E-SIGN Notice Regs Require Ink For Spousal Consents

The U.S. Treasury Department and the Internal Revenue Service have released a final rule that will affect electronic communications with participants in many different kinds of employee benefit plans.

The final rule, “Use of Electronic Media for Providing Employee Benefit Notices and Making Employee Benefit Elections and Consents,” sets standards for using electronic systems to send notices to plan members and collecting consents and elections from participants.

The new Treasury regulations section created by the final rule, Section 1.401(a)-21, will not apply to certain types of notices, such as summary plan descriptions and COBRA health benefits continuation notices, that are regulated by the U.S. Department of Labor, but they do apply to most IRS-regulated communications issued on or after Jan. 1, 2007, by section 401(a), section 403(a), section 403(b) and section 457(b) retirement plans, Pamela Kinard, an IRS official, and other officials write in a discussion of the final rule published Friday in the Federal Register.

The regulations also apply to simplified employee pension plans; individual retirement plans, including Roth individual retirement accounts and seemed IRAs; section 104(a)(3) and section 105 plans; educational assistance programs; transportation benefit programs; medical savings accounts; and health savings accounts.

In addition, the regulations apply to categories of notices that the IRS left out of regulations released in 2000.

“Safe harbor notices under sections 401(k)(12)(D) and 401(m)(11), which are required to be in writing, can be provided electronically if the requirements of section 1.401(a)-21 of this chapter are satisfied,” Kinard and other IRS officials write in the preamble to the regulations.

To comply with the regulations, a plan sponsor must use subject lines in electronic mail or similar means to alert a recipient to the importance of a notice; store the communications for later reference; and provide the information in a form that is at least as easy to understand as a written paper document would be.

“A plan delivering a lengthy section 402(f) notice would not satisfy this requirement if the plan chose to provide the notice through a pre-recorded message on an automated phone system,” Kinard and other IRS officials write. “However, a plan with few distribution options is permitted to provide a section 411(a)(11) notice through the use of a pre-recorded message on an automated phone system.”

Employers can plan communications through a “consumer consent method” or, in some cases, a streamlined “alternative method.”