Retirement plan sponsors should be allowed to send information electronically to participants automatically, without their prior consent — a change in policy that some say would make disclosures more user-friendly and less costly.
A report due to be released this morning argues that making electronic distribution the default mechanism would allow people with defined-contribution plans to better understand their investments and account balances.
“Participants get notices that do more for them,” said Peter Swire, a professor of law at Ohio State University and co-author of the report. “They can access information anytime, anywhere and with any device.”
Information distributed electronically also can be “layered,” according to Mr. Swire. For instance, it can come with a simple notice “on top” and then offer a way to “click through” for more details.
“Participants can drill down at will,” Mr. Swire said.
Mr. Swire and Kenesa Ahmad wrote the report, which was sponsored by the Investment Company Institute, the American Society of Pension Professionals and Actuaries and the American Council of Life Insurers.
The groups are responding to a request for information from the Labor Department issued earlier this spring. The agency has received 73 responses regarding the electronic distribution of employee benefit plan information, such as quarterly statements.
The comment period ended June 6. The electronic disclosure white paper is being filed as a supplement to previous letters from ICI and ASPPA.
Under current rules, plan sponsors can provide electronic disclosures only after getting the consent of a participant — a requirement that is both costly and onerous, industry experts say. Instead, electronic distribution should be the norm, with people having the right to “opt out” if they prefer paper delivery, the groups assert.
Automatic “electronic communication is necessary because the current system is so burdensome and confusing for plan sponsors to use that they give up,” said ASPPA general counsel Craig Hoffman. “Getting that affirmative consent from your entire work force is very frustrating.”
One of the concerns about going entirely electronic is that it would leave less technologically inclined workers behind.
Mr. Swire says those worries are misplaced because of the nearly universal embrace of online communication.
“Internet access is in the ballpark with the historical level of telephone access,” said Mr. Swire, who served as an advisor on Internet privacy in the Clinton administration.
Minorities have increased their Internet use substantially, thanks to smart phones.
“Mobile devices have closed the digital divide,” Mr. Swire said.
Bridging the electronic chasm also can save plan sponsors money, according to the report. It used the example of a proposed fee-disclosure document.
“Electronic delivery of a single new four-page notice could produce savings of $36.7 million to $60.5 million per year in printing and mailing costs,” the report states.
Mary Podesta, ICI senior counsel for pension regulation, predicts that the “vast majority” retirement plans will move to electronic disclosure if it became the default procedure.
“That, in the end, would reduce some plan costs and reduce costs on the economy and environment,” she said.
The subject may sound prosaic, but it's a priority for plan sponsors, according to Stephen Saxon, an attorney at Groom Law Group.
“It's not a sexy issue. It's an important issue,” Mr. Saxon said during a SPARK Institute conference in Washington on Monday. “Getting affirmative consent from anybody is a problem. Give us some more flexibility. That's what's needed.”