FLASHPOINT: DOL PROPOSED REGS ON ONCE-PER-YEAR PAPER PARTICIPANT STATEMENTS
NOT NEARLY AS CUT-AND-DRIED AS YOU MIGHT THINK

By: Ilene H. Ferenczy, Esq.

SECURE 2.0 section 338 added rules to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and mandated changes to the related U.S. Department of Labor (“DOL”) regulations to provide that participants and beneficiaries should receive periodic paper statements documenting the amount of  their retirement plan benefits. This seems like a simple (albeit perhaps backwards) concept. Let us assure you: simple, it ain’t. But we are here to translate the rules for you.

What is the Actual Requirement?

At its core, new ERISA section 105(a)(2)(E) says that:

• A participant in a participant-directed defined contribution plan, who must be provided with four quarterly account statements per year, must get one of those statements on paper each year, rather than all four being sent to them electronically.
• A participant in a trustee-directed defined contribution plan, who must be provided with one annual statement of benefits per year, must get that statement on paper, rather than electronically.
• A participant in a defined benefit plan, who must be provided with one statement every three years, must get that statement on paper, rather than electronically.

We will refer to the statement required to be provided on paper as the “one-paper-statement” throughout this FlashPoint.

A Bit of History …

I know that for some of you, history was never your favorite school subject. However, history is important here, because it determines what you need to do under the new rules.

The DOL has addressed electronic delivery of disclosures to participants twice before now: once in 2002 [Labor Reg. §2520.104b-1(c)] (the “2002 Safe Harbor”) and once in 2020 [Labor Reg. §2520-104b-31] (the “2020 Safe Harbor”). Plans that provide electronic disclosures do so based on one of these safe harbors, even though the plan sponsors may not understand or know that. [We published a Flashpoint when the 2020 Safe Harbor was issued, which can give you more detail on these rules.]

Identifying which safe harbor is being used by a plan, or – for plans that apply different rules to different employee populations – which safe harbor is being used for each participant demographic, is needed to properly apply the new law. For many, this may very well be the hardest part of the implementation of these new requirements.

The 2002 Safe Harbor

Under the pre-SECURE 2.0 rules, a plan administrator relying on the 2002 Safe Harbor to provide electronic disclosures needs to do the following:

• Provide electronic disclosures only to those individuals who meet one of the following conditions:
  • Is “wired at work,” i.e., has electronic email provided by the company as an integral part of their duties; or
  • Affirmatively agrees to electronic delivery and provides to the plan an email address for such delivery.
• Provide a notice to each participant, beneficiary, or other recipient of disclosures, in either electronic or paper form, at the time that a disclosure is provided, advising them of the document’s significance and that the individual has a right to request and receive a paper copy.

Note that, under this Safe Harbor, an employer is allowed to default all wired-at-work employees to electronic delivery of disclosures. Employees who are not wired-at-work must consent to electronic disclosures, or they must get defaulted to paper disclosures. In other words, non-wired-at-work employees must “opt into” electronic disclosure (and some call this the “opt-in rule”).

Many recordkeepers facilitate this Safe Harbor by requiring participants, when they first log into their account, to consent to the future electronic disclosures.

Either employee category may affirmatively elect the other delivery method, if it is desired. Furthermore, there is no limitation under this Safe Harbor as to which disclosures under Title I of ERISA (i.e., DOL-mandated disclosures) are eligible for electronic delivery.

The 2020 Safe Harbor

The 2020 Safe Harbor approached electronic disclosure differently. You’ll see why this rule is commonly referred to as the “opt-out” rule for electronic disclosures. Under this structure, all “covered individuals” (participants, beneficiaries, or other individuals (such as alternate payees)) to whom disclosure is due are treated the same, regardless of whether they are wired-at-work, as long as there is an email address or cell number on file that can be used for electronic delivery. The 2020 Safe Harbor permits the plan to provide disclosures of most disclosures electronically, unless the covered individual “opts out,” that is, elects to get paper disclosures. This was a lovely, and environmentally sound, change of course for the DOL.

