Current Thinking

A Brave New Digital World

The very idea of “going digital” has become so commonplace that most people probably don’t even think about it anymore. While there will always be a few of the technology-resistant (or, in some cases, simply “tech-challenged”) among us, the use of such communications tools as websites, email and smartphone texting is rarely even worthy of comment.

That is, unless you are the U.S. Department of Labor (DOL) and the Employee Benefits Security Administration (EBSA), which had plenty of comments on those delivery systems – specifically, by issuing their final rule establishing “a new, additional safe harbor for employee benefit plan administrators to use electronic media, as a default, to furnish information to participants and beneficiaries of plans subject to the Employee Retirement Income Security Act of 1974 (ERISA).”

And yes, that translates as email, text messages, and websites.

Acting as a fiduciary for most of the clients we do business with in the ERISA 3(16) marketplace, we have had a keen interest in this topic for the past few years – and we are big proponents of the new rule,. As a measure that simplifies matters for plan participants, it is way overdue.

Essentially the rule allows plan administrators to send plan disclosures to participants primarily electronically – thereby saving an estimated $3.2 billion in printing, mailing and related plan costs over the next decade.

The rule will also make disclosures more readily accessible and useful for participants, they say, while preserving the rights of those who prefer paper disclosures.

“This rule is an outstanding example of how commonsense deregulatory efforts can save billions of dollars,” U.S. Secretary of Labor Eugene Scalia said in a statement. “The rule will rely on widely available technology to keep workers and retirees informed about their plans, while still preserving the option to receive retirement information by mail.

“As we look ahead to reinvigorating the American economy,” he added, “the Department of Labor’s priorities include eliminating unnecessary burdens for employers that sponsor retirement plans and on addressing the needs of wage earners, job seekers and retirees.”

Now, instead of essentially dropping a lot of paper on participants — which you can never be sure have been understood or even read — these types of communications are expected to be more effective and efficient.

There are two main ways of doing this electronically: Posting a notice on an easily accessible website, or sending a message directly to each participant via smartphone or email; the latter can be accomplished either in the body of the email or as an attachment.

Where before a participant was required to opt in to an electronic system, they will now be automatically signed up for electronic disclosures. However, should they want to opt out and receive any or all such documents in the regular mail, they have the right to do so. They can even opt out on a piece-by-piece basis, or take a “now and forever” approach.

The new rule also includes additional protections, such as accessibility and readability standards for online disclosures and system checks for invalid email addresses and smartphone numbers. One of the challenges for employers and plan sponsors will be to keep up with what participants are doing when it comes to changing their phone numbers or email addresses, or when they leave their employer.

Inevitably, there will also be cases where a participant does not have a smartphone but a landline, which cannot receive text messages. Such data must be kept current.

Another potential benefit of this new(ish) electronic approach is, according to EBSA, that it can help employers and sponsors overcome the disruptions in service they may have incurred due to COVID-19. Many such parties have reportedly said they have faced unusual challenges in delivering ERISA disclosures in paper form, due to reduced staff, temporary business closures, and the like.

A challenge to keep in mind is the necessity to maintain a website that contains the plan document and can include any or all new plan-related developments in one place for participants’ review. Even if the document is superseded in less than a year, however, you should keep the original online for at least one year.

Nevertheless, this is the dawning of a brave new world for the retirement industry – something that should prove to be a real game-changer.

About the Author

Richard Rausser

Richard W. Rausser has over 25 years of experience in the retirement benefits industry. He is Senior Vice President of Client Services at Pentegra Retirement Services, a leading provider of retirement plan, fiduciary outsourcing and institutional investment services to organizations nationwide. Rausser oversees the consulting, marketing and communications, non-qualified plan and BOLI business development and  actuarial service practice groups at Pentegra. He is a frequent speaker on retirement benefit topics; a Certified Pension Consultant (CPC); a Qualified Pension Administrator (QPA); a Qualified 401(k) Administrator (QKA); and a member of the American Society of Pension Professionals and Actuaries (ASPPA). He holds an M.B.A. in Finance from Fairleigh Dickinson University and a B.A. in Economics and Business Administration from Ursinus College.