The electronic data revolution has been a blessing in many,
many ways. It has had a few bumps in the
road, to be sure. Data breaches in the
systems of major retailers have put sensitive customer data at risk. We’re all familiar with the communications
monitoring and data sharing that has taken place between phone and internet
providers and government agencies, which some of us find troublesome from a
privacy standpoint. Theft of laptops,
hacking of computers, and high-profile security leaks by so-called
whistleblowers are further examples of the risks involved when information is
stored electronically.
That said, very few of us would want to go back to paper
shuffling and hard-copy transmission, storage and retrieval of information
where we don’t have to. Losing the electronic
efficiencies we now almost take for granted would be like stabling a horse in the
garage instead of a sedan or an SUV, and feeding hay and grain instead of
gasoline. From internet banking and
investing to online purchasing, just about any action or transaction you can
name has – or likely soon will have – an electronic dimension or means to execute. I suspect that very few of us would really
want to roll back the clock.
The world of retirement plans is pretty comfortable with
electronic functions, too. A 401(k) plan
participant can change investments, request a distribution, apply for a plan loan,
and generally interact with their employer’s plan at its web site with a few
keystrokes. The tax return of a
retirement plan, Form 5500, is typically submitted electronically to the
Department of Labor on behalf of the sponsoring employer. The same is true of the information returns
that track qualified plan and IRA transactions, Forms 1099-R and 5498 among
them.
But not all dimensions of retirement plan administration are
as electronically streamlined as they could be.
One example is what I believe to be the unnecessarily conservative posture of the Department
of Labor’s Employee Benefits Security Administration, which we know more
familiarly by its acronym EBSA. In many electronic
communication situations in the wider world there is a presumption that
information will be delivered electronically.
If a person wishes to receive that information in paper form they must
indicate this. If they fail to do so,
they are “defaulted” to electronic delivery.
This is the “new normal” in a great and growing share of communications
in modern commerce.
EBSA’s preference – reflected in its regulations governing
electronic delivery of retirement plan communications of many kinds – requires that
plan participants and beneficiaries affirmatively declare their willingness to
receive notices, election requests, summaries and other information,
electronically. Many in our industry, myself included,
believe EBSA should be more flexible and more in line with the rest of
financial industry in this area. Given
the inclination of many people to put off decision making, or to fail to take
action simply out of inertia, it is likely that the lack of an election to
receive communications electronically is not necessarily a rejection of that
form of delivery. An argument often made in
favor of more automatic enrollment and automatic escalation of deferrals in
401(k) plans – without affirmative election beforehand – is that people often
simply fail to act, for no good reason and that this "negative" consent method results in increased participation.
This same logic seems to apply to other plan related communication as well.
I’m not oblivious of the need for safeguards to avoid harming
the interests of participants and beneficiaries who are unable or unwilling to
receive plan communications in electronic form.
Their rights must be protected, and not everyone chooses to do things in
the most modern and up-to-date way. The option to request things in paper must be preserved. But
it is worth noting that the
IRS is onboard with a more streamlined, almost negative consent method for electronic delivery of some important
plan communications. It's clear EBSA seems not to be. I believe EBSA should take another step into
the modern electronic world and relax its current electronic delivery requirements.