                 15. Discuss the role of education in assisting participants and
                beneficiaries with the often technical and complex subject matter of
                ERISA disclosures, including investing generally. Should the Department
                take additional steps or provide further guidance with respect to
                participant education and, if so, what steps? How would this improve
                participants' receipt, understanding, or use of information required to
                be disclosed? What could or should the Department do to increase
                engagement on the part of ERISA plan participants?
                 16. Well-designed plan websites or internet-connected apps may
                benefit plan participants by effectively communicating plan
                information, including by adopting features not possible with paper,
                such as interactive videos, calculators, and layered design. What
                common features have plan administrators adopted in their websites or
                apps that are effective in communicating plan information to
                participants and attracting participants to engage in activity with
                their plan accounts online? What are the benefits of these features,
                and how do they achieve them? Should any such features be required by
                regulation?
                 17. As discussed in the regulatory impact analysis (RIA), well-
                designed plan websites and apps may also be used to provide effective
                communication of plan information to certain vulnerable populations,
                such as the visually impaired and non-native English speakers, by
                adding voice-reader and translation features. How do plan websites and
                apps currently use these features and how effective are they in
                enhancing the presentation and use of covered documents by participants
                with special needs?
                 18. Some plan sponsors and participants have expressed concerns
                about cybersecurity and privacy when participants access sensitive plan
                information and engage in financial activity online. To protect against
                these concerns, how do plan administrators
                [[Page 56910]]
                currently assess risks and provide secure online access to their
                participants? What safeguards are implemented to protect participants,
                how effective are they, and what improvements could be made to make
                current systems more secure? What cost considerations are raised by
                increasing cyber security and privacy protections? Should risk
                assessments and security measures be required by regulation?
                 19. Some literature suggests that participants find that different
                documents are presented more effectively in different mediums. For
                example, some participants prefer to receive certain covered documents
                on paper while other types of covered documents are preferred to be
                received electronically. What, if any, types of covered disclosures do
                plans and participants perceive to be more effectively communicated in
                print (e.g. highly individualized and complex notices), and what
                explains this preference? How might modern technology and effective
                website or app design make electronic presentation of these covered
                disclosures more effective and increase participant engagement?
                 20. In the RIA for this proposal, the Department estimates that
                plans will benefit from substantial cost savings by distributing more
                covered documents electronically. How and to what extent do plans share
                these cost savings with plan participants?
                 21. Are there steps the Department could take to better coordinate
                disclosures required under ERISA and notices required under the Code?
                E. Regulatory Impact Analysis
                (1) Relevant Executive Orders for Regulatory Impact Analyses
                 Executive Orders 12866 \70\ and 13563 \71\ direct agencies to
                assess all costs and benefits of available regulatory alternatives and,
                if regulation is necessary, to select regulatory approaches that
                maximize net benefits (including potential economic, environmental,
                public health and safety effects; distributive impacts; and equity).
                Executive Order 13563 emphasizes the importance of quantifying both
                costs and benefits, reducing costs, harmonizing rules, and promoting
                flexibility.
                ---------------------------------------------------------------------------
                 \70\ 58 FR 51735 (Oct. 4, 1993).
                 \71\ 76 FR 3821 (Jan. 21, 2011).
                ---------------------------------------------------------------------------
                 Under Executive Order 12866, ``significant'' regulatory actions are
                subject to review by the Office of Management and Budget (OMB). Section
                3(f) of the Executive Order defines a ``significant regulatory action''
                as an action that is likely to result in a rule: (1) Having an annual
                effect on the economy of $100 million or more in any one year, or
                adversely and materially affecting a sector of the economy,
                productivity, competition, jobs, the environment, public health or
                safety, or State, local, or tribal governments or communities (also
                referred to as ``economically significant''); (2) creating a serious
                inconsistency or otherwise interfering with an action taken or planned
                by another agency; (3) materially altering the budgetary impacts of
                entitlement grants, user fees, or loan programs or the rights and
                obligations of recipients thereof; or (4) raising novel legal or policy
                issues arising out of legal mandates, the President's priorities, or
                the principles set forth in the Executive Order. The Department
                anticipates that this proposed regulatory action would likely have
                economic impacts of $100 million or more in any one year, and therefore
                meets the definition of an ``economically significant rule'' within the
                meaning of section 3(f)(1) of the Executive Order 12866. Therefore, the
                Department has provided an assessment of the potential benefits, costs,
                and transfers associated with this proposed rule. In accordance with
                the provisions of Executive Order 12866, this proposed rule was
                reviewed by OMB.
                 Executive Order 13771, titled Reducing Regulation and Controlling
                Regulatory Costs, was issued on January 30, 2017. This proposed rule is
                expected to be an E.O. 13771 deregulatory action, because it would
                provide pension benefit plans subject to ERISA with an alternative safe
                harbor to use electronic media to provide required disclosures to
                participants and beneficiaries thereby reducing the printing, material,
                and postage costs associated with providing printed disclosures by
                mail. Details on the estimated net cost savings of this proposed rule
                can be found below.
                (2) Need for Regulatory Action
                 Technology has changed substantially since the establishment of the
                2002 safe harbor,\72\ including through the expansion of broadband and
                wireless networks and use of email, improvements to servers and
                personal computers, as well as the expanded use of smartphones,
                tablets, and other mobile devices. These changes are reflected in data.
                For example, in 2003, one year after the existing safe harbor rule was
                established, approximately 62 percent of households had one or more
                computers.\73\ More recently, in 2016, approximately 89 percent of
                households had computers, smartphones, or tablets at home.\74\
                Smartphone ownership has increased rapidly in the past decade. The
                share of Americans who own a smartphone increased from 35 percent in
                2011 to 81 percent in 2019.\75\ The share of households with internet
                access also has increased: 55 percent of households had access to
                internet at home in 2003,\76\ while 82 percent had such access in
                2016.\77\ As the internet, smartphones, and other electronic devices
                have become an integral part of everyday American life, consumers use
                them in a wide range of activities, including shopping online and
                conducting financial transactions. According to an online survey
                conducted by the Federal Reserve Board in 2015, 82 percent of
                smartphone owners with a bank account used online banking and 53
                percent used mobile banking to check their balances or recent
                transactions in the prior 12 months.\78\
                ---------------------------------------------------------------------------
                 \72\ See 29 CFR 2520.104b-1(c).
                 \73\ Jennifer Cheeseman Day, Alex Janus, and Jessica Davis,
                ``Computer and internet Use in the United States: 2003'' (U.S.
                Census Bureau, 2005).
                 \74\ Camille Ryan, ``Computer and internet Use in the United
                States: 2016'' (U.S. Census Bureau, 2018).
                 \75\ Monica Anderson, ``Mobile Technology and Home Broadband
                2019,'' Pew Research Center (June 13, 2019).
                 \76\ Jennifer Cheeseman Day, Alex Janus, and Jessica Davis,
                ``Computer and internet Use in the United States: 2003'' (U.S.
                Census Bureau, 2005).
                 \77\ Ryan, ``Computer and internet Use in the United States.''
                 \78\ ``Consumers and Mobile Financial Services 2016'' (Board of
                Governors of the Federal Reserve System, March 2016).
                ---------------------------------------------------------------------------
                 Moreover, as technological capabilities and access to and use of
                the internet has increased, other government agencies have issued rules
                encouraging wider use of electronic disclosure. For example, the Social
                Security Administration no longer sends paper statements to workers;
                rather, workers generally must register on the Administration's website
                for a ``my Social Security'' account to access their statements.\79\ As
                another example, the Federal Thrift Savings Plan uses paperless
                delivery as the default for its quarterly statements, unless an
                individual requests mail delivery.\80\
                [[Page 56911]]
                Annual statements are available on the website and delivered by mail,
                unless an individual requests only electronic annual statements. TSP
                reported its switch from delivering statements by mail to electronic
                paperless delivery saved about $7 to $8 million in 2006.\81\
                ---------------------------------------------------------------------------
                 \79\ See section (5)(i) of the Notice for a fuller discussion.
                See also https://faq.ssa.gov/en-us/Topic/article/KA-01741. The
                Administration does, however, mail paper social security statements
                to workers age 60 and older if they don't receive social security
                benefits and they have not yet set up a ``my social security''
                account on the website.
                 \80\ 5 CFR 1640.6 (``The TSP will furnish the information
                described in this part to participants by making it available on the
                TSP website. A participant can request paper copies of that
                information from the TSP by calling the ThriftLine, submitting a
                request through the TSP website, or by writing to the TSP record
                keeper.''). See also ``Federal Thrift Savings Plan: Customer Service
                Practices Adopted by Private Sector Plan Managers Should Be
                Considered,'' GAO-05-38 (U.S. Government Accountability Office, Jan.
                2005), p. 12, n. 21, www.gao.gov/new.items/d0538.pdf (providing
                statistics on cost savings experience with TSP).
                 \81\ See Federal Retirement Thrift Investment Board, Board
                Meeting Minutes (February 2007), available at https://www.frtib.gov/MeetingMinutes/2007/2007Feb.pdf.
                ---------------------------------------------------------------------------
                 In addition, on October 20, 2006, the Treasury and the IRS
                published 26 CFR 1.401(a)-21, 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.\82\ See section A(5)(iii), above, for a
                fuller discussion of these regulations. Similarly, the Securities and
                Exchange Commission (SEC) has issued several regulations facilitating
                electronic deliveries of certain required disclosures. See section
                A(5)(iv), above, for a fuller discussion of these regulations.
                ---------------------------------------------------------------------------
                 \82\ 71 FR 61877.
                ---------------------------------------------------------------------------
                 The ERISA Advisory Council in prior years has made multiple
                recommendations regarding improvements to the 2002 safe harbor. Most
                recently, in its November 2017 report, the Advisory Council recommended
                that to ease burdens on plans and improve understandability for
                participants, an ideal disclosure protocol would implement both paper
                and electronic delivery.\83\ The ERISA Advisory Council, in the 2017
                report, recommended electronic delivery because it can help
                participants better navigate and understand their benefits in addition
                to reducing the cost burden on plan sponsors.\84\ In prior reports, the
                Council has recommended that the Department consider adopting
                electronic disclosure regulations more aligned with 26 CFR 1.401(a)-21.
                Also, in a 2013 report, the General Accountability Office (GAO)
                recommended that the Department (1) require plans to include the SPD
                and any SMMs on a continuous access website,\85\ and (2) focus on the
                readability standard for required disclosures by adding ``clear,
                simple, brief highlights'' \86\ of required disclosures, noting that
                ``the quantity of information diminishes the positive effects it can
                have for participants.'' \87\
                ---------------------------------------------------------------------------
                 \83\ ``Mandated Disclosure for Retirement Plans--Enhancing
                Effectiveness for Participants and Sponsors,'' ERISA Advisory
                Council, p. 27 (Nov. 2017).
