Earlier today, the Department of Labor (DOL) published its final rule to modernize retirement plan communications by permitting retirement plan documents to be delivered electronically by default. The SPARK Institute has long been working to expand the use of electronic delivery, which has been proven to provide higher-quality information, significant cost savings, and better retirement outcomes for retirement savers.
Tim Rouse, Executive Director of the SPARK Institute stated, “Default electronic delivery works and the Labor Department’s action today benefits millions of retirement savers by lowering costs and providing greater access to and deeper engagement with information about their retirement savings.” Rouse added, “Today is a great day for retirement savers. Retirement plan recordkeepers have a wealth of online tools and resources that will be unleashed by this commonsense modernization.”
The final DOL rule is similar in structure to the bipartisan RETIRE Act (H.R. 4610 / S. 3795), which the SPARK Institute helped to develop and worked to advance. Congressman Phil Roe (R-TN), one of the original sponsors of the RETIRE Act, added his praise for the DOL rule: “As a long-time supporter of e-delivery, I applaud Secretary Scalia and the Department of Labor for issuing this commonsense rule to allow plan participants to receive documents electronically by default.”
Previously, on October 23, 2019, DOL published a proposed rule that would give employers the option to use default electronic delivery, through a “notice and access” model, to deliver ERISA-required documents and notices to retirement plan participants.
Subsequently, in November 2019, the SPARK Institute wrote to the DOL in strong support of the proposed electronic delivery rule. At the time, the SPARK Institute also released updated research on the effectiveness of electronic delivery, “Default Electronic Delivery Works: Evidence of Improved Participant Outcomes from Electronic Delivery of Retirement Plan Documents.” The research concluded that the electronic delivery of retirement plan information provides an efficient, secure, and reliable means of communicating important plan information, which reduces costs and facilitates superior outcomes. The SPARK Institute’s research found that:
- A switch to default electronic delivery would produce between $250 and $450 million in annual aggregate savings that would accrue directly to individual retirement plan participants and improve participant retirement security by up to 9% during the accumulation phase.
- 99% of retirement plan participants have internet access and 88% use the internet on a daily basis.
- Driven by electronic delivery nudges and engagement with online tools, final account balances for retirement plan participants could increase by 63% with modest increases in their deferral rates.
- Under conservative assumptions, a 35-year-old worker who is defaulted into electronic delivery (in addition to engaging with online tools and educational resources) could gain 149% more in retirement savings at retirement.
- Electronic delivery provides a better guarantee of actual receipt of information, helping address missing participants and strengthening cybersecurity to prevent online account fraud.
On May 1, 2020, 15 trade associations wrote a joint letter to the Trump Administration supporting the DOL’s e-delivery rule, noting that it was “[T]imely and responsive to the ongoing COVID-19 pandemic which has changed the way that millions of Americans work and access information.” The joint letter, led by the SPARK Institute, was signed by: American Benefits Council, American Council of Life Insurers, American Retirement Association, The ERISA Industry Committee, Financial Services Institute, Insured Retirement Institute, The Investment Adviser Association, Investment Company Institute, National Association of Independent Life Brokerage Agencies, National Association of Insurance and Financial Advisors, National Association of Professional Employer Organizations, NTCA-The Rural Broadband Association, Securities Industry and Financial Markets Association, and U.S. Chamber of Commerce.
For more information, please contact Tim Rouse at email@example.com.
About the SPARK Institute
The SPARK Institute represents the interests of a broad-based cross section of retirement plan service providers and investment managers, including members that are banks, mutual fund companies, insurance companies, third-party administrators, trade clearing firms, and benefits consultants. Through the combined expertise of its member companies, the Institute provides research, education, testimony, and comments on pending legislative and regulatory issues to members of Congress and relevant Government agency officials. Collectively, its members serve approximately 100 million participants in 401(k) and other defined contribution plans.