DOL starts tackling SECURE 2.0 reporting and disclosure updates 

September 19, 2023

As a first step toward updating ERISA’s reporting and disclosure requirements for 10 different provisions of the SECURE 2.0 Act of 2022 (Div. T of Pub. L. No. 117-328), the Department of Labor (DOL) has issued an expansive request for information (RFI). The RFI covers SECURE 2.0’s new requirement for paper statements and other provisions that apply to defined contribution (DC) and defined benefit (DB) plans — including pooled employer plans (PEPs). However, the request doesn’t include a broader triagency directive aimed at modernizing and streamlining retirement plan disclosures. Comments are due by Oct. 10.

For plan years beginning after Dec. 31, 2025, DC plans must deliver at least one paper benefit statement per year (one every three years for DB plans). An exception applies if the statement is furnished electronically under DOL’s 2002 e-delivery safe harbor or the participant has affirmatively requested electronic delivery. In addition to summarizing the participant’s benefits, the paper statement must contain information on how participants can opt out of receiving the paper disclosure or request delivery of some or all disclosures on paper for no additional cost. The act also directs DOL to revise its two e-disclosure regulations.

SECURE 2.0’s paper statement requirement tightens the agency’s long-standing rules on e-delivery. DOL’s 2002 e-delivery safe harbor regulation allows sponsors and administrators to furnish ERISA disclosures electronically to current employees who are “wired at work” (i.e., who can effectively access the electronic document at their work location and have access to the employer's electronic information system as an integral part of their work duties), along with participants and beneficiaries who affirmatively consent. Employees who are wired at work don’t have to consent to e-disclosure but must be able to request paper copies of documents furnished electronically.

The act directs DOL to amend this regulation by Dec. 31, 2024, to require a one-time paper notice for participants who first become eligible to participate (or beneficiaries who first become eligible for benefits) after Dec. 31, 2025. The notice must be furnished before the plan e-delivers any benefit statement and inform individuals about their right to request paper copies of all required ERISA disclosures. The notice apparently won’t be required before e-delivery of other ERISA disclosures, such as summary plan descriptions (SPDs) or qualified default investment alternative (QDIA) notices. DOL requests input on this regulatory change, including whether the one-time paper notice should include additional information or what other standards should apply.

DOL’s alternative 2020 e-delivery regulation allows plan administrators to furnish e-disclosures through email or a “notice-and-access” framework that alerts participants when documents are posted to a website or other digital platform. Before e-delivering documents under the safe harbor, the plan administrator must provide an initial paper notice explaining the e-delivery method, including an explanation of how participants may receive paper copies of any covered document or opt out of e-delivery altogether.

DOL must update this regulation by Dec. 31, 2024, to reflect the new paper statement requirement and meet certain statutory directives. The directives include ensuring that participants and beneficiaries can request e-delivery of any document requiring paper delivery, and every document furnished electronically must explain how to request paper copies of all such documents.

DOL wants to know what modifications to the 2020 safe harbor are needed to implement this directive. The agency also asks whether and to what extent paper benefit statements required under the act should include content from the 2020 safe harbor’s initial paper notice.

DOL asks whether it should narrow both the 2002 and 2020 e-delivery safe harbors to require “access in fact,” although this is not required by SECURE 2.0. The 2002 safe harbor currently calls for appropriate measures reasonably calculated to ensure that e-delivery results in actual receipt, such as requesting a return receipt or notice of undelivered email. Under the 2020 safe harbor, an e-delivery system must alert the plan administrator to an invalid electronic address.

DOL wants to know if plan administrators can find out whether participants actually access or download e-disclosures, or determine the length of time participants view a particular electronic document. If these capabilities exist, DOL asks if it should require plan administrators to monitor whether participants affirmatively access e-disclosures and revert to paper disclosures for those who “forsake such access.”

The act doesn’t direct IRS to modify its long-standing electronic disclosure regulation, which applies a more flexible standard than either of DOL’s e-disclosure safe harbors. The IRS regulation allows furnishing notices required under the Internal Revenue Code (IRC) electronically without consent if the recipient has the “effective ability to access” those electronic documents. Plan sponsors and administrators using e-delivery that want to consolidate notices required under ERISA and the IRC (see below) need to keep in mind the lack of harmonization between the DOL and IRS e-disclosure regimes.