                 \84\ ``Mandated Disclosure for Retirement Plans--Enhancing
                Effectiveness for Participants and Sponsors,'' ERISA Advisory
                Council on Employee Welfare and Pension Benefit Plans (Nov. 2017).
                 \85\ ``Private Pensions: Clarity of Required Reports and
                Disclosures Could Be Improved,'' GAO-14-92, p. 40 (Government
                Accountability Office, Nov. 2013), https://www.gao.gov/assets/660/659211.pdf.
                 \86\ Id. at p. 41.
                 \87\ Id. at p. 29.
                ---------------------------------------------------------------------------
                 As discussed earlier in this preamble, in Executive Order 13847
                dated August 31, 2018,\88\ President Trump required the Department to
                make retirement plan disclosures required under ERISA more
                understandable and useful for participants, while also reducing the
                costs and burdens imposed on plan sponsors. The executive order also
                required the Department to explore the broader use of electronic
                delivery of disclosures as a way to improve the effectiveness of
                disclosures and to reduce their associated costs and burdens.
                ---------------------------------------------------------------------------
                 \88\ 83 FR 45321.
                ---------------------------------------------------------------------------
                 Responding to the mandate in Executive Order 13847, recommendations
                by the ERISA Advisory Council and GAO, and widespread use of the
                internet, computers, and mobile devices, as discussed in detail in
                Section B, above, the Department is proposing an alternative method for
                disclosure through electronic media in addition to the Department's
                current safe harbor for electronic delivery, which also would remain
                available. According to the Private Pension Plan Bulletin, there exist
                approximately 702,000 private retirement plans with over 136 million
                participants in 2016.\89\ Some of these participants already receive
                disclosures electronically by relying on the Department's current safe
                harbor for electronic delivery. Under the proposed rule, plan
                administrators could electronically deliver disclosures to participants
                who have been receiving paper copies by mail by sending a notice of
                internet availability that directs participants to access a website for
                detailed information. By taking this approach, participants can be
                informed of covered disclosures and access the website for details if
                desired, and request any covered disclosures to be sent by mail or
                email free of charge. The Department is also publishing a companion
                Request for Information soliciting comments on additional ideas on how
                to improve the effectiveness of ERISA disclosures.
                ---------------------------------------------------------------------------
                 \89\ Private Pension Plan Bulletin 2016, Employee Benefits
                Security Administration, Department of Labor.
                ---------------------------------------------------------------------------
                (3) Impacts
                 The Department expects that the proposed rule would facilitate
                expanded use of electronic technologies when providing covered
                disclosures to participants and beneficiaries, which will produce cost
                savings for plan sponsors by eliminating materials, printing, and
                mailing costs associated with furnishing printed disclosures.
                 The Department estimates that plans currently incur approximately
                $355 million annually to furnish only seven selected disclosures such
                as SPDs by mail.\90\ As described in detail below, the Department
                estimates that the gross savings produced by moving from printed to
                electronic disclosures would be $289 million in the first year. These
                savings would be partly offset by $146 million incurred to maintain a
                website; prepare the notice of internet availability; and prepare and
                distribute the initial notification and right to opt out. These added
                costs produce $144 million in net savings, or a 40 percent cost
                reduction from the $355 million current cost burden. In the second
                year, the cost reduction would increase to 72 percent, or $264 million
                in net savings. In the 10th year, the cost reduction would increase to
                86 percent. Over 10 years, the approximate net savings are $2.4
                billion, annualized to $274 million per year, using a three percent
                discount rate, resulting from eliminating distribution and mailing
                costs associated with furnishing retirement plan related
                disclosures.\91\ When the Department uses a perpetual time horizon to
                allow for comparisons under E.O. 13771, the perpetual annualized cost
                savings are $324 million at a three percent discount rate and $305
                million at a discount rate of seven percent in 2016 dollars.\92\
                However, the Department cautions against relying on the perpetual
                annualized cost savings estimate for purposes other than the required
                analyses under E.O. 13771 because any long-term projection is
                inherently uncertain. The fast pace of technological innovations in the
                context of this rulemaking makes it especially
                [[Page 56912]]
                difficult to reliably project cost savings into the far-distant future.
                ---------------------------------------------------------------------------
                 \90\ These seven disclosures are those that may be included in a
                combined notice of internet availability pursuant to paragraph (i)
                of the proposal.
                 \91\ The net cost savings would be approximately $2.0 billion
                over 10-year period, annualized to $270 million per year, if a seven
                percent discount rate were applied.
                 \92\ The cost savings in years 11 and beyond are estimated using
                the same methodology as for years 1 to 10, which is explained in the
                following section.
                ---------------------------------------------------------------------------
                (i) 10-Year Cost Saving Projection
                 The Department's projections are based on the following
                assumptions: (i) The number of participants will grow at 0.7 percent
                per year,\93\ (ii) the percentage of participants opting out of the
                default e-delivery system, will gradually decrease from 18.5 percent to
                7.5 percent over the 10-year period.\94\ The Department's 10-year
                projection may overstate cost savings because more participants may
                gradually receive disclosures electronically even in the absence of
                this proposed rule. This occurs because more participants may
                affirmatively consent to receive disclosures electronically as internet
                access expands and/or the internet and computer access become an
                integral part of more jobs in various occupations and industries.
                Therefore, plans would mail fewer disclosures to participants, and
                incur smaller printing and mailing costs even without this proposed
                rule. On the other hand, the Department's 10-year projection may
                understate cost savings if there are a small number of electronic
                delivery failures for notices of internet availability over time as
                plan administrators develop and maintain the most up-to-date lists of
                covered individuals' electronic addresses. If so, printing and mailing
                costs for covered documents will decrease and net cost savings will
                increase within the 10-year period. However, the Department's
                projection is based on the assumption that the rates of undelivered
                notices of internet availability would remain constant over the 10-year
                period. These cost savings could indirectly benefit covered individuals
                if they are used to defray plan expenses and lower the direct or
                indirect participant fees.
                ---------------------------------------------------------------------------
                 \93\ The Bureau of Labor Statistics projects that total
                employment will grow at 0.7 percent annually from 2016 to 2026.
                Based on this employment projection, the Department assumes that the
                total number of participants will also increase at 0.7 percent each
                year. See T. Allan Lacey, Mitra Toossi, Kevin S. Dubina, and Andrea
                B. Gensler, ``Projection overview and highlights, 2016-2026,''
                Monthly Labor Review (October 2017).
                 \94\ The Department assumes that (1) in the first year,
                approximately 18 percent of participants currently receiving
                disclosures by mail will opt out of the proposed default e-delivery
                and receive disclosures by mail, and (2) in the second year, about
                16.2 percent of participants receiving disclosures by mail will opt
                out, based on the American Community Survey data. Then the
                Department projects the opt-out rates will decrease gradually at
                rates consistent with exponential decay function, a *
                b(t-1), where a is the initial opt-out rate 18 percent, t
                is year, and b is the decay rate, 0.9 (= 16.2/18) and in the 10th
                year, only seven percent of those participants currently receiving
                disclosures by mail will continue to do so. Then the Department made
                an additional adjustment by adding 0.5 percentage point annually to
                account for the requirement in paragraph (f)(4) of the proposal
                regarding invalid or inoperable electronic addresses for covered
                individuals. For more detailed discussion, see the quantified cost
                section, below.
                ---------------------------------------------------------------------------
                (ii) Comparisons Between the Department's Estimates and Industry
                Estimates
                 Industry groups have published estimates of the costs plans incur
                to furnish covered documents by mail taking into account printing,
                material, and mailing costs. For example, a recent report submitted to
                the Department \95\ estimates that plans would incur total costs of
                more than $385 million per year to mail an average of six documents per
                year to 80.3 million 401(k) participants, assuming a cost of $0.80 per
                document. The Department's estimated cost savings are distinguishable
                from the report's cost estimate for the following reasons:
                ---------------------------------------------------------------------------
                 \95\ Peter Swire and DeBrae Kennedy-May, ``Delivering ERISA
                Disclosure for Defined Contribution Plans: Why the Time has Come to
                Prefer Electronic Delivery--2018 Update,'' peterswire.net (April
                2018), p. 19.
                ---------------------------------------------------------------------------
                 Reflecting practices under current rules, including the
                Department's 2002 safe harbor, the Department assumes that slightly
                less than half of participants currently receive covered documents by
                mail, and plans would realize cost savings by switching many of these
                participants from mail delivery to e-delivery if the proposed rule is
                finalized. In contrast, the cost estimate in the report assumes that
                all participants currently receive notices by mail.
                 The Department assumes that in the first year about 18
                percent of individuals that currently receive paper documents would opt
                out of e-delivery and continue to receive covered documents by
                mail.\96\ In subsequent years, the Department assumes that opt-out
                rates will gradually decrease such that in ten years only seven percent
                of current mail recipients will continue to receive paper copies of
                disclosures by mail. In contrast, the cost estimate in the report does
                not factor in the percentage of participants that request paper copies
                by mail.
                ---------------------------------------------------------------------------
                 \96\ This 18 percent opt-out assumption used in the Department's
                estimates comes from the 2016 American Community Survey (ACS)
                conducted by the Census Bureau. According to ACS, about 82 percent
                of U.S. households have internet subscriptions, thus can securely
                and conveniently access the internet at home; therefore, the
                Department assumes that the remaining 18 percent are more likely to
                opt out.
                ---------------------------------------------------------------------------
                 The Department estimated the cost savings disclosure by
                disclosure, assuming different percentages of plans and participants
                would receive different disclosures. Due to this methodology, it is
                difficult to directly compare the report's assumptions regarding the
                average number of notices participants receive annually.
                 The Department assumes plans would incur one-time start-up
                costs to develop systems and notices required by the proposal and
                material, printing, and postage costs to mail the initial notice of
                internet availability and right to opt out. As shown in the cost
                savings table below, these one-time costs will significantly diminish
                over time and become negligible in the long-term.
                (iii) Cost Savings
                 The Department's cost savings estimates understate the potential
                savings generated from this proposed rule, because they account for
                cost savings that would be realized by eliminating materials, printing,
                and mailing costs associated with furnishing only seven selected
                disclosures, such as SPDs, even though the rule would be more broadly
                available for other pension disclosures as well.\97\ According to the
                Department's Paperwork Reduction Act information collection inventory,
                these seven selected disclosures are some of the most costly
                disclosures for retirement plans in terms of distribution and mailing
                costs, because they affect a large number of plans and
                participants.\98\ Therefore, the proposed rule will generate the most
                cost savings from these seven disclosures by allowing plans to
                electronically deliver them without incurring printing and mailing
                costs. In contrast, other pension disclosures are distributed
                irregularly because they are triggered by the occurrence of certain
                events. Consequently, the proposed rule would produce relatively
                smaller cost savings from these irregular disclosures because they
                affect a smaller number of plans and covered individuals.
