The U.S. Department of Labor announced a proposed rule on October 22, 2019 to allow retirement plan disclosures to be posted online to reduce printing and mail expenses for employers and make disclosures more readily accessible and useful for employees.
“This proposal offers Americans choice in how they receive important retirement information,” said U.S. Secretary of Labor Eugene Scalia. “By adjusting for modern technology, the Department can help save billions of dollars in costs for the U.S. economy. The U.S. Department of Labor is focusing on rulemaking that eliminates unnecessary burdens while furthering the needs of the wage earners, job seekers, and retirees of the United States.”
In a fact sheet, the DOL said the proposal, titled the “Retirement Plans Electronic Disclosure Safe Harbor Rule,” would:
- Offer more disclosure options, which will benefit retirees, workers, and employers by enhancing communication regarding retirement savings.
- Save an estimated $2.4 billion net cost over the next 10 years for ERISA-covered retirement plans by eliminating materials, printing, and mailing costs associated with furnishing printed disclosures.
- Ensure workers’ rights to make the decision on how to best access their retirement information.
Reflecting modern internet technology, the proposal offers a new, voluntary safe harbor for employers who want to make retirement plan disclosures accessible on a website, rather than sending volumes of paper documents through the mail.
Plan participants would be notified that information is available online, including instructions for how to access the information, and they would be reminded of their right to paper copies of information.
“The Labor Department’s proposal reflects the reality that modern communications tools help today’s consumers better access information. Whether through smart devices or other technology, consumers needaccess to information about their retirement plans immediately, wherever they are. The proposal also protects consumers who prefer paper delivery,” said Jim Szostek, American Council of Life Insurers Vice President, Taxes and Retirement Security.
ACLI has long supported rules that facilitate the use of electronic delivery of plan information, and Szostek said ACLI is reviewing the proposal and will provide comments about it to the DOL.
Along with the proposed rule, the DOL also issued a Request for Information, soliciting input on the proposal from interested parties. The DOL will consider data and ideas on additional measures (beyond the proposed electronic delivery safe harbor) the Department could take in the future to improve the effectiveness of ERISA disclosures.
The request for information contains detailed questions covering a broad range of disclosure-related topics, including scope, content, design and delivery. The DOL said responses to these questions will enhance its record and inform whether additional changes should be made in response to that feedback in the future.
Information on how to comment can be found here, along with the full 115-page proposed rule document, scheduled to be published in the Federal Register Oct. 23.
Trump Executive Order spurs proposal
The proposed rule is designed to address the effectiveness of general standards for delivery of required disclosures established in the 2002 safe harbor, characterizing its conditions as hindering broader use of electronic delivery especially as the default method of delivery of retirement plan documents.
The DOL notes there are approximately 700,000 retirement plans covered by ERISA, and ERISA requires retirement plan administrators to furnish multiple documents per year to participants and beneficiaries.
The proposed rule would permit plan administrators to use electronic delivery as the default option to plan participants and beneficiaries with valid electronic addresses unless they specifically opt out of electronic delivery.
The issue was taken up in response to President Trump’s Aug. 31, 2018 Executive Order, “Strengthening Retirement Security in America,” which directed the DOL to complete a review of actions that could be taken to make retirement plan disclosures more understandable and useful for participants and beneficiaries, while also reducing the costs and burdens they impose on employers and other plan fiduciaries.
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.