The Labor Department has delivered to the Office of Management and Budget its plan to allow 401(k) participants to receive electronic disclosures instead of paper ones.
“We are one step closer to common-sense rules on how retirement plan notices are delivered, potentially saving participants hundreds of millions of dollars a year,” said Brian Graff, president and CEO of the American Retirement Association, in a statement.
Labor’s proposal, Improving Effectiveness of and Reducing the Cost of Furnishing Required Notices and Disclosures, is in response to President Donald Trump’s 2018 executive order on Strengthening Retirement Security in America, which directed Labor to, among other matters, review its electronic disclosure rules to determine if they should be modernized.
OMB review generally takes 30 days.
“My best guess is that DOL will ‘modernize’ by essentially reversing the existing disclosure preference,” Steve Saxon, who specializes in Title 1 of the Employee Retirement Income Security Act at Groom Law Group, told ThinkAdvisor on Wednesday. Labor “will do this by preferring electronic disclosure over mailing, but allowing participants to opt out of electronic disclosure if they prefer mail.”
A report commissioned by the ARA and the Investment Company Institute in 2018 estimated that participants could save more than $500 million per year, assuming about eight participant mailings per year across more than 80 million 401(k) account holders.
By contrast, once an electronic notice is drafted, the incremental cost of email to one person is essentially zero, the study notes.