                ---------------------------------------------------------------------------
                 \97\ These are the same disclosures that can be included in a
                combined notice of internet availability pursuant to paragraph (i)
                of the proposal.
                 \98\ Out of these seven disclosures, all but one (Pension
                Benefit Statements) have the associated information collection
                requests under the Paperwork Reduction Act. To estimate cost savings
                attributable to this proposed rule, the Department estimated the
                current cost burden associated with Pension Benefits Statements,
                although it is not a part of the Department's information collection
                inventory.
                ---------------------------------------------------------------------------
                 The Department's cost savings estimate is derived from the
                methodology it uses to estimate costs associated with furnishing
                printed disclosures for information collections subject to the
                Paperwork Reduction Act. For this purpose, preparation costs generally
                include costs plans incur to develop the content and format of
                disclosures, while distribution costs generally include materials,
                printing,
                [[Page 56913]]
                and mailing costs administrators incur to furnish required disclosures
                to participants and beneficiaries. The Department's estimates assume
                that preparation costs for covered disclosures such as SPDs and SMMs
                would be unchanged by the proposed regulation, because the proposed
                rule would not change the content of such disclosures. This reflects
                the Department's assumption that master copies of printed versions of
                disclosures are typically maintained in electronic form or can be
                easily converted to such form to be distributed to covered individuals.
                (iv) Quantified Costs
                 While the Department expects the proposed rule to reduce costs
                associated with distributing covered disclosures by eliminating
                material, printing, and mailing costs, these cost reductions are partly
                offset by costs incurred by administrators to meet the new safe
                harbor's requirements to: (1) Furnish a notice of internet availability
                to covered individuals ((paragraph (d) of the proposal); (2) ensure the
                existence of an website at which a covered individual is able to access
                covered documents (paragraph (e) of the proposal); and (3) furnish an
                initial notification of default electronic delivery and right to opt
                out in paper to each person, before he or she becomes a covered
                individual (paragraph (g) of the proposal).
                 The Department assumes that plans will incur one-time start-up
                costs to develop systems and notices required by the proposal, which
                would include time for the plan's (or the plan service provider's)
                legal counsel to prepare and review the notices to ensure compliance
                with the proposed regulatory requirements. While the Department also
                assumes that the cost incurred by plans to distribute notices of
                internet availability would be negligible because they could be
                distributed electronically, the initial notification of default
                electronic delivery and right to opt out would impose material,
                printing, and postage costs on administrators, because they would be
                required to be furnished to covered individuals in a non-electronic
                format.
                 The initial notification and right to opt out is a one-time
                transitional notice that informs participants who are existing
                employees of changes in default delivery system to e-delivery.\99\
                Administrators are required to furnish this notice in paper form to
                each person, prior to such person becoming a covered individual,
                informing them that some or all covered documents will be furnished
                electronically, that they have the right to request paper copies of
                some or all of the covered documents or to opt out of electronic
                delivery altogether, and of the procedures for exercising such rights.
                For transition purposes, the proposed rule would require an
                administrator using the proposed safe harbor to send this notification
                to all existing employees before any or all of them can become a
                ``covered individual.'' Thereafter, an administrator must send this
                notification to all new employees and beneficiaries receiving benefits.
                To minimize any unnecessary confusion and ensure smooth transitions
                from participants' perspectives, the proposal requires this
                notification to be sent to employees who have affirmatively consented
                to receive electronic disclosures under the existing safe harbor if an
                administrator wishes to transition to providing electronic disclosures
                to such participants under the proposed safe harbor. The Department
                believes that the costs for the initial notice are justified, because
                it is essential to protect participants' interests by adequately
                notifying them in paper that the administrator will be adopting a new
                method for electronic delivery of covered documents and that they have
                the option to opt out and receive paper copies of such documents.
                ---------------------------------------------------------------------------
                 \99\ For newly hired employees, it is assumed that they will
                receive the Initial Notice and Right to opt out in their new
                employee packets, as it will be incorporated into a part of new
                employee intake process, thus employers incur only negligible costs
                in subsequent years.
                ---------------------------------------------------------------------------
                 Retirement plans will incur one-time costs to develop and design an
                initial notice. The proposed rule clearly describes the specific
                information required to be included in this notice; therefore, the
                Department expects the costs to develop and design the notice would be
                modest, approximately $39 million on aggregate assuming all retirement
                plans decide to rely on this proposed alternative.\100\ The Department
                estimates that approximately 60 million retirement plan participants
                received covered disclosures by mail in 2016; \101\ and therefore,
                could potentially receive the initial notice from their plan
                administrators. Assuming a one-page notice is mailed to these 60
                million participants, the Department estimates the costs of
                distributing and mailing the initial notice will be approximately $50
                million.\102\ Therefore, the Department estimates that retirement plans
                would incur approximately $90 million one-time costs to develop and
                mail the initial notice. The Department assumes that these are one-time
                transitional costs that would not be incurred in subsequent years.\103\
                ---------------------------------------------------------------------------
                 \100\ The Department estimates there were over 702,000
                retirement plans in 2016. The Department estimates that attorneys
                will take approximately 293,000 hours to develop and review the
                Initial Notice. Assuming the hourly rate for in-house attorneys was
                $133.50 in 2016, the costs of developing the Initial Notice are
                estimated approximately $39 million (292,725 hours * $133.50).
                 \101\ ICRs associated with the SPD, SMM, SAR, and 404(a)(5)/
                404(c) disclosures recently were renewed after OMB review and public
                comment. These ICRs assume that approximately 56 percent of
                participants electronically receive those disclosures by relying on
                the 2002 safe harbor e-disclosure rule. According to the 2016
                Private Pension Bulletin, there are approximately 136 million
                participants. Therefore, the Department estimates that approximately
                60 million participants (44 percent of 136 million) receive
                disclosures by mail, while 56 percent of participants currently
                receive disclosures electronically.
                 \102\ This estimate is based on $36 million mailing costs
                (approximately 60 million notices * $0.60) and $14 million
                preparation costs incorporating an in-house clerk's time to prepare
                for mailing (approximately 330,000 hours * $64.20 hourly rate of
                mailing clerk).
                 \103\ For newly hired employees, the Department assumes that
                they will receive the Initial Notice in their new employee packets,
                as it will be incorporated into a part of new employee intake
                process, thus employers incur only negligible costs in subsequent
                years.
                ---------------------------------------------------------------------------
                 Paragraph (e) of the proposed rule would require administrators to
                ensure the existence of a website at which plan participants can access
                covered disclosures. The Department understands that very modest one-
                time costs would be incurred to comply with this condition of the
                proposed safe harbor. This is based on the Department's assumption that
                nearly all plans have institutional recordkeepers, third-party
                administrators, trustees, or investment providers that have compliant
                or easily adaptable platforms that most plans would rely on for
                compliance. The Department acknowledges that a small fraction of plans
                without institutional recordkeepers, third-party administrators, or
                investment providers may incur costs to develop or modify their
                websites. The Department is concerned that, while most small plans use
                bundled service providers that maintain highly functional websites,
                those few small plans that do not are less likely than larger plans to
                have their own websites, and, thus, are more likely to bear the cost
                burden associated with this requirement. The Department, however, does
                not have sufficient data to estimate such costs. The Department
                solicits comments regarding the fraction of plans, particularly the
                fraction of small plans, that would need to develop or modify a website
                in order to rely on this proposed safe harbor rule, and how the burden
                on small plans can be minimized while encouraging plans to furnish
                disclosures electronically.
                [[Page 56914]]
                 Paragraph (f)(4) of the proposal requires plan administrators to
                take certain actions if they are alerted that a covered individual's
                electronic address has become invalid or inoperable, such as if a
                notice of internet availability sent to that address is returned as
                undeliverable. In such circumstances, the administrator must (1)
                promptly take reasonable steps to cure the problem (for example, by
                furnishing a notice of internet availability to the covered
                individual's secondary electronic address that is valid and operable,
                if available, or obtaining a new valid and operable electronic address
                for the covered individual), or (2) treat the covered individual as if
                he or she made an election to opt out of electronic disclosure under
                paragraph (f)(2) of the proposal. If the covered individual is treated
                as if he or she opted out, the plan administrator must furnish to the
                covered individual, as soon as is reasonably practicable, a paper
                version of the covered document identified in the undelivered notice of
                internet availability. To satisfy this requirement, plan administrators
                would incur costs associated with detecting invalid or inoperable
                electronic addresses, taking appropriate actions to remedy the problem,
                and/or treating those covered individuals as if they opted out of
                electronic disclosure and furnishing covered documents to them via
                mail.
                 Some plan administrators would incur costs to purchase software to
                detect the validity and operability of electronic addresses due to this
                requirement. The Department believes, however, that most plan
                administrators already have such features built into their electronic
                delivery systems. The Department assumes that a small fraction,
                approximately one percent, of plans currently do not have such features
                built in to their systems, and thus, would incur costs to purchase
                software to allow them to verify whether electronic notices are
                delivered, bounced back, opened, and clicked through.\104\ The
                Department estimates these plan administrators would incur
                approximately $2.5 million in aggregate annual costs to purchase such
                software.\105\ The Department invites comments on costs associated with
                monitoring the validity and operability of electronic addresses,
                particularly how many plans currently lack these capabilities and also
                whether these types of software are widely available for types of
                electronic communications other than email such as texts and mobile
                applications.
                ---------------------------------------------------------------------------
                 \104\ The Department understands that software is commercially
                available to produce a list of email addresses that have bounced
                back with the owners' name, export the list into different formats,
                and, in certain circumstances, remove invalid email addresses from
                the list. Such software also generates and reports relevant
                statistics such as bounce rate, open rate and click-through rate.
                Some software has the capability to automatically re-attempt
                delivery depending on the reasons of failed delivery.
                 \105\ The Department gathered pricing information for five
                commercial software packages that ranged from $10 per month to $320
                per month depending on the volume and sophistication of features
                available. Taking the average of basic level price of these five
                products, the Department assumes that it would cost $28.2 per month
                ($338.4 per year) to subscribe. Assuming 7,392 plans would purchase
                this type of product, the Departments estimates that the aggregate
                costs would total an estimated $2.5 million (7,392 plans * $338.40).
                ---------------------------------------------------------------------------
                 Plan administrators also would incur costs to remedy failed
                delivery of internet availability notices. The Department assumes that
                before mailing out covered documents to the recipients of an
                undelivered notice of internet availability, plan administrators would
                choose the option of resolving issues that are relatively easier to fix
                such as attempting to redeliver bounced emails or reaching out to
                covered employees to obtain updated electronic addresses. However, it
                may be difficult for plan administrators to remedy failed delivery for
                certain covered individuals, such as those who have separated from
                service. Plan administrators consequently are likely to treat at least
                some such covered individuals as opting out of electronic delivery.
