Retirement Plan Electronic Delivery Under Consideration
Retirement plan electronic delivery (e-delivery) may soon be the default method when a plan sponsor issues a retirement plan disclosure notice. This is predicated on the Department of Labor (DOL) acceptance of a recent proposal made by a group of industry organizations. As reported by a Planadviser, eight defined contribution (DC) plan industry organizations, including the Investment Company Institute (ICI) and The SPARK Institute, have sent a letter to the Employee Benefits Security Administration of the DOL asking it to propose regulations that would give plan sponsors permission to make retirement plan electronic delivery (or e-delivery) the default method of delivery for retirement plan disclosures and notices. If the regulations are passed, going forward, employees who did not want e-delivery would need to place a request to receive paper copies.
The industry correspondence states: “We would urge the Department to further prioritize electronic delivery as a part of any rulemaking to reduce costs and burdens, as outlined by the Executive Order… If finalized, those regulations would immediately make the retirement plan disclosures and notice more efficient and useful for retirement savers. Electronic delivery empowers retirement plan participants by providing them constant and real-time access to information about their retirement benefits and other online tools that can assist with retirement planning. It also could make disclosures and notices much less costly.”
The default e-delivery request follows on to President Trump’s Executive Order on Strengthening Retirement Security in America, signed on August 31, 2018. One directive in that order was for the DOL to review within a year how to make the retirement plan electronic delivery of a disclosure notice more understandable and usable. The order proposed e-delivery as one viable option, which would also reduce the cost of producing retirement plan disclosures, and in theory, make it easier and less expensive for plan sponsors to deliver them to participants.
The group of industry organizations making the request also notes that e-delivery could pave the way for linking from the disclosure notices to other key retirement plan documents and information, such as financial wellness, which would help plan sponsors and advisors further education, communication and awareness efforts around retirement plans. In this way, the retirement plan electronic delivery could potentially help to increase participant engagement. To wit, the ability to link to other key retirement plan information from e-delivered disclosure documents may also spur additional positive participant behaviors, such as increased deferral rates, according to the groups.
E-delivery of retirement plan disclosure documents — and potentially by extension, other plan-related documents in the future — offers three major benefits for plan sponsors and participants:
- Cost-savings: Going paperless via e-delivery saves paper, printing and mailing costs, which can potentially cut administrative expenses for an organization by hundreds, perhaps thousands of dollars per year.
- Convenience: E-delivery makes it easier for participants to find and store important retirement plan documents. E-delivered documents are much easier to find on a hard drive or inbox. Participants don’t have to worry about misplacing paper documents, and it will help them vastly cut down on paper clutter at home or work.
- Security: Cybersecurity is a concern that plan sponsors should certainly address when considering e-delivery methods of sensitive retirement plan documents. However, e-delivery of disclosure documents means they are more likely than physical mail to reach participants securely. Depending on the e-delivery technology available, documents can be sent using encrypted data so only the intended recipient can read the contents. Plan sponsors and participants won’t have to worry about mail getting lost at the post office or in transit, or about thieves with malicious intent getting ahold of sensitive retirement plan documents.
Organizations that have co-signed on the letter proposing e-delivery of retirement plan disclosure notices include the American Bankers Association, American Council of Life Insurers, American Retirement Association, ERISA Industry Committee, Investment Company Institute, Securities Industry, and Financial Markets Association, SPARK Institute and U.S. Chamber of Commerce.
At first blush, it appears that retirement plan electronic delivery of disclosure documents would provide the ease of use and convenience that President Trump proposed in his Executive Order last year. Plan sponsors and advisors should view this change favorably and watch this issue closely for response and action by the DOL.