Think Green: Have You Considered 401(k) e-Disclosures?

Anyone who has received stacks of mailed booklets, leaflets or other paper 401(k) disclosure materials might be cheering about the Department of Labor’s (DOL) recent rule that expands employer options for delivering retirement plan documents online.[1]

The Electronic Disclosure Safe Harbor for Retirement Plans went into effect July 27, 2020 as a “voluntary safe harbor for retirement plan administrators who want to use electronic media, as a default, to furnish covered documents to covered individuals, rather than sending potentially large volumes of paper documents through the mail.”[2]

This has many employers “thinking green” and considering a transition to a fully electronic delivery of 401(k) plan disclosure materials, which is also welcome news for many plan participants who are often overwhelmed by the extensive tiny-print disclosures they currently receive as required by ERISA each year.[3]  

Going green could save some green

Companies making this transition could see a cost savings. According to the DOL, the move will save approximately $3.2 billion in net costs over the next decade for ERISA-covered retirement plans by eliminating significant materials, printing and mailing costs associated with furnishing printed disclosures.[4]  

The DOL also shows that electronic delivery can create “cost savings (that could) ultimately be passed back to participants, translating to lower expenses – and higher net investment returns.”[5]

Additionally, another research study notes that participants may be able to respond quicker to plan information when received electronically because by providing real-time information, it is more accessible, digestible, and customizable.[6]

Considerations and helpful information  

Here’s what you need to know if you are considering a switch to fully online disclosures.

Under the new rule, the two options for electronic delivery are website posting and email delivery. Plan participants can receive the required notices and disclosures as long as they have access to the information electronically and they are properly notified of any changes.  

The move towards an environmentally friendly, more efficient, and cost-effective 401(k) disclosure process could be an opportunity for employers to enhance their retirement plan communication with plan participants.