                Although the Department acknowledges that plan administrators would
                spend time attempting to correct failed delivery as provided in
                paragraph (f)(4) of the proposal, it does not have sufficient data to
                quantify associated costs. The Department, however, assumes that plan
                administrators always would select the least costly and most efficient
                option. Therefore, if obtaining updated electronic addresses were too
                burdensome, the Department assumes that the plans would furnish covered
                documents identified in the undelivered notice of internet availability
                to those participants by mail.
                 For purposes of this regulatory impact analysis, the Department
                assumes that this requirement would increase the global out-out rate by
                0.5 percentage points relative to what it otherwise have been in each
                year as plans furnish covered disclosures by mail to covered
                individuals with invalid or inoperable electronic addresses.\106\ The
                Department assumes that plan administrators would exercise due
                diligence to remedy the problem by reaching out to participants with
                invalid or inoperable electronic addresses rather than simply treating
                them as participants globally opting out of electronic delivery;
                therefore, this increase in the global opt-out rate would not compound
                over time. The 0.5 percentage point increase in the global opt-out rate
                is reflected in the cost savings estimates for the seven covered
                documents.
                ---------------------------------------------------------------------------
                 \106\ One industry report indicates that a well-targeted and
                maintained email list yields on average 1.06% bounce rate. See
                https://www.campaignmonitor.com/resources/guides/email-marketing-benchmarks/ for more information. For another example, EBSA's
                newsletter email deliveries yield a 4% bounce back rate. Although
                the Department's assumed 0.5% bounce back rate is lower than the
                information discussed here, the Department believes that in general,
                plan administrators are able to generate and maintain more accurate
                and current electronic addresses for covered individuals.
                ---------------------------------------------------------------------------
                 This proposed rule would provide a comprehensive alternative to the
                2002 safe harbor, such that all participants and beneficiaries may be
                easily covered. Although some plan sponsors currently using the 2002
                safe harbor may prefer to switch entirely to the proposed alternative,
                the Department assumes that most will maintain their existing systems
                and use the proposed rule to cover individuals that fall outside of the
                existing safe harbor.
                (v) Quantified Net Cost Savings
                 The Department's estimates of the net cost savings from the
                proposed regulations are summarized below.
                 Table--Estimated Cost Savings Attributable to the Proposed Rule
                 [$ million]
                ----------------------------------------------------------------------------------------------------------------
                 Total over 10
                 1st Year 2nd Year 3rd Year years
                ----------------------------------------------------------------------------------------------------------------
                Cost Savings from eliminating printing & mailing
                 costs:
                 Summary Plan Description (SPD).............. $76 $76 $76 $741
                 Summary of Material Modification (SMM)...... 15 15 15 151
                 Summary Annual Report (SAR)................. 23 23 23 225
                [[Page 56915]]
                
                 Annual Funding Notice....................... 13 13 13 129
                 404(a)(5)/404(c) Disclosure................. 42 42 42 411
                 Annual QDIA Notice.......................... 8 8 8 79
                 Pension Benefits Statement.................. 112 111 111 1,085
                 ---------------------------------------------------------------
                 Subtotal: Gross Cost Savings [1]........ 289 290 289 2,821
                ----------------------------------------------------------------------------------------------------------------
                Costs imposed by the proposed rule:
                 Website..................................... 23 16 16 154
                 Initial Notification and Right to Opt out... 90 0 0 90
                 Notice of Internet Availability............. 33 17 17 170
                 ---------------------------------------------------------------
                 Subtotal: Costs of the proposed rule [2] 146 33 32 413
                 ---------------------------------------------------------------
                 Total Net Cost Savings: [1]-[2]..... 144 257 257 2,408
                ----------------------------------------------------------------------------------------------------------------
                Note: Totals in table may not sum precisely due to rounding.
                Discounted at three percent.
                 The estimated cost savings of each covered disclosure, $289 million
                for the first year, in the Table reflect the Department's assumption
                that approximately 81.5 percent of participants who currently receive
                paper copies of covered documents by mail would receive covered
                documents electronically under the proposed rule, while 18.5 percent
                would elect to receive such documents by mail.\107\ This assumption is
                based on the American Community Survey (ACS) estimate that about 82
                percent of U.S. households had internet subscriptions in 2016.\108\
                This assumption may overstate the cost savings in some circumstances,
                because some participants with internet access at home may opt out
                because they prefer to receive paper copies. In other circumstances,
                however, this assumption may understate the cost savings, because
                households holding defined contribution plan accounts tend to have
                higher internet access rates and are more comfortable navigating
                online, which could lead to a lower opt-out rate.\109\ In projecting
                cost savings for 10 years, the Department assumes that in the 10th year
                this opt-out rate will gradually decrease to only seven and half
                percent of those participants currently receiving documents by
                mail.\110\ The Department solicits comments regarding any relevant
                information about the share of recipients that would elect to opt out
                and request to receive print disclosures by mail.
                ---------------------------------------------------------------------------
                 \107\ Among participants who currently receive disclosures by
                mail under the existing safe harbor, 18.5 percent are assumed to opt
                out of electronic delivery and receive paper copies. This 18.5
                percent global opt-out rate reflects 0.5 percentage point upward
                adjustment due to failed delivery of internet availability notice
                such as bounced emails. Without this adjustment, the global opt-out
                rate would be 18 percent, which is consistent with the data from
                American Community Survey 2016.
                 \108\ Ryan, ``Computer and Internet Use in the United States.''
                 \109\ According to one study, for households owning DC plan
                accounts, 93 percent used the internet in 2016. See Peter Swire and
                DeBrae Kennedy-Mayo, ``Delivering ERISA Disclosure for Defined
                Contribution Plans,'' peterswire.net (April 2018). Another survey
                suggests that 99 percent of respondents have a computer at home or
                work that is connected to the internet and 84 percent agree that
                employers can provide retirement plan information electronically if
                they can opt out at any time. This implies approximately 83 percent
                (99% x 84%) have internet access and would agree to receive plan
                information electronically, which is similar to the Department's
                assumption of 82 percent. See ``Improving Outcomes with Electronic
                Delivery of Retirement Plan Documents,'' Quantria Strategies (June
                2015), Appendix A--Plan Participant Views on Paper Versus Electronic
                Delivery of Plan Documents.
                 \110\ Based on the American Community Survey (ACS) data from
                2016 and 2017, the Department assumes the opt-out rate for the 2nd
                year is 16 percent. The Department's projection on the opt-out rates
                is based on these two recent years of ACS data, and gradually
                declining but adjusted to not reach a zero opt-out rate far in the
                future. This also reflects the 0.5 percentage point upward
                adjustment due to bounced emails.
                ---------------------------------------------------------------------------
                (vi) Non-Quantified Costs (Potential Adverse Impacts)
                 Although overall 82 percent of U.S. households had access to the
                internet at home in 2016, the data indicate that the following persons
                have lower rates of internet-access at home: Limited English-speaking
                households (63%), households with income less than $25,000 (59%),
                households where the head of the household is age 65 or older (68%),
                black households (73%), households in nonmetropolitan areas of the
                South (69%), and households where the head of the household obtained a
                high school diploma or less (56%).\111\ Responding to these relatively
                lower internet access rates for certain demographics, ICI/ARA pointed
                out in a letter to the Department that households with defined
                contribution (DC) plan accounts tend to have higher internet access
                rates. For example, ICI/ARA stated that among households with DC
                accounts, 79 percent of households with income between $20,000 and
                $39,999 use the internet and 76 percent of households where the head of
                the household is age 65 or older use the internet.\112\ However, these
                numbers confirm that some groups owning DC plan accounts still have a
                lower usage rate than the overall 93 percent internet usage rate of DC
                plan account holders.
                ---------------------------------------------------------------------------
                 \111\ Ryan, ``Computer and Internet Use in the United States.''
                 \112\ Investment Company Institute and American Retirement
                Association Letter to the Department of Labor, dated April 30, 2018.
                ---------------------------------------------------------------------------
                 Another subpopulation worth noting is households connected to the
                internet only through smartphones. Racial/ethnic minorities and low-
                income households are more likely to comprise these smartphone-only
                households.\113\ In 2015, approximately 8 percent of households in the
                U.S. depended on handheld devices for internet connectivity, and 16
                percent of households where the head of the household obtained a high
                school diploma or less are handheld device-only households. In
                contrast, only 3 percent of households where the head of the household
                obtained a Bachelor's degree or higher are handheld device-
                [[Page 56916]]
                only households.\114\ Although connected to the internet, these
                households face some limitations in fully harnessing the efficiency,
                capacity, and convenience offered by modern technology. Therefore,
                accessing disclosures online for these households may not be as
                convenient as for households with other means to access the internet.
                ---------------------------------------------------------------------------
                 \113\ Ryan, ``Computer and Internet Use in the United States.''
                 \114\ Jamie M. Lewis, ``Handheld Device Ownership: Reducing the
                Digital Divide?'' SEHSD Working Paper 2017-04 (U.S. Census Bureau,
                2017).
                ---------------------------------------------------------------------------
                 For participants without ready internet access, this proposed rule
                may create additional impediments to accessing critical plan
                information by requiring them to go to a public library or family
                members' home to access the information if they do not opt out or
                request printed documents. As stated earlier in this preamble, the
                proposed rule would require covered individuals to receive a notice of
                internet availability containing statements regarding their rights to
                (1) request and obtain a paper version of the covered document, free of
                charge, and receive an explanation of how to exercise this right, and
                (2) opt out of receiving all covered documents electronically and an
                explanation of how to exercise this right. One of the Department's
                goals in establishing the proposed framework was to be certain that,
                regardless of the delivery method chosen by a plan administrator,
                covered individuals who wish to receive paper copies of covered
                documents would be able to do so without undue burden. Further, a
                covered individual who prefers to receive all covered documents in
                paper may opt out of receiving any covered documents electronically.
                This global opt-out provision enables a participant who wants to have
                all of her disclosures in paper, without having to make repeated
                requests, to elect to do so; she will receive all covered documents in
                paper.
