Criticism of DOL E-Delivery Proposal Misses the Mark, Experts Say

“We think there will be cost savings from e-delivery and that these cost savings will be passed on to individual consumers,” says Chris Spence of TIAA. “There is also an engagement factor to consider.”

Back in mid-August, the U.S. Department of Labor (DOL) asked the Office of Management and Budget (OMB) to review a proposed rule relating to the provision of default electronic disclosures to retirement plan participants.

The title of the rule is “Improving Effectiveness of and Reducing the Cost of Furnishing Required Notices and Disclosures.” According to the DOL leadership, the rule intends to reduce the costs and burdens imposed on employers and other plan fiduciaries responsible for the production and distribution of retirement plan disclosures required under Title I of the Employee Retirement Income Security Act (ERISA), as well as making these disclosures more understandable and useful for participants and beneficiaries. It would do this in part by making electronic delivery of plan documents the default method assumed by the law.

Since the rule’s submission to OMB, advocacy organizations associated with defined contribution (DC) plans, including the Investment Company Institute (ICI) and the SPARK Institute, have submitted supportive letters to the DOL’s Employee Benefits Security Administration (EBSA), which would be tasked with implementing any new rule in this area. Other supportive organizations include the American Bankers Association, the American Council of Life Insurers, the American Retirement Association, the ERISA Industry Committee, the Securities Industry and Financial Markets Association and the U.S. Chamber of Commerce.

On the other hand, entities such as the Coalition for Paper Options, which describes itself as “an alliance of consumer organizations, labor unions, rural advocates, and print communications industry organizations,” have called on the Trump Administration to reject the proposed rule. In explaining its opposition, the Coalition for Paper Options argues that the Department of Labor’s draft rule does not meet long-held standards for the proposal and adoption of new regulation.   

The Coalition for Paper Options argues that the Department of Labor’s proposed regulation fails to meet the key principle of Executive Order 12866, stating that any new regulation must address “market failure justifying new regulation,” a principle which the Coalition says “has governed U.S. regulatory planning and review for over 25 years.”

“Under the status quo, consumers who prefer their retirement plan disclosures in paper have their preference honored, and consumers who prefer electronic disclosure can opt-in to electronic delivery,” the group says in a letter to EBSA. “Citizens who prefer electronic information are taking this option, while others continue their preference for paper-based disclosures. In any event, the current system is working. … Millions of Americans without interest in or ready access to robust internet services may never see these notices again.”

Chris Spence, TIAA’s senior director of government relations, tells PLANSPONSOR he looks forward to seeing the real text of the proposed rule once the OMB completes its review.

“We expect that within the next month we will get to see the rule and exactly what the DOL has decided to do,” Spence says. “It’s too early to speculate on exactly what direction they have taken—we are anxiously awaiting the proposal so that we can start to digest it.”

Spence says TIAA and its peer organizations all support making e-delivery the default communication method for required disclosures under ERISA. He adds that there is also a proposal being circulated on Capitol Hill that will tackle the same issue legislatively and allow for electronic delivery to be the default method for delivering retirement plan documents.

“Why is this important? We think there will be cost savings and that these cost savings will be passed on to individual consumers,” Spence says. “There is also an engagement factor to consider. We have seen that people who engage with online resources tend to be more engaged with their retirement planning as a whole. There are so many tools made available online that just can’t be included in a paper statement. When you deliver a statement electronically, you can link people directly to a secure website that allows them to manage their account. They can see their most recent quarterly report. They can review their investments and their savings strategy. So, for all of these reasons, TIAA is very supportive of working with policymakers to get this change in place.”