If plan sponsors want to switch from first-class mail to actual email to participants, once they’ve ensured they have an appropriate and accurate email address, they may want to take note of the rules around emailing plan documents to plan participants.
Changes to the laws around the post office may have arrived right on time. Many plan sponsors struggled with using first class mail during the pandemic due to the overload on the Post Office. But not so fast, struggles may still be on extended delivery. Here’s a quick survey of what plan sponsors may want to consider around first-class mail and plan disclosures.
Currently, the Department of Labor requires that plan sponsors use a limited number of delivery methods to get plan disclosures into the hands of their plan participants. Those methods are hand delivery, first class mail and, if possible, electronic delivery. But email, or a shared electronic delivery service, can only be used for “participants who “have access to the plan sponsor’s electronic information system on a daily basis as part of their work duties.” Work from home for some employees now may mean a four-day work week. That could mean some employees do not have “access to the plan sponsor’s electronic information system” on a daily basis. The result for some plan sponsors may be that they increase their use of first-class mail.
Plan Sponsors may also want to consult with counsel about whether first class mail fits within it’s Department of Labor requirements. Disclosure rules require that a plan sponsor “shall use measures reasonably calculated to ensure actual receipt of the material by plan participants, beneficiaries and other specified individuals.” First-class mail was thought to be the gold standard for ensuring that documents were received in a timely manner. But that might not be true. According to the Postmaster General’s website, performance for some states, like Colorado and Virginia are more than 6 points below its acceptable scale. That means mail is lost, delayed, or misdelivered more than 10% of the time. Importantly, for Delaware, that number is more than 11%. Plan Sponsors that rely on investment clearinghouses in Delaware may want to take note.
A new law, which garnered widespread supporting congress, was signed into law on April 6, 2022, may not give plan sponsors much relief. That is because it may lengthen mail times. Previously, plans had been made by the Postmaster General to make first class mailings more difficult. Those plans included cuts to post office hours and make significant changes to first class mail.” They also included “decommissioning hundreds of high-speed mail-sorting machines, eliminating overtime, banning additional trips to deliver the mail and removing sidewalk mailboxes that get less than 25 stamped mail pieces per day.” The law now “codif[ies] a minimum of six-day delivery of mail and packages into federal law.” This is a four day extension from the previous two to three day minimum for first class mail. Delays “disproportionately affect Western states and parts of Texas and Florida.” Now may be an excellent time to review the potential new law with your administrative staff to make sure all compliance issues can be handled appropriately.
If plan sponsors want to switch from first-class mail to actual email to participants, once they’ve ensured they have an appropriate and accurate email address, they may want to take note of the rules around emailing plan documents to plan participants. Sponsors should always consult with counsel before changing practice. Sponsors should consider also that DOL email rules require that the email should be drafted in a way that the average plan participant can understand it, and also include an identification or brief description of the document that is attached to the email. They may also want to keep in mind that an email with the document should be in a format that is widely readable and also can be later searched by number or letter.
These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, Advisors and Plan Sponsors should consult with their compliance, finance and legal teams.
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