The disclosures under the 2020 Safe Harbor that can be delivered electronically do not include those required to be furnished only upon participant request (such as plan documents, the latest Form 5500/annual report, and other items listed in ERISA §104(b) related to the plan’s establishment and operation). However, those excluded disclosures could still be provided electronically by using the 2002 Safe Harbor rules for those documents (i.e., if the participant is wired-at-work or affirmatively elects electronic copies).

The 2020 Safe Harbor permits the transmission of applicable disclosures via email or the posting of such disclosures on the internet with an email or text message advising the participant how to access the post.

To be able to provide these electronic disclosures under the 2020 Safe Harbor, the plan is required to take the following steps:

• Before any electronic disclosure occurs, provide a paper notification called an “Initial Notice,” advising the covered individual that information will be sent electronically to such individual at a specified electronic address, and providing instructions for accessing that electronic information. The notice must provide additional information, including the right of the individual to request and receive paper disclosures (see the Flashpoint noted above for more details).
• Either:
  • When something is posted on the internet, send the covered individual an electronic Notice of Internet Availability (“NOIA”) advising them what the document is, that it is important, and giving the address or hyperlink to the document. The NOIA must repeat that the individual can elect to receive the specific disclosure on paper free of charge or opt out entirely from electronic delivery, and how to do that. Certain other information is required.
  • When a disclosure is attached to the email, rather than being posted on-line, provide the NOIA, referring to the attachment rather than to a web location.

The 2020 Safe Harbor also contains other requirements about ensuring delivery and obtaining new addresses when the participant terminates. It also provides that the plan can charge the participant to provide a paper document more than once. (Again, for more info, see our earlier FlashPoint.)

What About Tax-Based Documents under the Internal Revenue Code?

The 2002 and 2020 Safe Harbors were issued independently by the DOL, without coordination with the IRS. They are not applicable to tax-based disclosures under the Internal Revenue Code (the “Code”). The IRS electronic disclosure rules are in Treas. Reg. §1.401(a)-21, issued in 2006 and applicable in 2007, and deal with notices, as well as how a plan may obtain electronic consents.

The 2020 Safe Harbor provides that these rules can be used for tax-related disclosures if the IRS so permits. The preamble to the 2020 Safe Harbor included a statement by the DOL that those rules were intended to apply to the notices permitted to be disclosed under the IRS’s electronic disclosure regulations. The IRS hasn’t said anything about this at all in relation to the DOL Safe Harbors. It has not even acknowledged the DOL’s mention of IRS disclosures in the preamble to the 2020 Safe Harbor.

There is a glimmer of hope that the IRS might be ready to pick up the discussion.  It recently issued Notice 2026-4, regarding electronic furnishing requirements in relation to self-directed brokerage accounts.  We are not holding our collective breath.

Okay, Thanks for the Walk Down Memory Lane. What Do We Need to Do in 2026?

What adjustments need to be made to a plan’s current procedures depends on which of the two Safe Harbors is being used by the plan. The recordkeeper or TPA likely selected one of the two Safe Harbors for its clients (the DOL is pretty sure that most have historically chosen the 2020 Safe Harbor), but you may need to match what you do to the above descriptions to remember which option was elected. It’s also possible that one Safe Harbor is used for one group of employees (such as using the 2002 Safe Harbor for those who are wired-at-work), while the other is used for another group of employees. So, your clients may actually be using a combination of both Safe Harbors.

The New Rules are for the One-Paper-Statement Only

Nothing has changed in relation to other disclosures, such as Summary Plan Descriptions and annual notices, or the participant statements that are permitted to be provided electronically. The new rules affect only the one-paper-statement.

There are really four Categories into which participants may fall, and the requirements are different for each category.

Category 1: Pre-2026 Participants and Others Covered under the Wired-at-Work Portion of the 2002 Safe Harbor

The paper statement rules do not change for people who became entitled to benefits as a participant, beneficiary, or alternate payee prior to 2026 for plans using the 2002 Safe Harbor. No new notice is required and wired-at-work employees can continue getting all statements (including the one-paper-statement) electronically. However, the electronic statements must now state that the recipient can get paper copies of the electronically delivered documents and how and to whom to make that election.

