As technology progresses, the retirement industry is seeing digital trends take way in the workforce. One notable feature is the step towards electronic delivery methods for plan disclosures.
The Department of Labor (DOL) has proposed a rule aimed at increasing use of electronic disclosures to retirement plan participants. The rule would push towards reducing costs on employers and plan fiduciaries who are responsible for the production and distribution of retirement planning documents under Title I of the Employee Retirement Income Security Act (ERISA), according to the DOL.
While eight organizations—including the Investment Company Institute (ICI) and the SPARK Institute—have urged the DOL to prioritize electronic delivery since June, The Coalition for Paper Options argued against the proposal. The group cites a failure to meet key principals of Executive Order 12866, which would allow for those who prefer hard disclosure copies to receive them instead of automatically enrolling into e-delivery notifications.
“Under the status quo, consumers who prefer their retirement plan disclosures in paper have their preference honored, and consumers who prefer electronic disclosures can opt-in electronic delivery,” the group said in a letter to the Employee Benefits Security Administration (EBSA).
Even as the industry and society move towards more use of technology, paper copies of disclosures continue to be popular among participants. According to Consumer Action, a nonprofit organization that focuses on financial education for low- and mid-income and limited-English-speaking consumers, 49% of respondents to their 2018 ‘Paper of Digital?’ study prefer mailed copies of investment/brokerage account statements, and 42% favor paper when it comes to mutual fund annual reports.
Consumer Action says respondents in the study believe paper copies are simpler to read and easily accessible when utilized for future purposes. In the case of a power outage or another emergency where a computer is not available, having a paper copy on file can be handy. For individuals who don’t own computers or cannot access one, mailed copies allows them to still take control of their own finances.
However, a 2018 study update by the Investment Company Institute (ICI) and American Retirement Association says a lack of internet access isn’t a sound argument anymore. The organizations argue that in 2016, 93% of households owning defined contribution (DC) accounts had access to the internet, and 82% of households with DC accounts and an overall income under $20,000 used the internet in their homes. Additionally, 79% of households with DC accounts and an income of $20,000 to $39,999 utilized the internet.
Aside from their homes, most working participants continue to have internet accessibility in their offices, adds Sarah Holden, senior director of retirement and investment research at ICI. “Many participants do interact electronically with their 401(k) plan at work, and when they do that, we see some very positive results,” she says. “Participants who act with the plan website tend to have higher contribution rates than those who do not.”
A lack of internet accessibility isn’t the only reason some participants opt out of e-delivery notifications. Others prefer physical hard copies of their notices, where they could clearly see and indicate text, rather than squinting at a computer monitor or zooming onto a mobile device’s screen. Or, for those participants who would rather read notifications in another language, their hard copies have been mailed to them in their preferred language for years. However, Holden says, participants can access these same preferences with e-delivery, either by modifying the text on their screen to enhance their reading or switching a setting to their preferred language. It’s just up to the plan sponsor to implement these additional features.
“If you have an electronic version of a copy and want to make the font bigger, you can do that. We have more than 20 million employees who have some kind of vision loss, and that would be a great feature for them,” Holden explains. “We have about 25 million workers for whom English isn’t the language they want to read or understand these things, so you can easily translate an electronic document to another language.”
Outside from the issue of accessibility, plan sponsors can educate participants on the benefits of implementing e-delivery. Dependent upon the plan size, employers could host annual meetings with the recordkeeping firm to refresh plan details, such as employer contribution, and how adding e-delivery could simplify their own notification process, whether it’s including asset allocation or savings decisions.
“There are opportunities during routine plan education where a plan sponsor can highlight all of the features and benefits of the things that are online and indicate to people that they can opt for e-delivery,” says Holden.
And while the industry continues to push for e-delivery notifications, if a participant would rather opt for a paper copy, under the new rule, they could continue to receive one. Considering this, while employers can make the case for e-delivery notifications, at the end the day, participants have their choice to select, says Holden. “Just in the routine description of the plan, employers will highlight what is available online,” she says. “But in either scenario the plan sponsor will say this is a choice for participants.”
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