                 If covered individuals in groups with low internet-access rates
                fail to request hard copies of disclosures or exercise their opt-out
                rights due to inertia or if they face impediments to accessing the
                covered documents on the internet (if, for example, they forget their
                password that must be entered when the plan's internet address takes
                them to a login page), the negative impacts imposed on these
                individuals would offset some benefits of this proposed regulation. The
                Department does not have sufficient data to quantify these negative
                impacts, which most likely would be borne disproportionately by
                demographics such as the low-income, the elderly, and workers in rural
                areas. If these unintended consequences were to occur, plan
                administrators might take steps to limit their impact, such as
                conducting outreach with these demographics and communicate their
                plan's electronic disclosure policy effectively, providing sufficient
                time for participant education before implementing any electronic
                disclosure changes, and employing simple processes for requesting print
                documents, opting out of electronic disclosure, and establishing and
                resetting passwords. Such steps might help ensure that the cost savings
                discussed above would be realized without unduly burdening vulnerable
                subpopulation groups.
                 Another potential negative impact is that covered individuals'
                confidential information could be intentionally or unintentionally
                breached due to increased use of electronic media to furnish covered
                documents to them. Paragraph (e)(3) of the proposal requires the
                administrator to take measures reasonably calculated to ensure that the
                website protects the confidentiality of personal information relating
                to any covered individual. As generally required by ERISA section 404,
                the Department expects that many administrators, or their service or
                investment providers, already have secure systems in place to protect
                covered individuals' personal information, which should reduce the
                possibility that confidentiality breaches would occur.
                (vii) Benefits
                 Although this proposed regulation generally would not require plan
                sponsors to develop formats or content beyond that which satisfies
                disclosure requirements in printed form, some plan sponsors may elect
                to develop new formats and content for electronic disclosures. Such
                formats may include interactive interfaces that involve hot-links and/
                or multimedia presentations, all of which could improve the quality and
                accessibility of information for participants. Furthermore, for defined
                contribution plans, the account information is available to
                participants continuously and updated in real-time, which allows them
                to effectively manage their accounts. Using assistive technology such
                as screen readers, some electronic disclosures could be read to the
                visually impaired, thus making disclosures more accessible to a wide
                participant population. Some technology features, such as online
                translation, also could enhance the ability of covered individuals with
                limited English proficiency to understand their disclosures, which
                would assist their decision-making process. Some plans may create apps
                with interactive features that will allow participants to navigate with
                ease and conduct account transactions. Although the Department does not
                have sufficient data to quantify these benefits, it underscores that
                effective design using currently available technology could make
                disclosures more accessible and relevant to recipients. The Department
                solicits comments about how to improve the effectiveness of ERISA
                disclosures, particularly by incorporating recent technological
                features in the companion Request for Information.
                (4) Regulatory Alternatives
                 In conformance with Executive Order 12866, the Department
                considered several regulatory approaches in developing this proposed
                rule, which are discussed below.
                (i) Covering Welfare Benefit Plan Disclosures
                 As discussed earlier in section (B)(2)(ii) of this document, while
                the Department considered including welfare benefit plan disclosures in
                the proposal, it has concluded not to include them. Therefore,
                paragraph (c)(2) of the proposed rule currently is reserved so that the
                Department can study the future application of the new safe harbor to
                documents that must be furnished to participants in employee welfare
                benefit plans. This reservation follows the directive of Executive
                Order 13847, which focuses the Department's review on retirement plan
                disclosures.
                 Although the Department does not interpret the Order's directive as
                limiting the Department's ability to take 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, this
                proposal is limited to retirement plan disclosures.
                 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 want to consult with these other Departments.
                Accordingly, focusing its attention first
                [[Page 56917]]
                on retirement disclosures is a sound and efficient use of the
                Department's resources.
                (ii) Conforming With Electronic Delivery Approaches Adopted by Other
                Departments and Agencies
                 Executive Order 13847 directed the Department to coordinate with
                the Treasury Department in exploring the potential for broader use of
                electronic delivery as a way to improve the effectiveness of
                disclosures and to reduce their associated costs and burdens. Following
                discussions with Treasury staff, the Department considered as one of
                its regulatory alternatives adopting an approach similar to 26 CFR
                1.401(a)-21 relating to the use of an electronic medium for
                disclosures.\115\ As discussed in Section A(5)(iii), above, the
                Treasury regulation generally provides that a plan may use an
                electronic medium to provide applicable notices only for a participant
                who affirmatively consents to receive the notice electronically or who
                has the ``effective ability to access'' the electronically delivered
                notice.\116\ In the past, a number of parties have encouraged the
                Department to adopt this approach, which they interpreted to be more
                flexible than the Department's 2002 safe harbor.\117\ The proposed rule
                does not adopt 26 CFR 1.401(a)-21 verbatim. In light of Executive Order
                13847 requiring consultation with the Treasury Department, this
                proposal is intended to align with 26 CFR 1.401(a)-21(c) for applicable
                notices.
                ---------------------------------------------------------------------------
                 \115\ The Treasury Department and the IRS have issued a series
                of guidance on electronic delivery of required disclosures,
                beginning with IRS Notice 99-1 and most recently in 26 CFR 1.401(a)-
                21(c) issued in 2006 on the ``Use of Electronic Media for Providing
                Employee Benefit Notices and Making Employee Benefit Elections and
                Consents.'' See, e.g., Notice 99-1 (1999-2 I.R.B. 8), Announcement
                99-6 (1999-4 I.R.B. 24), T.D. 8873, 65 FR 6001 (Feb. 8, 2000), and
                T.D. 9294, 71 FR 61877 (Oct. 20, 2006).
                 \116\ See 26 CFR 1.401(a)-21(b) and (c).
                 \117\ For example, in comments submitted to the ERISA Advisory
                Council in 2017, the Department was encouraged to adopt the Treasury
                Department's approach. See Davis & Harman LLP, statement to the
                ERISA Advisory Council, June 7, 2017, p. 8, at https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/about-us/erisa-advisory-council/2017-mandated-disclosure-for-retirement-plans-hadley-written-statement-06-07.pdf. See also Groom Law Group, June 7, 2017, p. 4,
                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.
                ---------------------------------------------------------------------------
                 The Department also consulted with other relevant regulators,
                including the Securities and Exchange Commission. The Department's
                proposed approach, discussed in Section B above, resembles the ``notice
                and access'' approach taken by the Securities and Exchange Commission
                for certain investor disclosures.\118\ The Department believes that
                this approach significantly modernizes electronic delivery and,
                importantly, facilitates a layered approach--participants and
                beneficiaries will be notified directly about the availability of
                important plan disclosures on a regular basis and can access the full
                disclosures online at any time. Administrators who wish to furnish
                disclosures on paper, or electronically in accordance with the 2002
                safe harbor, may continue to do so under the proposed alternative
                method. Although the basic framework of the proposal is similar to the
                Commission's guidance for furnishing certain disclosures, such as proxy
                materials and shareholder reports, it also differs, because ERISA
                disclosures that may be furnished pursuant to the Department's guidance
                impact a different segment of the population, in a different manner,
                than the investor disclosures covered by the Commission's guidance.
                Accordingly, the specific provisions of the proposal in this document
                are in some ways broader, and in other ways narrower, than the
                Commission's rules. For example, the Department proposed applying the
                ``notice and access'' standard to a larger set of required disclosures.
                The proposal is structured in its entirety as a safe harbor--
                administrators will not, under the proposal, be required to make any
                specific disclosures available on a website (unless otherwise required
                by different Department rules). Further, paragraph (i) of the
                Department's proposal includes a provision that permits administrators
                to furnish one annual notice of internet availability covering a subset
                of required disclosures, as opposed to requiring in all cases that a
                separate notice of internet availability be required for each
                disclosure. Of course, both the Department and the Commission are
                dedicated to protecting participants and investors, respectively by
                including appropriate safeguards in their disclosure rules, for example
                by always permitting them to request paper copies of required
                disclosures or to opt out of electronic delivery altogether.
                ---------------------------------------------------------------------------
                 \118\ See 83 FR 29158 (June 22, 2018), permitting issuers to
                transmit certain shareholder reports by posting on a website
                specified in a required notice to investors; 70 FR 44722 (Aug. 3,
                2005), permitting ``access equals delivery'' framework for final
                prospectus; 72 FR 42221 (Aug. 1, 2007), requiring issuers to post
                proxy materials on a specified website and furnish a notice of
                internet availability to shareholders; and 75 FR 9073 (Feb. 26,
                2010), providing additional flexibility as to the format of the
                notice of availability for proxy materials.
                ---------------------------------------------------------------------------
                (5) Paperwork Reduction Act
                 The Department of Labor, as part of its continuing effort to reduce
                paperwork and respondent burden, conducts a preclearance consultation
                program to provide the general public and Federal agencies with an
                opportunity to comment on proposed and continuing collections of
                information in accordance with the Paperwork Reduction Act of 1995 (PRA
                95) (44 U.S.C. 3506(c)(2)(A)). This helps to ensure that requested data
                can be provided in the desired format, reporting burden (time and
                financial resources) is minimized, collection instruments are clearly
                understood, and the impact of collection requirements on respondents
                can be properly assessed.
                 Currently, the Department is soliciting comments concerning the
                proposed information collection requests (ICR) incorporated in the
                proposed rule relating to use of electronic communication by employee
                benefit plans. A copy of the ICR may be obtained by contacting the PRA
                addressee shown below or at https://www.RegInfo.gov.
                 The Department has submitted a copy of the proposed information
                collection to the Office of Management and Budget (OMB) in accordance
                with 44 U.S.C. 3507(d) for review of its information collections. The
                Department and OMB are particularly interested in comments that:
                 Evaluate whether the collection of information is
                necessary for the proper performance of the functions of the agency,
                including whether the information will have practical utility;
                 Evaluate the accuracy of the agency's estimate of the
                burden of the collection of information, including the validity of the
                methodology and assumptions used;
                 Enhance the quality, utility, and clarity of the
                information to be collected; and
                 Minimize the burden of the collection of information on
                those who are to respond, including through the use of appropriate
                automated, electronic, mechanical, or other technological collection
                techniques or other forms of information technology, e.g., permitting
                electronic submission of responses.
                 Comments should be sent to the Office of Information and Regulatory
                Affairs, Office of Management and Budget, Room 10235, New Executive
                Office Building, Washington, DC 20503; Attention: Desk Officer for the
                Employee Benefits Security Administration. OMB requests that comments
                be received within 30 days of publication of the proposed ICR to ensure
                their consideration.
                [[Page 56918]]
                 PRA Addressee: Address requests for copies of the ICR to Joseph
                Piacentini, Office of Policy and Research, U.S. Department of Labor,
                Employee Benefits Security Administration, 200 Constitution Avenue NW,
                Room N-5718, Washington, DC 20210. Telephone (202) 693-8410; Fax: (202)
                219-5333. These are not toll-free numbers. ICRs submitted to OMB also
                are available at https://www.RegInfo.gov.
                 Dates: The Department has requested that OMB approve or disapprove
                the collection of information by December 23, 2019. Comments should be
                submitted to OMB by November 22, 2019 to ensure their consideration.