Category 2:  Pre-2026 Participants and Others Who are Not Wired-at-Work and Covered under the 2002 Safe Harbor

These participants must receive the one-paper-statement unless they have affirmatively elected to get it electronically. While these individuals are not required to receive the new notice, you may want to provide it anyway so as to notify them that they have the right to elect to get the one-paper-statement electronically. This may also be a conservative way to ensure everyone required to get the notice gets it, rather than hoping the population is parsed correctly for the mailing.

Category 3: 2026+ Participants and Others Covered under the 2002 Safe Harbor

There is one change for new participants and others under the 2002 Safe Harbor. All employees (including those wired-at-work), beneficiaries, and others who first become eligible for benefits on or after January 1, 2026, must now receive a one-time Initial Notice. The notice previously provided to employees not wired-at-work can be used for both groups of employees, although it must be modified slightly from the pre-2026 document. This notice must now notify the covered individuals that all documents will be provided electronically, but that they have the right to get all documents on paper, and how to elect to do that. And, as under the new rules, the notice must continue to state that the employees who are not wired-at-work must affirmatively elect electronic disclosure to avoid paper.

Furthermore, every document provided electronically must continue to meet the 2002 Safe Harbor rules, which require that the individual be advised with the disclosure of his or her right to get a paper copy of the disclosure being provided and how to do that.

Category 4: Participants and Others Covered under the 2020 Safe Harbor

The regulations specifically preclude applying the 2020 Safe Harbor to the one-paper-statement. Only participants covered by the 2020 Safe Harbor who affirmatively elect to receive electronic statements may be excluded from the one-paper-statement requirement.

In other words, the SECURE 2.0 rules have flipped the default on its head for the one-paper-statement. Whereas, previously, the 2020 Safe Harbor defaulted to fully electronic disclosure, so long as the Initial Notice and the NOIA were provided, the new rules exclude the one-paper-statement from that treatment. Under the proposed regulations, the only way to avoid providing the one-paper-statement is for the participant to affirmatively elect (“opt-into”) electronic delivery.

Both the Initial Notice and the NOIA are still required for all covered individuals. However, with regard to the one-paper-statement, the individual must receive a notice that states that the one-paper-statement may be provided electronically only upon the participant’s affirmative election. The notice must explain how the participant can make that election, and identify who to contact to make the election.

The plan may not charge any fee for paper statements. (Note: This modifies the rule that permits the plan to charge for any disclosure already provided once on paper. The plan may no longer do this for benefit statements.)

One more thing: both the law and the proposed regulations make it clear that nothing prevents a plan from providing statements in both paper and electronic formats. So, if the plan wants to provide everyone with electronic copies, while providing some or all people with paper copies pursuant to the new rules, it can do so. While this may make administration easier, participants who do not want paper copies due to data security and identity theft concerns should be able to refuse to receive paper.

Our Thoughts and Recommendations

Just to get our opinion on record, we do not think that the vast majority of plan participants really needed Congress’s protection in regard to participant statement disclosure. At a time when smart phones, tablets, and computers are almost ubiquitous, and paper communications are becoming nearly obsolete, why plans are being taken back in time to the 1990s defies us. Changing everything to accommodate a very small population that is resisting technological change is putting the cart before the horse.

Nonetheless, it’s the law and we need to comply. What is the most sensible way to do so?

Note who needs to actually get paper statements under these rules.

If proper notice is given, there are three types of covered individuals who must receive the one-paper-statement under the new rules:

• Covered individuals becoming eligible for benefits after 2025 to whom no Safe Harbor applies, i.e., who receive no initial notice under either the 2002 or the 2020 Safe Harbor so that they are covered under neither;
• Employees entering the plan after 2025 who have received the modified 2002 Safe Harbor Notice, are not wired-at-work, and who have not affirmatively elected to receive electronic statements under the 2002 Safe Harbor; or
• Covered individuals who are not covered under the 2002 Safe Harbor and who have not affirmatively elected to receive electronic statements under the 2020 Safe Harbor.

Or, put differently, the only participants who default to electronic disclosure of all participant statements are those who are wired-at-work and have received the required 2002 Safe Harbor Notice or those who have affirmatively elected (after receiving the 2002 or 2020 Safe Harbor notices) to receive electronic statements.

For 2026, is it a foregone conclusion that all defined contribution participants covered under the 2020 Safe Harbor must get the one-paper-statement?

