Electronic disclosure for 401(k) plan participants is closer to reality with news that the Department of Labor sent proposed rules to the Office of Management and Budget.
Titled “Improving Effectiveness of and Reducing the Cost of Furnishing Required Notices and Disclosures,” supporters say the change would be more efficient and less wasteful than paper delivery, benefiting providers and workers alike.
“Breaking News—DOL sent proposed rules on electronic delivery of retirement plan disclosures to the Office of Management and Budget (OMB),” Brian Graff, Chief Executive Officer at the American Retirement Association, posted to LinkedIn on Wednesday. “We are one step closer to common-sense rules on how retirement plan notices are delivered potentially saving participants hundreds of millions of dollars a year.”
Switch to E-Delivery Saves Millions in 401(k) Plan Costs
A study ARA conducted with the Investment Company Institute last year found that electronic delivery would save 401(k) participants hundreds of millions of dollars annually.
“Current regulations requiring paper delivery of participant 401(k) plan information can cost investors between $350 and $500 million per year, which can reduce the average account balance by 2.4 percent over a 40-year work life,” ARA and ICI said at the time. “Working from the study’s estimated cost of paper delivery, the ARA finds that eliminating the cost of delivering paper notices to 80 million participants annually can translate into additional retirement savings of about 2.4 percent over a lifetime of work.”
In contrast, once a participant notice is drafted, the incremental cost of sending an email to one person is essentially zero.
“E-delivery can lead to increased saving and investing. The interactivity of e-delivery helps achieve public policy goals for DC plans of increasing retirement savings and enabling participants to better manage their accounts,” they added. “Participants could receive just-in-time notices, layered notices, contribution prompts and online calculators—with hyperlinks, allowing the user to simply click on a link when interested in learning more or taking an action.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
