This is the fourth in our EGTRRA Restatement Series, the purpose of which is to help retirement plan sponsors handle the required amendment and restatement of their retirement plans. Last week, I discussed plan document choices.

Today’s post is about the Summary Plan Description ("SPD") and its distribution requirements – electronically speaking. For many retirement plan sponsors the SPD that’s part of the EGTRRA Restatement process may be the first in several years. So for purposes of this post (and brevity), I’ll conveniently cut through all the technical rules about content, timing, etc., and get right to distributing the SPD in the electronic world.

The Department of Labor (DOL) is the federal agency, of course, that has oversight responsibility for complying with ERISA’s reporting, disclosure and fiduciary rules. One of which is that Plan Administrators provide participants and beneficiaries with a copy of the SPD and Material Modifications of the Summary Plan Description (MMSPD) in a manner that is "reasonably calculated" to ensure the actual receipt of the documents.

But in an electronic business environment with email, websites, etc., how do you actually met this requirement. Like many aspects of ERISA that are facts and circumstances based, the regulators provide safe harbors.

The DOL issued safe harbor regulations permitting Plan Administrators to distribute SPD through electronic media as long as certain requirements were met. First issued as interim regulations in April, 1997, the DOL issued final regulations on April 9, 2002. These regulations apply not to just SPDs, but also to permit electronic distribution of COBRA notices, qualified domestic relations orders (QDROs), and qualified medical child support orders (QMCSOs).

Here’s a brief overview of the DOL’s safe harbor rules: First, retirement plan participants must be able to access electronic information as an integral part of their duties, and they must be able to access documents in electronic form anywhere they are reasonably expected to perform work. If not, then they must consent to electronic delivery.

The DOL safe harbor says that

  1. The electronic delivery system must confirm actual receipt of the transmitted information.
  2. The system must protect the confidentiality of participants by incorporating measures designed to designed to stop unauthorized access or receipt of the information.
  3. The electronic version of the document must be consistent with the style, content and format normally required.
  4. Notice of the document’s significance must be provided at the time of electronic delivery.
  5. The participant must be apprised of his or her right to receive a paper copy of the document free of charge upon request.

Note that all along I’ve been saying "distributed" and not just "made available". Thus, just simply posting it on the company intranet, for example, doesn’t meet the distribution requirement. Such was one of the holdings in a recent court case.

What are the consequences of a Plan Administrator to properly distribute an SPD? As with most ERISA disclosure requirements, there’s the potential for substantial financial penalties. It’s one of  those "kids don’t try this at home" ERISA matters. Check with your advisors first.

Next up, to submit or not to submit the Plan to the IRS for a determination letter, that is the question.