Participant Communication Advances with Use of Modern Technology

During a time when retirement plan participants are increasingly relying on online resources to access account information, a new rule from the Department of Labor (DOL) that greatly expands plan sponsors ability to deliver plan information by email or text couldn’t come at a better time. While this common way of communicating is present in our every day lives, previous rules made it restrictive and cumbersome to communicate ERISA plan documents prior to the ruling.

The 2020 final rule created a new safe harbor for electronically delivering these important plan documents as long as recipients have a valid email address or smartphone number. Plan sponsors must ensure their electronic delivery system alerts them when an address is invalid or number is inoperable. The new rule effectively allows for two new delivery systems beyond the traditional standards of in-hand delivery or first-class US mail.

The Electronic Delivery Methods:

Website posting: Plan sponsors may use this method if a notification of internet availability (NOIA) is provided to plan participants by email or text. The NOIA must contain the web address of or hyperlink to the document, along with a statement of the right to receive a free paper version and the right to opt out of electronic communications. Steps and contact information for how to do so must be provided.

Once posted to the website, the documents must remain until superseded by an updated version and never for less than one year.

Email delivery: Sponsors may also send disclosures directly to the e-mail addresses of plan participants with the documents in the body or as an attachment. In this instance, a NOIA is not required because disclosure is being provided directly to the participant.

It is important to note that when employment ends, administrators must take reasonably calculated measures to ensure the continued accuracy and availability of electronic addresses used to deliver the required ERISA documents, or take steps to obtain new, valid electronic addresses from plan participants.

Benefits of Email and Text Communication in Retirement Plans

The shift to default electronic delivery has many potential positive long-term effects on multiple aspects of retirement planning. A 2019 Spark Institute study on default electronic delivery showed that e-delivery of required notices could yield many benefits.

Reduced printing, processing, mailing and storage costs for plan administrators, ultimately benefiting participants.

Increasing participants’ engagement with online tools and educational resources available to them, driving increases in contributions and better overall retirement savings.

Providing information in a clearer and better organized fashion, allowing participants the ability to easily access any particular document or information they desire. For instance, websites generally present information on separate tabs that provide a concise format for the user to page through in a more searchable and digestible fashion than traditional printed materials.

Allowing administrators to be immediately alerted to delivery issues. In contrast, delivery of paper documents is a significant problem for many plans, particularly in regards to a high volume of return-mail. Mailing documents to physical addresses where the participant may no longer live can increase chances of fraud and decrease account security, particularly if the documents fall into the hands of fraudsters.

Enhancing cybersecurity and combating fraud. Studies have shown that when participants register their account online, the likelihood of fraudsters gaining improper access to their account decreases and participants can more easily monitor their account to ensure unauthorized activity doesn’t occur.

In light of research indicating that 90% of US adults use the internet today, the DOL believes the final rule has struck an appropriate balance between taking advantage of innovations and reduced costs that may be achieved, and ensuring suitable safeguards for participants and beneficiaries who simply prefer paper. The expansion of default electronic delivery types for retirement plan participants not only represents a significant improvement over current retirement plan disclosure rules, but experts believe that it has also left a door open to extending similar allowances to health and welfare plans. With this in mind, look for continued advancements in engaging technology from regulators and less paper to store in your personal files as Greenleaf Trust and other providers focus on implementing this new rule.