As new retirement fee disclosures go into effect this summer, a coalition of 15 retirement industry groups are urging the Department of Labor to allow broader use of electronic communication for retirement plan participant disclosures, which are now mailed in paper form to plan participants.
"It's just the way technology is going, you've got people of all ages using the Internet," says Brian Tate, VP, banking and securities at the Financial Services Roundtable, one of the agencies pushing for the changes. "We think it's just an effective way for our members to reach out with their customers."
The drive for e-disclosure
Disclosures are there to help plan participants properly plan for their retirement, but "paper is counter-productive to that," says Anne Kim, managing director for policy and strategy at the Progressive Policy Institute, a Washington-based progressive think tank. "Paper is static, it's outdated. If the government's goal is to really help people take charge of retirement, they are going in the wrong direction."
Judy Miller, director of retirement policy at ASPPA - another group advocating for the changes - says there are many reasons why this idea is so valuable, including that it is just easier to read information online and there are many more presentation tools that allow for simplification of sometimes complex information.
"There is an awful lot of paper going out already that is just getting trashed and it's a waste," she says. "There will be even more with the new disclosure rules kicking in, and depending on the nature of the investment, [people] will be getting, in some cases, a box of paper. And we don't think they will be reading it. We think it will be better if they were encouraged to go online where it's easier to drill down and get something out of it."
But, Miller stresses that the industry groups are not saying eliminate paper if a plan participant wants it, rather make it opt-in for paper, rather than opt-out. From a policy standpoint, using defaults such as automatic enrollment and default investments encourages good behavior, Miller says, with people getting more information out of information delivered electronically.
E-communication further allows access "anywhere, anytime, with the device of the user's choosing, and with a better filing system than paper notices," writes Ohio State University Law Professor Peter Swire, in a white paper, "Delivered ERISA Disclosure for Defined Contribution Plans."
That flexibility is important, Swire says, as with paper being stored in one place, "the lack of geographic flexibility can be an obstacle to examining documents and making investment decisions."
There is an additional cost savings involved, Swire says. While the preparation time to meet legal requirements would be the same, there is near zero marginal cost to send a few or a few million disclosures.
Will it happen?
The 15 trade associations pushing for the changes sent a letter to DOL at the end of March asking for the policy change, but have yet to receive an official response. "I think that the Department is aware of our concerns, but if you take a step back, you see more and more people, regardless of age, using the Internet and technology to communicate in a way that we couldn't think about five years ago," the Roundtable's Tate says.
Miller adds that while ASPPA is hoping that DOL will act, "we are, frankly, also talking with people on [Capitol] Hill. Because if DOL doesn't act, we are hoping Congress will give them a nudge."
It's inevitable, Kim says, that at some point DOL will change, but "it's a pity in the meantime that people are losing opportunities to take a more active role in managing their savings and getting access to the information they need while DOL sits on their hands.
"There's been enough interest on" moving to e-communication in government, such as IRS e-filing and paying parking tickets online. "The fact that DOL is behind will become so much more obvious," she says.
Tate says that in the end is it about the consumers as "we want to get the information to them as quick as possible. ... We do know they are working in a fast-paced environment ... let's try to make [this] as easy as we can."
Meanwhile, the DOL says in an e-mailed statement to EBA that it has "received a variety of letters on this issue in recent months and ... continue[s] to consider the issues raised in this letter and others that expressed differing perspectives and concerns. EBSA has not yet completed its broader evaluation of the current regulatory standards for the electronic distribution of disclosures required by ERISA, including the potential impacts on the rights and interests of plan participants and beneficiaries."
DOL says in the statement that in the interim, "the Department's current regulation and other guidance on electronic disclosures to participants and beneficiaries are available to plan administrators."
The letter to Phyllis C. Borzi, assistant secretary for the Employee Benefits Security Administration, is signed by 15 trade groups and Miller says that number is very helpful. "I think it's helpful for regulatory agencies when [they] don't have all of us coming in separately," she says. "When we can resolve our positions instead of ... telling them different stories."
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