This is a logistics question. To avoid receiving the one-paper-statement, a participant must affirmatively elect electronic delivery. Under the 2020 Safe Harbor, the only notice the employee must get as to their right to get electronic statements is the statement itself. So, how will an affected participant know that such an election is needed?  On a practical basis, either the first one-paper-statement will always be provided or the plan administrator will need to provide a special paper notice to affected participants about the paper statement rule before the one-paper-statement is first issued.

From a practical standpoint, if you expect anyone to opt out of the paper statement, it is likely a good idea to provide the special paper notice before any statements are issued for the year.

Is it worthwhile if the 2002 Safe Harbor is used to treat post-2025 people differently than pre-2026 people?

Anytime the rules require you to bifurcate the participant population, the chances of errors rise. Furthermore, just the act of identifying which participants are subject to which rule takes time and effort. Is it worth it?

The only real difference in the 2002 Safe Harbor between the rules for pre-2026 people and the post-2025 people applies to wired-at-work employees, and is the requirement that only the newer people must receive the new initial notice. It is likely easier to just provide the 2002 Safe Harbor initial notice (as modified under the new rules) to all participants, to provide electronic statements to the wired-at-work employees, and to require anyone who is not wired-at-work to affirmatively elect to receive electronic documents (including the one-paper-statement).

If you are going to try to parse out participant populations, your ability to do so – ironically enough – may depend on whether it can be accomplished via electronic means. If it is easy to sort employees by entry date and treat them differently, you can do so. But remember as you do this: once people start getting notices and making elections, the entry date matters less than their elections, and you will need to accommodate that, too.

Can we just give the modified 2002 Safe Harbor Initial Notice to everyone and then use electronic delivery for everyone?

No. Only wired-at-work employees can default to electronic delivery, and only if they receive the Initial Notice. All other individuals must get the one-paper-statement, unless they affirmatively elect otherwise.

Also, be careful about those who cease to be wired-at-work, such as terminated employees with balances, beneficiaries, and alternate payees, who must give new email addresses and make affirmative elections.

Remember that the 2020 Safe Harbor does not apply to the one-paper-statement OR documents required to be provided only on demand.

The 2020 Safe Harbor does not apply to the one-paper-statement or the documents “required on demand.” Individuals must affirmatively elect to get electronic statements to avoid the one-paper-statement requirement.  Other documents that cannot be electronically delivered under the 2020 Safe Harbor may be delivered electronically if the 2002 Safe Harbor rules are met for them.

Don’t forget to add magic disclosure language to all participant statements beginning in 2026.

Be sure that all participant statements from now on contain the necessary language about the ability to decline delivery as provided and elect the opposite – i.e., electronic statements must offer participants the right to get paper statements, and paper statements must provide information about the right to elect electronic delivery.

Should we just throw in the towel and go back to paper delivery of statements once per year?

You need to assess how the plan permits electronic disclosure, and how diverse the employee population is. If things are really complex, it may be reasonable to just give paper statements to everyone (and, if you want, you can also provide duplicate electronic delivery to all).

If you choose this option, however, remember to consider that one of the advantages to electronic delivery is the security it provides. Financial information in a mailbox is much more prone to theft. Does the plan really want to take that chance with this information? What if your participants affirmatively object to this risk? Can you accommodate them on a participant-by-participant basis?

Effective Dates

These rules apply to statements provided in 2026 and later years. The regulations are only proposed at this time, so they contain language saying that the DOL will not take enforcement action against plans that try to comply with a good faith interpretation of the rules. We are not sure in what way you can deviate from the proposed regulations before they are finalized and still be considered to be acting in good faith. So it is likely best to comply as much as possible.

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We know that these rules are unduly complex. That’s why Alison Cohen and Derrin Watson are doing a webcast on ERISApedia on March 17, 2026, at 2 p.m. EDT. Give it a listen!

And, remember, if you have questions, please let us know. After all, we ARE your ERISA solution!

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The countdown to Pensions on Peachtree 2026 is on – and spots are going quickly! Don’t miss your chance to join FBLC for fresh insights, dynamic conversations, and CE credits.

Adventure awaits in Atlanta, April 23-24.

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