The move would save an estimated $2.4 billion over the next 10 years for Employee Retirement Income Security Act-covered retirement plans by eliminating materials, printing and mailing costs, according to a Labor Department fact sheet. That figure is in line with a SPARK Institute report published Nov. 22 that found default electronic delivery would produce $250 million to $450 million in annual savings.
A 2015 SPARK survey of plan participants, in conjunction with research firm Greenwald & Associates, discovered that 84% of respondents were fine with making electronic delivery the default option.
"Any time you make things simpler it's more helpful for participants," said Aliya Robinson, senior vice president of retirement and compensation policy at the ERISA Industry Committee in Washington.
Sending important documents electronically allows participants to archive them easier, she added. "When you send something in paper, it may not be at the time that the participant actually needs that information and then it's up to the participant to hold onto that paper, file it and keep it someplace where they can find it again, as opposed to electronically where they can just do a search for that information," she said.
Karen Friedman, executive vice president and policy director for the Pension Rights Center in Washington, feels differently and in a statement called the proposal a "consumer nightmare."
"If this rule is adopted, employees and retirees would get one paper notice telling them that they have a chance to opt out of this electronic notice regime, and if they miss the chance it looks like they may be on a perpetual hunt for documents," Ms. Friedman said. "We're not even sure what the process is for them to opt into paper … it's not spelled out."
Despite their support for the proposal, supporters are concerned that its safe harbor does not include health and welfare plan disclosures.
Brian Kearney, a Denver-based principal in Mercer LLC's law and policy group, expects most of the comments submitted to the Labor Department to call for expanding the safe harbor.
"Expanding to welfare plans would add to the cost savings," he said. "It also just raises issues for employers having to follow two sets of rules for the different plans. It would just ease administration if they had one set of electronic disclosure rules that they could follow."
Jennifer Eller, a principal at Groom Law Group LLP and co-head of its fiduciary practice group in Washington, said many sponsors have combined benefits booklets that include information about retirement and health plans.
"Under the rule, it could be that you send the same booklet out electronically as it relates to retirement plan information, but because the rule doesn't apply to health and welfare (plans) you might have to mail it as well," she said. "It seems unfortunate."
Since health and welfare disclosures are more voluminous than retirement disclosures, it's likely more difficult for the Labor Department to decide what documents can be transmitted electronically, Ms. Eller said.
She thinks the Labor Department — after sifting through comment letters — will identify "a core universe of health and welfare plan documents" to be included under the rule. "Even that step would be very much appreciated," she said.
Dannae Delano, a St. Louis-based partner with The Wagner Law Group, is also expecting a rule expansion.
"The current administration has made it clear that they're trying to streamline employer obligations and costs related to some of these compliance issues," she said. "I think the DOL is going to be very receptive to suggestions that it be expanded. It would be pretty easy to limit it to the core ERISA-required documents if they wanted to do that and work out any other issues later."
Secretary of Labor Eugene Scalia said in a news release announcing the rule proposal last month that his department is "focusing on rule-making that eliminates unnecessary burdens while furthering the needs of the wage earners, job seekers and retirees of the United States."
The Labor Department issued a 30-day comment period for the proposal, which is shorter than past rule-makings. The shorter comment period suggests that the department is "looking to get it out ASAP and that might be part of the reason they've demurred on the health and welfare part for now, just to take more time separately to think about the health and welfare documents that they'd want this safe harbor to apply to," said Geoff Manville, principal, government relations at Mercer in Washington. "My guess is it would be on the fast track."