If the proposal is adopted, electronic deliverycan be the default method for providing documents, so long asparticipants can opt out of the default if they prefer paperdocuments. (Photo: Shutterstock)

The country's largest sponsors of retirement plans are more thanready to move on a Labor Department proposal that would facilitatewider utilization of electronic plan documents.

"Employers have been looking at this for quite a while," saidAliya Robinson, senior vice president, retirement and compensationpolicy, for the ERISA Industry Committee.

"We are ready," she added.

Labor's proposed rule, which is currently open to a 30-daycomment period that closes November 22, would establish a new safeharbor for using electronic media to deliver required plan documents.

If the proposal is adopted, electronic delivery can be thedefault method for providing documents, so long as participants canopt out of the default if they prefer paper documents.

A 2002 safe harbor allowed electronic delivery, but with greaterrestrictions. The option could only be used for employees that are"wired at work"—meaning they have access to email or a computerportal as part of their work responsibilities.

And employees had to give affirmative consent to receivedocuments electronically. The original safe harbor will remainavailable to plan sponsors.

Utilization of the original safe harbor has been relativelyslack, which has resulted in higher costs to administer retirementplans, which may have been passed on to plan participants.

In 2016, Labor estimates that just under half of approximately120 million plan participants received plan documents through themail. Labor also estimates that the new proposed safe harbor willresult in $2.4 billion in savings over 10 years.

That slack take-up rate has been due to inertia, explainedRobinson. While more participants would prefer electronic delivery,they simply haven't taken the step to actively choose theoption.

With the new safe harbor, too, it's expected that inertia wouldstill be a factor, but the new safe harbor effectively flips thetable on the tendency: Participants will be less likely to opt outof electronic delivery if they are defaulted into the option.

Opportunity to expand retirement education

The cost savings will translate to participant savings, saidRobinson.

But large sponsors—ERIC represents employers with at least10,000 employees—see an opportunity to broaden already substantialefforts to increase financial literacy.

"They see this as a way to expand retirement education," saidRobinson.

Sponsors will have some latitude in how they deliver electronicdocuments. A workforce that is consistently at a computer can bedirected to a dedicated portal. Those that are more mobile mayreceive notices through emails.

In either case, electronic delivery will facilitate greaterconnections to retirement accounts, and vital information onsavings rates and other tailored data designed to enhanceretirement outcomes, said Robinson.

"What our plan sponsors like is the ability to layer informationso that it is useful to everyone. You can start with a first layer,then embed links to more detailed information," she said.

That ability to layer information electronically will naturallycreate simplified plan documents, thinks Robinson.

AARP has reservations

ERIC plans to file a comment letter that is appreciative of theproposal but will raise some technical issues, said Robinson. Theadvocacy also wants the new safe harbor extended to workplacehealth care plans.

While sponsors have been lobbying for a default electronicdelivery option over the past two decades, not everyone is onboard. AARP has been resistant to the option.

"We are reviewing the proposal carefully and look forward toproviding comments to the Department of Labor, but we already knowthat in a world of information overload, many people prefer to getimportant financial information delivered on paper, notelectronically," said Cristina Martin Firvida, vice president forfinancial security and consumer affairs at AARP, in an email.

"The reality is missed emails, misplaced passwords, anddifficulties reading complex information on a screen mean that mostpeople do not visit their retirement plan website on a regularbasis," she added.

ERIC's Robinson thinks AARP's concerns are misplaced, citingdata from Pew Charitable Trusts showing 73 percent of retired-ageAmericans use the internet, and 68 percent of baby boomers ownsmartphones.

"The opt-out provision in the new safe harbor takes care ofthose that will want or need paper documents," said Robinson.

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