The U.S. Department of Labor today announced publication of a final rule that permits default electronic delivery of retirement plan disclosures.
The rule allows employers to deliver disclosures to plan participants primarily electronically, which will reduce printing, mailing, and related plan costs by an estimated $3.2 billion over the next decade, the DOL said in a statement announcing the final rule. The rule will also make disclosures more readily accessible and useful for participants, but preserve the rights of those who prefer paper disclosures.
“This rule is an outstanding example of how commonsense deregulatory efforts can save billions of dollars,” said U.S. Secretary of Labor Eugene Scalia. “The rule will rely on widely available technology to keep workers and retirees informed about their plans, while still preserving the option to receive retirement information by mail. As we look ahead to reinvigorating the American economy, the Department of Labor’s priorities include eliminating unnecessary burdens for employers that sponsor retirement plans and on addressing the needs of wage earners, job seekers, and retirees.”
“This commonsense rule reflects today’s marketplace while retaining the ability of participants to choose how they receive their retirement information,” said Assistant Secretary of the Employee Benefits Security Administration Preston Rutledge, who is stepping down from the post on May 31.
“This is a terrific development and one that will help modernize the entire retirement system,” said Empower Retirement President and CEO Edmund F. Murphy III. “The enhanced flexibility, efficiency and cost savings that will likely result from this rule will ultimately be a benefit to the millions of private sector workers we serve. This rule is representative of the kind of progress for which the retirement industry should continue to strive.”
Doug Chittenden, head of Institutional Relationships at TIAA, praised the DOL for finalizing the rule.
“The new rule will significantly modernize and streamline retirement disclosures and ensure participants have access to high-quality information about their savings in the format they prefer,” Chittenden said. “Ultimately, wider use of e-delivery will result in decreased costs for plan sponsors, as well as improved retirement outcomes for individuals, both in the amount Americans save for retirement and the ways savers understand, monitor, and manage their retirement plans.”
American Council of Life Insurers (ACLI) President & CEO Susan Neely also released a statement Thursday on the new rule.
“Retirement savers won a big victory with this final action to have the federal government use modern communications tools to help consumers better access information. The Labor Department’s e-delivery rule represents smart public policy for the smart phone age,” Neely said.
“People are conducting business all the time over their phones and through other technologies. Digital capabilities are more important all the time and that’s been amplified by COVID-19. It only makes sense for people to have access to information about their retirement plans when they want it, wherever they are.”
On Oct. 22, 2019, the Department’s Employee Benefits Security Administration (EBSA) issued a proposed rule to allow plan administrators that satisfy certain conditions to notify retirement plan participants that required disclosures, such as a plan’s summary plan description, will be posted on a website. At the same time, participants can choose to opt out of electronic delivery or request paper copies of disclosures.
Following the Department’s proposal, plan sponsors and fiduciaries, plan service and investment providers, retirement plan and participant representatives, and other interested parties submitted several hundred written comments.
The final rule allows retirement plan administrators to furnish certain required disclosures using the proposed “notice-and-access” model. Retirement plan administrators also have the option to use email to send disclosures directly to participants. These administrators must notify plan participants about the online disclosures, provide information on how to access the disclosures, and inform participants of their rights to request paper or opt out completely.
The new rule also includes additional protections for retirement savers, such as accessibility and readability standards for online disclosures and system checks for invalid electronic addresses.
The final rule furthers President Trump’s Executive Order 13847, “Strengthening Retirement Security in America,” which called on the Secretary of Labor to review actions that could be taken to make retirement plan disclosures more understandable and useful for plan participants, while also reducing the costs and burdens the disclosures impose on employers and plan administrators.
This rule also may help some employers and the retirement plan industry in their economic recovery from the disruption caused by the coronavirus pandemic, the DOL statement said. Many retirement plan representatives and their service providers, for example, have indicated that they are experiencing increased difficulties and, in some cases, a present inability to furnish ERISA disclosures in paper form. Enhanced electronic delivery offers an immediate solution to some of these problems.
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