The bulk of other SECURE 2.0 provisions covered by the RFI affect only DC plans. (Provisions specific to DB plans are discussed below.)

Simplified disclosures for unenrolled participants. For plan years beginning after Dec. 31, 2022, SECURE 2.0 simplifies disclosure requirements for “unenrolled participants” (i.e., eligible employees who are not participating and have no account balance). As long as these employees received the plan’s SPD and other required disclosures when first eligible, DC plans only have to provide an annual reminder notice about participants’ eligibility to participate and any applicable election deadlines. The notice must be provided within a reasonable period before the beginning of each plan year. (Unenrolled participants can still request copies of any documents available to participants.) The RFI asks what guidance plan administrators need to implement this simplified disclosure, including whether it should include additional information and whether a model notice would be helpful. DOL also asks whether it should provide additional criteria for determining if participants are unenrolled.

Pension-linked emergency savings accounts. In plan years beginning after Dec. 31, 2023, DC sponsors can let nonhighly compensated employees contribute to short-term pension-linked emergency savings accounts (PLESAs). Employees can only contribute to these accounts on a Roth basis and can make withdrawals as frequently as monthly. Employers will have to provide an initial notice and annual notices explaining the accounts. (See SECURE 2.0 offers new alternative for in-plan emergency savings (July 7, 2023).) DOL invites comments on what guidance plan administrators need to implement the act’s ERISA requirements for PLESAs and how the agency should prioritize that guidance. The RFI also asks whether DOL should provide a model participant notice.

Blended performance benchmarks for asset allocation funds. DOL must issue regulations by Dec. 29, 2024, allowing (but not requiring) DC plan administrators to benchmark a designated investment alternative holding a mix of asset classes — such as a target-date or balanced fund — against a blend of securities market indices. DOL’s current participant investment disclosure rules only allow blended benchmarks as a supplement to a broad-based securities market index. The blend must be:

• Reasonably representative of the fund’s asset class holdings
• Modified at least once per year to reflect changes in the fund’s asset class holdings
• Furnished in a manner reasonably calculated for the average participant’s understanding
• Composed of underlying securities market indices that each would satisfy the current regulation’s requirements for their respective asset classes

The agency asks whether additional factors beyond these criteria should apply. DOL also asks what methods it could use to assess participants’ understanding of blended benchmarks for a subsequent report to Congress.

Consolidation of notices. The act directs DOL and Treasury to adopt regulations by Dec. 29, 2024, allowing plans to consolidate into a single notice two or more of the required notices regarding QDIAs, automatic enrollment and 401(k) plan safe harbors. The consolidated disclosure would need to meet the content, timing and frequency requirements for each individual notice. Suggesting that DOL isn’t certain about the need for regulations to allow this consolidation, the RFI asks for information about current “impediments” to consolidating these notices, as well as the benefits and drawbacks for both plans and participants.

DOL report on DC plan fee disclosure. DOL must explore improvements to the required content and design of DC plan fee disclosures to enhance participants’ understanding of fees and expenses, as well as the cumulative effect on retirement savings over time. DOL has until Dec. 29, 2025, to report its findings to Congress, including recommended consumer education on financial literacy concepts relating to retirement plan fees and recommended legislative changes to address the findings. The RFI seeks the following information to help DOL complete this review:

• The content and adequacy of information currently provided to help DC participants make informed investment decisions
• Any additional content not currently required — or different design, delivery or formatting of disclosures — that could enhance participants’ understanding plan costs
• Modifications to DOL’s model comparative chart that could enhance its effectiveness

The RFI also seeks input on two provisions specifically applicable to DB plans: lump sum window disclosures and annual funding notice (AFN) enhancements.

SECURE 2.0 requires plan administrators to provide extensive disclosures to participants and beneficiaries offered a period to elect a lump sum in lieu of future annuity payments. The disclosures — which participants must receive at least 90 days before the window opens — must include information about all available benefit options, the relative value of the lump sum compared with the plan’s annuities and a statement regarding the relative cost of a commercial annuity. The notice must also explain the ramifications of accepting the lump sum, including longevity risks, the loss of protection from the Pension Benefit Guaranty Corp. (PBGC) and creditors, and the loss of spousal and other ERISA protections. Plans must also report specified information to DOL and PBGC before the window opens and after it closes.