                 As discussed above, the proposed regulation would create two new
                information collections that are subject to the PRA: The annual notice
                of internet availability (Sec. 2520.104b-31(d)(2)) and the initial
                notification (Sec. 2520.104b-31(g)). These information collections are
                discussed below. Also, as discussed below, the proposed rule also would
                reduce costs for some of the Department's existing information
                collections.
                 The Department is unaware of any data source that would directly
                identify the number of plans that will decide to use the proposed new
                alternative safe harbor. Therefore, for purposes of this analysis, the
                Department conservatively assumes that all plans will use the proposed
                alternative safe harbor for at least some of their covered individuals.
                As discussed in the Cost Saving section above, the Department has
                estimated that plans using the proposed new safe harbor would incur a
                one-time start-up cost to prepare the annual notice of internet
                availability, and prepare and distribute by paper the initial
                notification. The proposed rule's impact on the hour and cost burden
                associated with the Department's information collections are discussed
                below.
                 Agency: Employee Benefits Security Administration, Department of
                Labor.
                 Title: Consent to receive employee benefit plan disclosures
                electronically.
                 Type of Review: Revision of currently approved collection of
                information.
                 OMB Control Number: 1210-0121.
                 Affected Public: Individuals or households; Business or other for-
                profit; Not-for-profit institutions.
                 Respondents: 750,000.
                 Responses: 114,548,000.
                 Estimated Total Burden Hours: 1,209,000.
                 Estimated Total Costs: $40,652,000.
                 The expiration date for this information collection is May 31,
                2021.
                 As discussed earlier in this preamble, on April 9, 2002, the
                Department published a notice of final rulemaking on electronic
                disclosure and recordkeeping issues \119\ to establish a safe harbor
                for the use of electronic media to satisfy the general furnishing
                requirement. Based on public comments, the final regulation expanded
                the list of disclosures addressed by the safe harbor to disclosures
                under Title I generally. The final regulation also provided for the
                receipt of required disclosures at locations other than the workplace.
                For those participants and beneficiaries offered the opportunity and
                wishing to receive disclosures via electronic information systems
                outside the workplace, the final regulation requires advance
                affirmative consent on the part of the recipient.\120\
                ---------------------------------------------------------------------------
                 \119\ 67 FR 17264.
                 \120\ This requirement is incorporated at 29 CFR 2520.104b-
                1(c)(2)(ii)(A), (B), and (C).
                ---------------------------------------------------------------------------
                 Before consenting, the plan administrator must provide a
                participant or beneficiary with a clear and conspicuous statement
                indicating: The types of documents to which the consent would apply;
                that consent may be withdrawn at any time; the procedures for
                withdrawing consent and updating necessary information; the right to
                obtain a paper copy, free of charge; and any hardware and software
                requirements.
                 The Department is proposing to revise this information collection
                by adding the information collections that are associated with the
                alternative safe harbor in this proposal that are discussed above. This
                will increase the number of respondents for the information collection
                by 703,000, the responses by 109,756,000, the hour burden by 1,189, and
                the cost burden by $40,412.
                 Although the foregoing discussion pertains to the information
                collections contained in the existing safe harbor and proposed
                alternative new safe harbor, the Department's burden estimates for
                several existing information collections that are covered disclosures
                also would be affected by the proposal. Specifically, as a result of
                meeting the conditions of this existing and proposed new alternative
                safe harbors, the burden associated with the following existing covered
                disclosures that are information collections covered by the PRA would
                be reduced: The SPD, the SMM, the SAR, the annual funding notice,
                disclosures for participant directed individual account plans under
                ERISA section 404(a)(5), and the QDIA notice. The burden reductions
                resulting from a wider adoption of electronic delivery of covered
                disclosures that would be facilitated by this proposed regulation are
                estimated based upon cost and hour burdens for the Department's
                existing ICRs for the covered disclosures as adjusted for the number of
                plan and participants assumed to rely on the proposed rule to send and
                receive the covered disclosures electronically. The Department
                discusses these ICRs and its revised estimates below. The Department
                has submitted the revised information collections for these covered
                disclosures to OMB for review in accordance with 44 U.S.C. 3507(d).
                 Agency: Employee Benefits Security Administration, Department of
                Labor.
                 Title: Summary Plan Description Requirements under the ERISA.
                 Type of Review: Revised Collection.
                 OMB Control Number: 1210-0039.
                 Affected Public: Businesses or other for-profits, Not-for-profit
                institutions.
                 Respondents: 3,033,000.
                 Responses: 112,733,000.
                 Estimated Total Burden Hours: 164,000.
                 Estimated Total Costs: $233,051,000.
                 Description: Section 104(b) of ERISA requires the administrator of
                an employee benefit plan to furnish plan participants and certain
                beneficiaries with an SPD that describes, in language understandable to
                an average plan participant, the benefits, rights, and obligations of
                participants in the plan. The information required to be contained in
                the SPD is set forth in section 102(b) of ERISA. To the extent there is
                a material modification in the terms of the plan or a change in the
                required content of the SPD, section 104(b)(1) of ERISA requires the
                plan administrator to furnish participants and specified beneficiaries
                with a summary of material modifications (SMM) or summary of material
                reductions (SMR). The Department has issued regulations providing
                guidance on compliance with the requirements to furnish SPDs, SMMs, and
                SMRs. These regulations, which are codified at 29 CFR 2520.102-2,
                2520.102-3, and 29 CFR 2520.104b-2 and 29 CFR 2520.104b-3, contain
                information collections for which the Department has obtained OMB
                approval under OMB Control No. 1210-0039. The current approval is
                scheduled to expire on October 31, 2022.
                 The Department estimates that due to plan administrators' use of
                the proposed alternative safe harbor to provide disclosures to
                participants who currently are receiving them by mail, the hour burden
                will be reduced by 125,000 and the cost burden by $90,969,000.
                [[Page 56919]]
                 Agency: Employee Benefits Security Administration, Department of
                Labor.
                 Title: ERISA Summary Annual Report Requirement.
                 Type of Review: Revised Collection.
                 OMB Number: 1210-0040.
                 Affected Public: Not-for-profit institutions, Businesses or other
                for-profits.
                 Respondents: 744,000.
                 Responses: 170,629,000.
                 Estimated Total Burden Hours: 1,817,000.
                 Estimated Total Costs: $26,091,000.
                 Description: ERISA Section 104(b)(3) and the regulation published
                at 29 CFR 2520.104b-10 require, with certain exceptions, that
                administrators of employee benefit plans furnish annually to each
                participant and certain beneficiaries a summary annual report (SAR)
                meeting the requirements of the statute and regulation. The regulation
                prescribes the content and format of the SAR and the timing of its
                delivery. The SAR provides current information about the plan and
                assists those who receive it in understanding the plan's current
                financial operation and condition. It also explains participants' and
                beneficiaries' rights to receive further information on these issues.
                EBSA previously submitted the ICR provisions in the regulation at 29
                CFR 2520.104b-10 to OMB, and OMB approved the ICR under OMB Control No.
                1210-0040. The ICR approval is scheduled to expire on June 30, 2022.
                 The Department estimates that due to plan administrators' use of
                the proposed alternative safe harbor to provide disclosures to
                participants who currently are receiving them by mail, the cost burden
                will be reduced by $23, 132,000.
                 Agency: Employee Benefits Security Administration, Department of
                Labor.
                 Title: Annual Funding Notice for Defined Benefit Pension Plans.
                 Type of Review: Amendment of a currently approved collection of
                information.
                 OMB Control Number: 1210-0126.
                 Affected Public: Businesses or other for-profits, Not-for-profit
                institutions.
                 Respondents: 33,000.
                 Responses: 69,453,000.
                 Estimated Total Burden Hours: 713,000.
                 Estimated Total Costs: $7,510,000.
                 Description: Section 101(f) of the ERISA sets forth requirements
                applicable to furnishing annual funding notices. Before the enactment
                of the Pension Protection Act of 2006 (PPA), section 101(f) applied
                only to multiemployer defined benefit plans. The Department has issued
                multiple final regulations with regard to this provision, most recently
                on February 2, 2015 (80 FR 5625). Section 501(a) of the PPA amended
                section 101(f) of ERISA and made significant changes to the annual
                funding notice requirements. These amendments require administrators of
                all defined benefit plans that are subject to Title IV of ERISA, not
                only multiemployer plans, to provide an annual funding notice to the
                Pension Benefit Guaranty Corporation (PBGC), to each plan participant
                and beneficiary, to each labor organization representing such
                participants or beneficiaries, and, in the case of a multiemployer
                plan, to each employer that has an obligation to contribute to the
                plan. An annual funding notice must include, among other things, the
                plan's funding percentage, a statement of the value of the plan's
                assets and liabilities and a description of how the plan's assets are
                invested as of specific dates, and a description of the benefits under
                the plan that are eligible to be guaranteed by the PBGC. The ICR was
                approved by OMB under OMB Control Number 1210-0126, which is scheduled
                to expire on August 31, 2021.
                 The Department estimates that due to plan administrators' use of
                the proposed alternative safe harbor to provide disclosures to
                participants who currently are receiving them by mail, the cost burden
                will be reduced by $12,676,000.
                 Agency: Employee Benefits Security Administration, Department of
                Labor.
                 Title: Disclosures for Participant Directed Individual Account
                Plans.
                 Type of Review: Revised Collection.
                 OMB Control Number: 1210-0090.
                 Affected Public: Businesses or other for-profits, Not-for-profit
                institutions.
                 Respondents: 547,000.
                 Responses: 669,852,000.
                 Estimated Total Burden Hours: 6,439,000.
                 Estimated Total Costs: $209,764,000.
                 Description: Plan administrators are required to provide plan- and
                investment-related fee and expense information to participants and
                beneficiaries in all participant directed individual account plans
                (e.g., 401(k) plans) for plan years beginning on or after January 1,
                2011. The Department previously requested review of this information
                collection and obtained approval from OMB under OMB control number
                1210-0090. The ICR is scheduled to expire on April 30, 2022.
                 The Department estimates that due to plan administrators' use of
                the proposed alternative safe harbor to provide disclosures to
                participants who currently are receiving them by mail, the cost burden
                will be reduced by $42,307,000.
                 Agency: Employee Benefits Security Administration, Department of
                Labor.
                 Title: Default Investment Alternatives under Participant Directed
                Individual Account Plans.
                 Type of Review: Revised collection.
                 OMB Control Number: 1210-0132.
                 Affected Public: Not-for-profit institutions, Businesses or other
                for-profits.
                 Respondents: 276,000.
                 Responses: 36,250,000.
                 Estimated Total Burden Hours: 192,000.
                 Estimated Total Burden Costs: $1,842,000.
