The presence of redundant disclosures in the retirement industry can dilute the efficacy and intent of the documents and rules they were created for. So says noted TPA Eric Droblyen, President of Employee Fiduciary, explains why current participant rules are redundant making them less likely to be read and costlier defeating their purpose and subverting the goal of ERISA to provide reasonably priced retirement plans.
Fee disclosure is essential and participants have the right to know what they are paying but the number of rules have grown and the default method to distribute them is still paper. In addition, because cross-referencing is not allowed, the communications are lengthy making them less likely to be read.
Basic communications to employees include:
| Pre-Enrollment Disclosures | Annual Disclosures |
| All plans:
·Summary Plan Description (SPD) ·404a-5 Participant Fee Notice Some plans: ·Qualified Default Investment Alternative (QDIA) Notice |
All plans:
·404a-5 Participant Fee Notice Some plans: ·Qualified Default Investment Alternative (QDIA) Notice |
While the concern of regulators requiring communications through traditional paper methods might have been well intentioned 15 years ago when fewer people had access to a computer, the advent of smart phones and cheap tablets makes that concern out of date. As a result, participant paper communications add unnecessary costs while making them less likely to be read.
In 2015, The SPARK Institute published a white paper outlining a case for this change. In it, they cited the following advantages of electronic delivery:
- Allows participants to respond quickly to plan information received electronically;
- Ensures information remains up-to-date and is accessed by participants in “real time;”
- Provides information that is more accessible – and digestible;
- Provides information that can be more readily customized; and
- Provides a better guarantee of actual receipt of information.
Most companies, especially smaller ones with limited HR and benefits staff, have a hard time understanding and keeping up with all the rules and regulations to run their ERISA plan. Streamlining the process like the greater use of technology and cross-referencing participant communications not only makes sense, it can mean less cost and greater retirement savings.
Good work Eric!
