Electronic retirement plan documents could be the click to increased savings
The Department of Labor should adopt proposed expanded e-delivery rule
A solid argument could be made that delivering retirement plan documents electronically to working Americans would be more efficient, provide information more quickly and reduce clutter.
But the e-delivery effect could be something even more significant.
It could result in increased retirement savings and improved financial outcomes for working Americans saving for retirement.
The Department of Labor is considering a proposed rule for the retirement services industry that would expand the allowed uses of e-delivery of retirement plan disclosures and notices.
We think they should adopt it.
The idea of this expanded e-delivery rule has been bandied about for years. But in the summer of 2018, President Trump, in his executive order on Strengthening Retirement Security in America, directed the Department of Labor to explore the potential for broader use of electronic delivery as a way to improve the effectiveness of disclosures and reduce their associated costs and burdens.
In October, the DOL released a promising rule that would expand e-delivery as an option for employees receiving documents on their retirement savings plans. Employees would receive an e-mail or text message alerting them to new notices and documents available on their plans’ websites.
If employees wish to continue to receive paper disclosures and notices — and we know some will — they can.
Our retirement services industry has seen explosive transformation because of advances in technology. Alongside that transformation, employees’ expectations have changed too. In addition to information about their retirement savings plan, they want information about health savings accounts and student loan payments as well as overall financial wellness planning advice.
That’s why we believe the exciting effect of e-delivery for employees in workplace retirement plans is access to real-time information about their retirement benefits. People saving for their future financial freedom want to be involved in the planning and be able to map out financial plans in real time.
E-delivery means employees could be linked to their retirement plans alongside financial planning tools with the option for immediate action, including increasing retirement contributions or modifying investment strategies.
It means they would have instant access to a full range of financial tools that provide their whole financial picture, and they could quickly respond to the related information they receive.
Research shows that just being exposed to online tools encourages employees to increase deferrals or modify their investment strategies. Employees who have already opted for electronic delivery of their retirement plan notices have higher average deferral rates compared to those who have stayed with paper notices.1
In our 2017 and 2018 surveys on communications, we found that 68% of all respondents — including 65% of government employees who responded and 70% of non-government employees who responded — said they prefer receiving information about their plans via email because it’s convenient, efficient and reduced paper clutter.2
We serve the retirement needs of some of the nation’s biggest and best-known corporations plus thousands of small business as well as government clients and not-for-profits, and we work with over 38,000 plans with 9.2 million employees who are enrolled in their workplace savings plans. We want those employees to receive information in the format that is best for them.
Yes, electronic delivery of retirement plan documents would be more convenient and efficient and reduce clutter. But it may also be the prompt that encourages employees to save a little more. And we think that’s exciting.
1”Improving Outcomes with Electronic Delivery of Retirement Plan Documents,” The SPARK Institute. A total of 1,000 randomly selected plan participants nationwide were administered a 10-minute telephone survey. The results reflect the weighted (by age and gender) responses to reflect the current demographics of plan participants.
2In 2017, Empower Retirement conducted research among 2,000 retirement plan participants. Empower set out to improve its communications by making the complex easy to understand and accessible.