                 Description: Section 404(c) of ERISA states that participants or
                beneficiaries who can hold individual accounts under their pension
                plans, and who can exercise control over the assets in their accounts
                ``as determined in regulations of the Secretary [of Labor]'' will not
                be treated as fiduciaries of the plan. Moreover, no other plan
                fiduciary will be liable for any loss, or by reason of any breach,
                resulting from the participants' or beneficiaries exercise of control
                over their individual account assets.
                 The Pension Protection Act (PPA), Public Law 109-280, amended ERISA
                section 404(c) by adding subparagraph (c)(5)(A). The new subparagraph
                says that a participant in an individual account plan who fails to make
                investment elections regarding his or her account assets will
                nevertheless be treated as having exercised control over those assets
                so long as the plan provides appropriate notice (as specified) and
                invests the assets ``in accordance with regulations prescribed by the
                Secretary [of Labor].'' Section 404(c)(5)(A) further requires the
                Department of Labor (Department) to issue corresponding final
                regulations within six months after enactment of the PPA. The PPA was
                signed into law on August 17, 2006. The Department of Labor issued a
                final regulation under ERISA section 404(c)(5)(A) offering guidance on
                the types of investment vehicles that plans may choose as their
                ``qualified default investment alternative'' (QDIA). The regulation
                also outlines two information collections. First, it implements the
                statutory requirement that plans provide annual notices to participants
                and beneficiaries whose account assets could be invested in a QDIA.
                Second, the regulation requires plans to pass certain pertinent
                materials they receive relating to a QDIA to those participants and
                beneficiaries with assets invested in
                [[Page 56920]]
                the QDIA as well to provide certain information on request. The ICRs
                are approved under OMB Control Number 1210-0132, which is scheduled to
                expire on June 30, 2020.
                 The Department estimates that due to plan administrators' use of
                the proposed alternative safe harbor to provide disclosures to
                participants who currently are receiving them by mail, the cost burden
                will be reduced by $8,117,000.
                (6) Regulatory Flexibility Act
                 The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) imposes
                certain requirements with respect to Federal rules that are subject to
                the notice and comment requirements of section 553(b) of the
                Administrative Procedure Act (5 U.S.C. 551 et seq.) and that are likely
                to have a significant economic impact on a substantial number of small
                entities. Unless an agency determines that a proposal is not likely to
                have a significant economic impact on a substantial number of small
                entities, section 603 of the RFA requires the agency to present an
                initial regulatory flexibility analysis (IRFA) at the time of the
                publication of the notice of proposed rulemaking describing the impact
                of the rule on small entities. Small entities include small businesses,
                organizations, and governmental jurisdictions.
                 For purposes of analysis under the RFA, the Employee Benefits
                Security Administration (EBSA) continues to consider a small entity to
                be an employee benefit plan with fewer than 100 participants.\121\ The
                basis of this definition is found in section 104(a)(2) of ERISA, which
                permits the Secretary of Labor to prescribe simplified annual reports
                for pension plans that cover fewer than 100 participants. Under section
                104(a)(3), the Secretary may also provide for exemptions or simplified
                annual reporting and disclosure for welfare benefit plans. Pursuant to
                the authority of section 104(a)(3), the Department has previously
                issued at 29 CFR 2520.104-20, 2520.104-21, 2520.104-41, 2520.104-46 and
                2520.104b-10 certain simplified reporting provisions and limited
                exemptions from reporting and disclosure requirements for small plans,
                including unfunded or insured welfare plans covering fewer than 100
                participants and satisfying certain other requirements.
                ---------------------------------------------------------------------------
                 \121\ The Department consulted with the Small Business
                Administration in making this determination as required by 5 U.S.C.
                603(c) and 13 CFR 121.903(c).
                ---------------------------------------------------------------------------
                 Further, while some large employers may have small plans, in
                general small employers maintain most small plans. Thus, EBSA believes
                that assessing the impact of this proposed rule on small plans is an
                appropriate substitute for evaluating the effect on small entities. The
                definition of small entity considered appropriate for this purpose
                differs, however, from a definition of small business that is based on
                size standards promulgated by the Small Business Administration (SBA)
                (13 CFR 121.201) pursuant to the Small Business Act (15 U.S.C. 631 et
                seq.). Therefore, EBSA requests comments on the appropriateness of the
                size standard used in evaluating the impact of this proposed rule on
                small entities.
                 The Department has determined that this proposed rule is likely to
                have a significant impact on a substantial number of small entities
                based on the definition considered appropriate by EBSA as based on
                section 104(a)(2) of ERISA, as an employee benefit plan with fewer than
                100 participants. Therefore, the Department provides its IRFA of the
                proposed rule, below.
                (i) Need for and Objectives of the Rule
                 Pursuant to section 505 of ERISA, the Secretary of Labor has broad
                authority ``to prescribe such regulations as he finds necessary or
                appropriate to carry out the provisions of [Title I] of ERISA.'' As
                discussed earlier in this preamble, the proposed rule offers a
                voluntary alternative method to broaden the use of electronic delivery
                of disclosures and, thus, would reduce the costs and burdens that
                disclosures impose on employers and other plan fiduciaries responsible
                for their production and distribution. By reducing printing and mailing
                costs of covered disclosures, the proposed rule would benefit plans
                regardless of the size, large and small. Thus, the Department intends
                and expects that the proposed rule would deliver benefits to the
                participants of many small plans and their families, as well as many
                small plans themselves.
                (ii) Affected Small Entities
                 The majority of private retirement plans are small plans with fewer
                than 100 participants. The 2016 Form 5500 filings show out of total
                702,000 private retirement plans approximately 87 percent, 613,000
                ERISA-covered retirement plans were small plans with fewer than 100
                participants\122\ However, small plans cover only a fraction of total
                participants. In 2016, over 136 million individuals participated in
                private retirement plans. Out of these 136 million participants, over
                12 million participants, less than 10 percent, were in these small
                plans. The Department estimates that slightly more than half of these
                12 million participants of small plans already receive disclosures
                electronically. If this rule is finalized, the remaining half of
                participants are expected to be covered by this proposed rule, and
                therefore receive the notice of internet availability, and access the
                covered disclosures on their plan's website.
                ---------------------------------------------------------------------------
                 \122\ Private Pension Plan Bulletin 2016, Employee Benefits
                Security Administration, Department of Labor.
                ---------------------------------------------------------------------------
                (iii) Projected Reporting, Recordkeeping, and Other Compliance
                Requirements
                 As discussed above, by broadening a base of participants who access
                covered disclosures online, the proposed rule would yield cost savings
                to retirement plans including small plans. These cost savings could in
                turn be used to defray other plan-related expenses, and thus lower the
                overall fees charged to participants. In addition, although not
                required by the proposed rule, disclosures that effectively use modern
                technology features can better assist participants with disabilities or
                limited English skills to understand the content of disclosures, which
                will allow them to better manage their plan accounts. Both large and
                small plans would benefit from the cost savings and other benefits that
                result from wider use of e-disclosure.
                 As discussed in the preamble, this proposed rule is a voluntary
                safe harbor. Therefore, plan administrators would not be required to
                make any specific disclosures available on a website. This proposed
                rule would simply provide an additional method for plan administrators
                to deliver covered disclosures to participants and beneficiaries
                electronically and would not change any underlying reporting,
                disclosure and recordkeeping compliance requirements of plans under
                ERISA. Therefore, the Department does not believe this proposed rule
                would impose any additional reporting and recordkeeping compliance
                requirements on small entities.
                (iv) Duplicate, Overlapping, or Relevant Federal Rules
                 The proposed rule would provide retirement plans with an
                alternative method to furnish covered disclosures electronically. In an
                effort to assess how to best disseminate information electronically to
                workers participating in employee benefit plans without duplicating or
                overlapping other relevant regulatory requirements, the Department
                consulted with other relevant regulators, including the Treasury
                Department and the Securities
                [[Page 56921]]
                and Exchange Commission. The Treasury Department has interpretive
                jurisdiction over certain notices relating to pension plans covered by
                Title 1 of ERISA, but the covered disclosures under the proposed rule
                are exclusively in the jurisdiction of the Department. Although the
                Securities and Exchange Commission has jurisdiction over the issuers of
                investment products that often are used as ERISA employee retirement
                plan investments, as well as some service providers to ERISA-covered
                plans, it has no jurisdiction over ERISA-covered pension plans.
                (iv) Significant Alternatives Considered
                 The RFA directs the Department to consider significant alternatives
                that would accomplish the stated objective, while minimizing any
                significant adverse impact on small entities. As discussed above, the
                Department expects that this proposed rule, as currently drafted, would
                generate significant cost savings for small plans as well as large
                plans by eliminating materials, printing and mailing costs.
                 The Department considered an option to relax the notice of internet
                availability by emailing the combined notice of internet availability
                less frequently than on an annual basis. One of the disclosures that
                can be included in the combined annual notice of internet availability
                is a Pension Benefit Statement. This pension benefit statement is
                required to be furnished on a quarterly basis for certain types of
                plans. If the combined annual notice of internet availability is to be
                sent less frequently than an annual basis, for example, every other
                year, some participants may not know their benefit statements are
                available online, and thus not access them for an extended period of
                time. In the Department's view, this can have detrimental impacts on
                participants' retirement savings, while resulting in only minimal cost
                savings. Therefore, the Department determines that the current proposal
                is a more balanced approach that provides sufficient protection for
                participants while generating substantial cost savings. The Department
                further determines that this current approach does not impose any undue
                burden on small plans nor place small plans in disadvantaged positions.
                (7) Congressional Review Act
                 The proposed rule is subject to the Congressional Review Act (CRA)
                provisions of the Small Business Regulatory Enforcement Fairness Act of
                1996 (5 U.S.C. 801 et seq.) and, if finalized, will be transmitted to
                Congress and the Comptroller General for review. The proposed rule is a
                ``major rule'' as that term is defined in 5 U.S.C. 804(2), because it
                likely would result in an annual effect on the economy of $100 million
                or more.
                (8) Unfunded Mandates Reform Act
                 Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
                4) requires each Federal agency to prepare a written statement
                assessing the effects of any Federal mandate in a proposed or final
                agency rule that may result in an expenditure of $100 million or more
                (adjusted annually for inflation with the base year 1995) in any one
                year by State, local, and tribal governments, in the aggregate, or by
                the private sector. For purposes of the Unfunded Mandates Reform Act,
                as well as Executive Order 12875, this proposal would not include any
                Federal mandate that the Department expects would result in such
                expenditures by State, local, or tribal governments, or the private
                sector. This is because the proposal merely would provide an
                alternative safe harbor for pension benefit plans subject to the ERISA
                to use electronic media to furnish required disclosures to participants
                and beneficiaries.
