The Treasury and IRS have issued proposed regulations entitled “Use of Electronic Technologies for Providing Employee Benefit Notices and Transmitting Employee Benefit Elections and Consents.” The press release summarizes the regulations as follows:
The Treasury Department and IRS issued proposed regulations today regarding the use of electronic media to provide notices to employee benefit plan participants and beneficiaries and to transmit elections or consents from participants and beneficiaries to employee benefit plans.These regulations coordinate the rules in existing guidance for using electronic media for these purposes with the requirements of the E-SIGN statute (the Electronic Signatures in Global and National Commerce Act, Public Law 106-229). The regulations would allow a plan to use electronic media either under the E-SIGN consumer consent rules or under an alternative that is similar to the retirement plan rules for electronic transmission of plan information that were in effect before E-SIGN and that are both less burdensome on employers and as least as protective for participants.
Comments about the proposed regulations in general:
According to the preamble, the standards set forth in these proposed regulations would apply to any “notice, election, or similar communication” made to or by a participant or beneficiary under the following types of plans:
- a qualified plan
- a 403(b) plan
- a SEP
- a simple IRA plan under section 408(p)
- an eligible governmental plan under section 457(b)
- an accident and health plan under section 104(a)(3) or 105
- a cafeteria plan under section 125
- an educational assistance program under section 127
- a qualified transportation fringe benefit program under section 132
- an Archer Medical Savings Account under section 220
- or a health savings account under section 223.
The regulations state that they are meant to constitute the “exclusive rules relating to the use of electronic media” to satisfy a requirement under the Code that a communication be in written form, but would also act as “safe harbor” with respect to any communication that is not required to be in written form. The preamble states specifically that these proposed regulations would apply to section 402(f) notices, section 411(a)(11) notices, and section 204(h) notices.
What notices or communications are not covered by the new rules? The preamble states that they would not apply to any notice, election, consent, or disclosure required under the provisions of Title I or IV of ERISA over which the DOL or the PBGC has interpretative and regulatory authority. For example, the preamble states that the rules provided in 29 C.F.R. 2520.104b-1 of the Labor Regulations (which require an employee benefit plan to furnish disclosure documents, such as summary plan descriptions or summary annual reports) would continue to apply. They go on to note that the proposed regulations would also not apply to the following:
- Code section 411(a)(3)(B) (relating to suspension of benefits)
- Code section 4980B(f)(6) (relating to an individual’s COBRA rights)
- “or any other Code provision over which DOL and the PBGC have similar interpretative authority”
- “other requirements under the Code such as requirements related to tax reporting, tax records, or substantiation of expenses”
As to the effective date for the new rules, the regulations state that they are to apply “prospectively” and will apply “no earlier than the date of the publication of the Treasury decision adopting these rules as final regulations in the Federal Register.” The regulations make it clear that they “cannot be relied upon prior to their issuance as final regulations.”