DOL must develop regulations — but not before Dec. 29, 2023 — including a model participant notice. The agency encourages commenters to submit “exemplary samples of notices” for it to consider. DOL also asks whether the model notice developed in 2015 by the ERISA Advisory Council would be a good starting point.

The agency asks several questions to help as it develops regulations:

• Do plan administrators need guidance for any of the specific content requirements of the participant notice, and if so, what guidance and why?
• What other potential ramifications of accepting a lump sum should DOL consider for the participant notice? The agency is particularly interested in whether transactional complexity, aging and cognitive decline, and financial literacy are relevant, given that some behavioral finance professionals believe that more and better information won’t necessarily ensure that people make good choices.
• Which additional mandatory notices or disclosures, if any, should DOL consider when developing regulations?
• What demographic or other information should DOL collect in the post-window report, beyond the number of participants and beneficiaries who were eligible for and took the offer?

SECURE 2.0 made several changes to the AFN content for single-employer DB plans, starting with the 2024 notice (due April 30, 2025, for calendar-year plans). Several of these changes will require reporting information as of the plan year-end rather than the beginning of the year, which may be challenging, given the relatively short time frame between plan year-end and the notice due date.

DOL asks whether guidance is needed on any of the amended content or the relationship of the disclosed year-end values to the beginning-of-year values that has to be disclosed on the supplement for plans using stabilized interest rates to determine the required minimum contribution. (The agency is apparently concerned that some participants may be confused by seeing two different funding percentages for the same plan. Yet affected plans have been disclosing two different measures of funded status since 2012, and the double disclosures are statutorily required.) The agency is also interested in comments on how to update the model notice to reflect SECURE 2.0 and what other changes would improve single-employer and multiemployer plan notices.

The act allows PEPs to designate any named fiduciary (other than a participating employer) to be responsible for collecting contributions for plan years beginning after Dec. 31, 2022. DOL expects to update Form PR, Registration for Pooled Plan Provider, and asks what other guidance PEPs and their providers need to implement this change.

By Dec. 29, 2027, and every five years afterwards, DOL must conduct a detailed study of PEPs and make a report to Congress. That report must describe the number of PEPs, range of available investment options, fees assessed by PEPs and certain other PEP-related information. While DOL expects to use Form PR and Form 5500, Annual Return/Report of Employee Benefit Plan, to gather much of this information, the RFI asks for other data sources the agency could use. DOL also seeks input on other elements of the report.

The RFI doesn’t seek input on the following SECURE 2.0 reporting and disclosure provisions:

• SECURE 2.0 directs DOL, Treasury and PBGC to jointly review reporting and disclosure requirements that apply to retirement plans under ERISA and the IRC. The agencies must consult with participant and employer representatives and prepare a report to Congress by Dec. 29, 2025, that recommends how to simplify and improve disclosures.
• The act directs DOL, in consultation with Treasury, to study the effect of inflation on retirement savings and submit findings to Congress by March 29.
• Plan sponsors must report certain information to facilitate DOL’s establishment and maintenance of an online Retirement Savings Lost and Found database that participants can search for information about retirement benefits.

The RFI also excludes SECURE 2.0 reporting and disclosure requirements contained only in the IRC and other requirements the agency has already started — or intends — to address separately.

• RFI on SECURE 2.0 reporting and disclosure (Federal Register, Aug. 11, 2023)
• Div. T of Pub. L. No. 117-328, the SECURE 2.0 Act of 2022 (Congress, Dec. 29, 2022)

• User’s guide to SECURE 2.0 (regularly updated)
• SECURE 2.0 offers new alternative for in-plan emergency savings (July 7, 2023)
• Form 5500 trilogy concludes with latest set of changes (March 13, 2023)
• Bill seeks new lump-sum buyout disclosures to participants, agencies (May 9, 2022)
• DOL finalizes pooled plan provider registration requirements (Nov. 20, 2020)
• DOL finalizes electronic delivery rule for retirement plan notices (June 1, 2020)