                (9) Federalism Statement
                 Executive Order 13132 outlines fundamental principles of
                federalism. E.O. 13132 requires Federal agencies to follow specific
                criteria in forming and implementing policies that have ``substantial
                direct effects'' on the States, the relationship between the national
                Government and States, or on the distribution of power and
                responsibilities among the various levels of government. Federal
                agencies promulgating regulations that have federalism implications
                must consult with State and local officials and describe the extent of
                their consultation and the nature of the concerns of State and local
                officials in the preamble to the final rule.
                 In the Department's view, these proposed regulations would not have
                federalism implications because they would have not have a direct
                effect on the States, the relationship between the national Government
                and the States, and on the distribution of power and responsibilities
                among various levels of government. The Department welcomes input from
                affected States and other interested parties regarding this assessment.
                List of Subjects in 29 CFR Part 2520
                 Employee benefit plans, Pensions.
                 For the reasons stated in the preamble, the Department of Labor
                proposes to amend 29 CFR part 2520 as follows:
                PART 2520--RULES AND REGULATIONS FOR REPORTING AND DISCLOSURE
                0
                1. The authority citation for part 2520 continues to read as follows:
                 Authority: 29 U.S.C. 1021-1025, 1027, 1029-1031, 1059, 1134 and
                1135; and Secretary of Labor's Order 1-2011 77 FR 1088 (Jan. 9,
                2012). Sec. 2520.101-2 also issued under 29 U.S.C. 1132, 1181-1183,
                1181 note, 1185, 1185a-b, 1191, and 1191a-c. Secs. 2520.102-3,
                2520.104b-1 and 2520.104b-3 also issued under 29 U.S.C. 1003, 1181-
                1183, 1181 note, 1185, 1185a-b, 1191, and 1191a-c. Secs. 2520.104b-1
                and 2520.107 also issued under 26 U.S.C. 401 note, 111 Stat. 788.
                Sec. 2520.101-5 also issued under sec. 501 of Pub. L. 109-280, 120
                Stat. 780, and sec. 105(a), Pub. L. 110-458, 122 Stat. 5092.
                0
                2. Add Sec. 2520.104b-31 to read as follows:
                Sec. 2520.104b-31 Alternative method for disclosure through
                electronic media--Notice and access.
                 (a) Alternative method for disclosure through electronic media--
                Notice and access. As an alternative to Sec. 2520.104b-1(c), the
                administrator of an employee benefit plan satisfies the general
                furnishing obligation in Sec. 2520.104b-1(b)(1) with respect to
                covered individuals and covered documents, provided that the
                administrator complies with the notice, access, and other requirements
                of paragraphs (b) through (k) of this section, as applicable.
                 (b) Covered individual. For purposes of this section, a covered
                individual is a participant, beneficiary, or other individual entitled
                to covered documents and who, as a condition of employment, at
                commencement of plan participation, or otherwise, provides the
                employer, plan sponsor, or administrator (or an appropriate designee of
                any of the foregoing) with an electronic address, such as an email
                address or internet-connected mobile-computing-device (e.g.,
                ``smartphone'') number. Alternatively, 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.
                 (c) Covered documents. For purposes of this section, a covered
                document is:
                 (1) Pension benefit plans. In the case of an employee pension
                benefit plan, as defined in section 3(2) of the Act, any document that
                the administrator is required to furnish to participants and
                beneficiaries pursuant to Title I of the Act, except for any document
                that must be furnished upon request.
                [[Page 56922]]
                 (2) [Reserved]
                 (d) Notice of internet availability--(1) General. The administrator
                must furnish to each covered individual a notice of internet
                availability for each covered document in accordance with the
                requirements of this section.
                 (2) Timing of notice of internet availability. A notice of internet
                availability must be furnished at the time the covered document is made
                available on the website. However, if an administrator furnishes a
                combined notice of internet availability for more than one covered
                document, as permitted under paragraph (i) of this section, the
                requirements of this paragraph (d)(2) are treated as satisfied if the
                combined notice of internet availability is furnished each plan year,
                and, if the combined notice of internet availability was furnished in
                the prior plan year, no more than 14 months following the date the
                prior plan year's notice was furnished.
                 (3) Content of notice of internet availability. A notice of
                internet availability furnished pursuant to this section must contain
                the information set forth in paragraphs (d)(3)(i) through (vii) of this
                section:
                 (i) A prominent statement, for example as a title, legend, or
                subject line that reads, ``Disclosure About Your Retirement Plan.''
                 (ii) A statement that: ``Important information about your
                retirement plan is available at the website address below. Please
                review this information.''
                 (iii) A brief description of the covered document.
                 (iv) The internet website address where the covered document is
                available. The website address must be sufficiently specific to provide
                ready access to the covered document. A website address satisfies the
                standard in the preceding sentence if the address leads the covered
                individual directly to the covered document. A website address also
                satisfies 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.
                 (v) 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.
                 (vi) A statement of the right to opt out of receiving covered
                documents electronically, and an explanation of how to exercise this
                right.
                 (vii) A telephone number to contact the administrator or other
                designated representative of the plan.
                 (4) Form and manner of furnishing notice of internet availability.
                A notice of internet availability must:
                 (i) Be furnished electronically to the address referred to in
                paragraph (b) of this section;
                 (ii) Contain only the content specified in paragraph (d)(3) of this
                section, except that the administrator may include pictures, logos, or
                similar design elements, so long as the design is not inaccurate or
                misleading and the required content is clear;
                 (iii) Be furnished separately from any other documents or
                disclosures furnished to covered individuals, except as permitted under
                paragraph (i) of this section; and
                 (iv) Be written in a manner calculated to be understood by the
                average plan participant. 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 satisfies the understandability
                standard in the preceding sentence.
                 (e) Standards for internet website. (1) The administrator must
                ensure the existence of an internet website at which a covered
                individual is able to access covered documents.
                 (2) The administrator must take measures reasonably calculated to
                ensure that:
                 (i) The covered document is available on the website no later than
                the date on which the covered document must be furnished under the Act;
                 (ii) The covered document remains available on the website until it
                is superseded by a subsequent version of the covered document;
                 (iii) The covered document is presented on the website in a manner
                calculated to be understood by the average plan participant;
                 (iv) The covered document is presented on the website in a widely-
                available format or formats that are suitable to be both read online
                and printed clearly on paper;
                 (v) The covered document can be searched electronically by numbers,
                letters, or words; and
                 (vi) The covered document is 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) of this section.
                 (3) The administrator must take measures reasonably calculated to
                ensure that the website protects the confidentiality of personal
                information relating to any covered individual.
                 (f) Right to copies of paper documents or to opt out of electronic
                delivery. (1) Upon request from a covered individual, the administrator
                must promptly furnish to such individual, free of charge, a paper copy
                of a covered document.
                 (2) Covered individuals must have the right to opt out of
                electronic delivery and receive only paper versions of some or all
                covered documents. Upon request from a covered individual, the
                administrator must promptly comply with such an election.
                 (3) The administrator must establish and maintain reasonable
                procedures governing requests or elections under paragraphs (f)(1) and
                (2) of this section. 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.
                 (4) The system for furnishing a notice of internet availability
                must be designed to alert the administrator of a covered individual's
                invalid or inoperable electronic address. If the administrator is
                alerted that a covered individual's electronic address has become
                invalid or inoperable, such as if a notice of internet availability
                sent to that address is returned as undeliverable, the administrator
                must promptly take reasonable steps to cure the problem (for example,
                by furnishing a notice of internet availability to the covered
                individual's secondary electronic address that is valid and operable,
                if available, or obtaining a new valid and operable electronic address
                for the covered individual) or treat the covered individual as if he or
                she made an election under paragraph (f)(2) of this section. If the
                covered individual is treated as if he or she made an election under
                paragraph (f)(2) of this section, the administrator must furnish to the
                covered individual, as soon as is reasonably practicable, a paper
                version of the covered document identified in the undelivered notice of
                internet availability.
                 (g) Initial notification of default electronic delivery and right
                to opt out. The administrator must furnish to each individual, prior to
                the administrator's reliance on this section with respect to such
                individual, a notification on paper that some or all covered documents
                will be furnished electronically to an electronic address, a statement
                of the right to request and obtain a paper version of a covered
                document, free of charge, and of the right to opt out of receiving
                covered documents electronically, and an explanation of how to exercise
                these rights.
                 (h) Special rule for severance from employment. At the time a
                covered
                [[Page 56923]]
                individual who is an employee severs from employment with the employer,
                the administrator must take measures reasonably calculated to ensure
                the continued accuracy of the electronic address described in paragraph
                (b) of this section or to obtain a new electronic address that enables
                receipt of covered documents following the individual's severance from
                employment.
                 (i) Special rule for consolidation of certain notices of internet
                availability. Notwithstanding the requirements in paragraphs (d)(4)(ii)
                and (iii) of this section, an administrator may furnish one notice of
                internet availability that incorporates or combines the content
                required by paragraph (d)(3) of this section with respect to one or
                more of the following covered documents:
                 (1) A summary plan description, as required pursuant to section
                104(a) of the Act;
                 (2) A summary of material modification, as required pursuant to
                section 104(a) of the Act;
                 (3) A summary annual report, as required pursuant to section
                104(b)(3) of the Act;
                 (4) An annual funding notice, as required pursuant to section
                101(f) of the Act;
                 (5) An investment-related disclosure, as required pursuant to 29
                CFR 2550.404a-5(d);
                 (6) A qualified default investment alternative notice, as required
                pursuant to section 404(c)(5)(B) of the Act; and
                 (7) A pension benefit statement, as required pursuant to section
                105(a) of the Act.
                 (j) Reasonable procedures for compliance. The conditions of this
                section are satisfied, notwithstanding the fact that the covered
                documents described in paragraph (b) of this section are temporarily
                unavailable for a period of time in the manner required by this section
                due to unforeseeable events or circumstances beyond the control of the
                administrator, provided that:
                 (1) The administrator has reasonable procedures in place to ensure
                that the covered documents are available in the manner required by this
                section; and
                 (2) The administrator takes prompt action to ensure that the
                covered documents become available in the manner required by this
                section as soon as practicable following the earlier of the time at
                which the administrator knows or reasonably should know that the
                covered documents are temporarily unavailable in the manner required by
                this section.
                 (k) Effective and applicability dates--(1) Effective date. This
                section shall be effective on [date 60 days after date of publication
                of final rule].
                 (2) Applicability date. This section shall apply to employee
                benefit plans on the first day of the first calendar year following
                [date of publication of final rule].
                 Signed at Washington, DC, October 16, 2019.
                Preston Rutledge,
                Assistant Secretary, Employee Benefits Security Administration,
                Department of Labor.
                [FR Doc. 2019-22901 Filed 10-22-19; 8:45 am]
                 BILLING CODE 4510-29-P
                

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT