EBSA’s E-Disclosure Rule Is Final

Art by Pete Ryan

The Department of Labor (DOL) and its Employee Benefits Security Administration (EBSA) have published their much anticipated Electronic Disclosure Final Rule. The rule expands the ability of private sector employers to communicate mandated retirement plan disclosures and other information online or by email.

Largely mirroring the proposed version of the rule, put forward last year, the final rule allows employers to deliver disclosures to plan participants electronically by default, letting participants opt out and receive paper mailings if they prefer.

EBSA leadership says this measure will reduce printing, mailing and related plan costs by an estimated $3.2 billion over the next decade. The rule will also make disclosures more readily accessible and useful for participants, while preserving the rights of those who prefer paper disclosures, EBSA says.

“This rule is an outstanding example of how commonsense deregulatory efforts can save billions of dollars,” says U.S. Secretary of Labor Eugene Scalia in a statement published alongside the final rule. “The rule will rely on widely available technology to keep workers and retirees informed about their plans, while still preserving the option to receive retirement information by mail. As we look ahead to reinvigorating the American economy, the Department of Labor’s priorities include eliminating unnecessary burdens for employers that sponsor retirement plans and addressing the needs of wage earners, job seekers and retirees.”

Outgoing Assistant Secretary of the Employee Benefits Security Administration Preston Rutledge says the rule “reflects today’s marketplace while retaining the ability of participants to choose how they receive their retirement information.”

During the rulemaking process, EBSA received hundreds of comment letters from a diverse showing of parties in the retirement industry. Most voiced strong support for the e-delivery default rule, citing the desire of participants to access information digitally and the possibility of saving significant amounts of money and paper.

The final rule allows plan administrators to furnish certain required disclosures using the proposed “notice-and-access” model. Administrators also have the option to use email to send disclosures directly to participants. According to EBSA, the administrators must notify plan participants about the online disclosures, provide information on how to access them and inform participants of their rights to request paper or opt out completely. The new rule also includes extra protections for retirement savers, such as accessibility and readability standards for online disclosures and system checks for invalid electronic addresses.

EBSA says it expects this rule also may help some employers and the retirement plan industry in their economic recovery from the disruption caused by the coronavirus pandemic. Many retirement plan representatives and their service providers, for example, have indicated they are experiencing increased difficulties and, in some cases, a present inability to furnish Employee Retirement Income Security Act (ERISA) disclosures in paper form. Enhanced electronic delivery offers an immediate solution to some of these problems, EBSA says.

The State of Trump’s EBSA

Because it was under Rutledge’s tenure that EBSA proposed the e-disclosure rule, his leadership could be described as more dynamic than some predecessors’, says David Levine, a principal with Groom Law Group focused on retirement plan regulation and litigation under ERISA.

“The reality is that President Trump’s agenda is deregulatory; I would not say necessarily that it is anti-regulatory,” Levine observes. So, while EBSA and the DOL under Donald Trump have so far failed to enact a sweeping new fiduciary rule, it has been active in other areas.

“We have seen, for example, a continued focus on the issue of missing participants,” Levine says. “Under the leadership of Scalia and Rutledge, the department is still doing active enforcement in this area.”Levine in particular praises the e-disclosure rule. “I think this is one of the main successes coming out of the EBSA in the last few years. Compared with the strong reactions we have seen to other DOL rules published recently, default electronic document delivery has enjoyed broad-based support. So, that’s an impressive thing. Also, there’s the fact that, during the Trump administration, we have seen the internal reorganization of EBSA. In my view, it is still to be seen what the impact will be.”

Levine has heard that one goal of the reorganization, as viewed from inside EBSA, is to improve consistency and coordination across regions—which he and others argue would be a good thing for regulated entities.

Looking forward, Levine says, the industry is waiting to see whether the DOL and EBSA will roll out any new conflict of interest rules, especially given the creation of the national Regulation Best Interest (Reg BI) by the Securities and Exchange Commission (SEC). There is also additional interest in asking who will take on Rutledge’s job and what the confirmation process might look like, given the U.S. Senate’s clear prioritization of judicial appointments.