|Paperless Administration of Employee Benefits Plans: A Practical Analysis of the Unresolved Issues |
* Associate, Nexsen Pruet Jacobs & Pollard, LLP, Columbia, South Carolina; Michigan State University, B.A., 1996; University of South Carolina School of Law, J.D., 1999; University of Florida, LL.M. in Taxation, 2000.
As of 1997, 50 percent of employees in the United States have access to computers at work and a similar percentage of employees have access to the Internet or use electronic mail (“e-mail”) at the workplace. A recent survey indicated that 59 percent of corporate communications are transmitted electronically, a number which is expected to rise to 93 percent during the year 2000. Furthermore, 22 percent of survey respondents indicated that they currently use electronic technologies to enroll individuals in employee benefit plans, while an additional 53 percent expect to do so this year. Another survey found that 92 percent of workplace respondents either use or expect to use the Internet and e-mail for the distribution of benefit information.
Because these technological advances have increasingly permeated the work force, Congress recognized that employee benefit plan sponsors need official guidance relating to how electronic technologies may be used for plan administration. Specifically, in section 1510 of the Taxpayer Relief Act of 1997, Congress called upon both the Department of Labor (“DOL”) and the Treasury Department (“Treasury”) to issue guidance explaining how the new technologies may be used to satisfy the recordkeeping and writing requirements of the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code, respectively. Both the Treasury and the DOL responded to the Congressional mandate with proposed regulations which set forth rules governing these so-called paperless transactions. On February 8, 2000, the Treasury issued final regulations which, in large part, incorporate the standards originally pronounced in the proposed regulations.
The paperless technology requirements change the compliance procedures and logistics of benefit recordkeeping and reporting. In doing so, they create a number of legal and practical issues which have not been addressed administratively. This paper begins with a general discussion of the notice, election, consent, disclosure, time, and recordkeeping requirements of ERISA and the Code. It then examines the modifications made by the proposed Labor Regulations and the Final Treasury Regulations, and evaluates the advantages and disadvantages of paperless administration. The paper concludes by considering the issues that the Labor and Treasury Regulations leave unresolved. Specifically, this article analyzes the legal and practical difficulties that electronic technologies may create with respect to spousal consent, plan loans and fiduciary obligations under ERISA.
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