The Department of Labor finalized a rule Thursday that permits default electronic delivery of retirement plan disclosures.
The rule, crafted by the Employee Benefits Security Administration, provides a 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.
It's a "common sense deregulatory effort that will improve the delivery of important retirement plan information to workers and retirees and save billions of dollars, while ensuring that workers obtain the right to make the decision on how to best access their retirement information," said Preston Rutledge, assistant secretary of labor for EBSA, in a call with reporters Thursday.
The Labor Department estimates the rule will save $3.2 billion over the next decade for Employee Retirement Income Security Act-covered retirement plans by cutting down on materials, printing and mailing costs.
Retirement plan administrators also have the option to use email to send disclosures directly to participants, but participants who prefer printed disclosures can opt out of electronic delivery. Moreover, a plan administrator may not default a participant into electronic delivery unless the participant has an email address and notifies the participant by paper that retirement documents will be furnished electronically.
Administrators also must notify participants by paper 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, Mr. Rutledge said. 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, he added.
"Electronic delivery will make disclosures more efficient, reduce plan costs to the ultimate benefit of plan participants, and during the current COVID crisis, allow plan administrators to continue sending important retirement plan information to participants without interruption during this period when paper delivery may not even be possible," Mr. Rutledge said.
Tim Rouse, executive director at the SPARK Institute, has been a big proponent of electronic delivery and said Thursday was a big day for the record-keeping community.
"Default electronic delivery works and the Labor Department's action today benefits millions of retirement savers by lowering costs and providing greater access to and deeper engagement with participants about their retirement savings," Mr. Rouse said in an email. "Our members have a wealth of online tools and resources that will be unleashed by this important modernization."
American Council of Life Insurers President and CEO Susan Neely said in a statement that the rule "represents smart public policy for the smart phone age. 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 the coronavirus pandemic. It only makes sense for people to have access to information about their retirement plans when they want it, wherever they are."
The rule, which was unveiled Oct. 22, comes after President Donald Trump signed an executive order in August 2018 directing the Labor Department to review how retirement plan disclosures required under ERISA could be made more understandable and useful for participants and beneficiaries, while also reducing the costs and burdens they impose on employers and other plan fiduciaries responsible for their production and distribution.
"This rule is an outstanding example of how commonsense deregulatory efforts can save billions of dollars," said Secretary of Labor Eugene Scalia in a new release. "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."
The new safe harbor is effective 60 days after its publication in the Federal Register. But the Labor Department said in a fact sheet that it will not take any enforcement action against a plan administrator that relies on this safe harbor before that date. "The department understands the far-reaching effects of COVID-19, and the non-enforcement policy provides flexibility and may reduce administrative burden on employers and pension plan service providers during this unprecedented time," it said.