2020 Retirement Plan DOL Regulatory Update

Each year, our Technical Services Committee creates a Regulatory Update covering the legislative, regulatory, and litigation developments affecting retirement plans. This year, we had a lot of material to cover with the SECURE Act, the CARES Act, developments in ESG guidance, plus much more. This year brought several regulatory changes from the Department of Labor (DOL). Here is a snip-it of the material we cover in this year's Update.

E-Disclosure Safe Harbor Rule

In May of this year, the DOL published its final rule providing a voluntary safe harbor to allow retirement plan administrators to provide certain retirement plan disclosures via e-mail or make them available on a website or mobile app. Under the rule, a plan administrator may send any documents that are required to be sent under Title I of the Employee Retirement Income Security Act (ERISA).

This would include:

  • summary plan descriptions
  • summary of material modification
  • statements
  • summary annual reports
  • fee disclosures
  • safe harbor notices QDIA notices
  • blackout notices

The rule does not apply to documents that are only required to be available on request or documents required by the IRS. These include 401(k) plan safe harbor notices, ERISA 204(h) notices, special tax notices related to plan distributions, and notices regarding IRS determination letter filings.

The notices may be sent to any participant in the plan who provides an email or a smartphone number for purposes of electronic delivery. Alternatively, if the employer has provided an employee with an email address for their employment, they will be viewed as having provided the email address.

Employees retain the right to opt-out of e-delivery, in which case the employer must continue to mail the documents.

Any electronic materials provided must follow these guidelines:

  • Communicated in a manner that could be understood by the average plan participant
  • Recipients must be able to search the information electronically
  • Must be in a format suitable for reading online or clearly printed and has the ability to be permanently retained in the format it was delivered

To be covered by this safe harbor, an employer must provide an initial paper notice to inform participants that they will now receive communications electronically. The paper notice must indicate the electronic address that will be used and let the individual know that they can opt-out. It must also describe how to access documents and indicate that some documents may only be available for a limited time.

When the employer begins sending electronic communications, there are certain notifications that must be included in each communication to ensure the employee is aware it is a plan communication.

New EBSA rule covering ESG investments in private employer retirement plans

On June 24, 2020, the DOL’s Employee Benefits Security Administration (EBSA) issued a proposed rule for the Financial Factors in Selecting Plan Investments. The rule seeks to clarify guidance for inclusion and selection of Environmental, Social, Governance investments (ESG).

The DOL has periodically updated guidance on ESG investments over the past three decades. As part of the press release for the proposed rule, the Secretary of Labor stated, “Private employer-sponsored retirement plans are not vehicles for furthering social goals or policy objectives that are not in the financial interest of the plan.

Rather, ERISA plans should be managed with an unwavering focus on a single, very important social goal: providing for the retirement security of American workers.”

At this time, we believe the following are important takeaways for plan sponsors of defined contribution plans:

  • ESG investments are not appropriate for a plan’s qualified default investment alternative
  • Document the inclusion of ESG criteria into your investment policy statement
  • ESG options should be included in an investment menu because you reasonably believe that they have a positive economic impact on the expected return and/or expected risk of an investment.
  • ESG options should not be included just to appease participants or make a subset of your plan population feel good
  • ESG options should be monitored and held to the same standards as other investment options

The public provided over 8,700 comments. The comment period ended on July 30, 2020. We will continue to monitor developments from EBSA as this preliminary rule moves forward.

Fiduciary Rule

The DOL’s new fiduciary rule was issued June 29, 2020 and published in the Federal Register[1] on July 7, 2020. There are three main pieces to the package.

First, effective immediately, it reinstates the “five-part test” for determining if a person is a fiduciary by providing investment advice for a fee. This was the status quo prior to the 2016 fiduciary rule, which was vacated by the 5th Circuit in 2018.

This is a confirmation of a field bulletin released by the DOL shortly after the rule was vacated. Per the DOL, to be considered fiduciary investment advice, the advisor must

“1. Render advice to the plan as to the value of securities or other property, or make recommendations as to the advisability of investing in, purchasing, or selling securities or other property,

  1. On a regular basis,
  2. Pursuant to a mutual agreement, arrangement, or understanding with the plan, plan fiduciary or IRA owner, that
  3. The advice will serve as a primary basis for investment decisions with respect to plan or IRA assets, and that
  4. The advice will be individualized based on the particular needs of the plan or IRA.”[2]Second, the DOL also provided further guidance on the five-part test as it relates to advice to roll over assets into an IRA. Service providers had long taken the view that this distribution advice did not meet the five-part test because it was not provided on a “regular basis” or that the advice would not serve as a “primary basis” for the decision. This was supported by Advisory Opinion 2005-23A (known as the “Deseret Letter”). The DOL now says that this was incorrect analysis and that distribution advice may be covered under the test if it is part of an ongoing relationship or serves as the start of an ongoing relationship.

Third, the DOL has proposed a new prohibited transaction exemption, which would allow investment advice fiduciaries to receive compensation as a result of providing fiduciary investment advice, including distribution advice, and to enter into principal transactions in which they may buy or sell certain securities from their inventories. In order to receive this exemption, the advice must be provided with a best interest standard, a reasonable compensation standard, and a requirement to not make materially misleading statements. The DOL has confirmed that the best interest standard is aligned with the requirements of the SEC’s recent Regulation Best Interest rule which went into effect June 30, 2020. 


[1] https://www.govinfo.gov/content/pkg/FR-2020-07-07/pdf/2020-14260.pdf

[2] https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/fact-sheets/improving-investment-advice-for-workers-and-retirees

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Multnomah Group is a registered investment adviser, registered with the Securities and Exchange Commission. Any information contained herein or on Multnomah Group’s website is provided for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Multnomah Group does not provide legal or tax advice.

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