DOL Needs to Strengthen Plan Disclosure Notice Requirements

DOL Needs to Strengthen Plan Disclosure Notice Requirements

A recent New York Times (NYT) article demonstrates why, in this age of online accounts, it’s so important to have and retain paper copies of our financial statements and documents, including retirement plan disclosures.

In the article, columnist Tara Siegal Bernard fielded a question from a woman living in Colorado who lost all traces of her retirement money held at Fidelity — not because the money was stolen, but because the electronic system keeping track of it malfunctioned and wiped clean all of her account information, including the fact of her ever having a relationship with Fidelity.

Fidelity ultimately was able to recover the woman’s accounts, but not before she had endured a high stress ordeal for nearly a week, fearing that tens of thousands of dollars of her retirement and other savings had permanently disappeared. In the end, she told the NYT that she was hindered in her effort to prove the existence of her accounts by not having any record of them and that she’s now “going to be sure to keep physical evidence of her accounts and balances in a secure place.”

From hearing similar stories, the Pension Rights Center has been a longtime advocate of making paper delivery the default when employees become members of their retirement plan, thus ensuring that it remains easy for people to get paper delivery through the mail or at their workplace of their retirement plan communications and disclosures. Doing so helps to guarantee that these records can be reviewed and retained so they are accessible if needed.

Consistent with PRC’s advocacy on behalf of workers and retirees, it recently filed comments to the U.S. Department of Labor (DOL) on a provision of the SECURE 2.0 Act, governing the obligation of private-sector retirement plans to give workers and retirees periodic paper statements about their plan rights and benefits earned.

In 2002, DOL changed its longstanding policy of requiring that virtually all retirement plan participants receive paper copies of mandated federal law disclosures at work or through the mail, permitting plans to default participants into electronic delivery if they are “wired at work,” such as working with their company’s computer system.

In 2020, the Department expanded electronic delivery to all individuals who have an email address or a smart phone. Those changes were particularly troubling in that they permit a retirement plan to simply provide an email notice that disclosures are available on a website – requiring people to find them on an electronic device.

“One of the fundamental rights granted under the federal private pension law (ERISA) is for workers, retirees and spouses to get essential information such as benefit statements, modifications to investment options, summaries of plan terms and rights, and other pertinent information,” said PRC’s Executive Director Karen Friedman. “These disclosures can be critical to individuals’ ability to prove their right to an earned benefit when this might be disputed by the plan.”

Furthermore, PRC’s comments to DOL pointed out that behavioral economic studies suggest that people are more likely to open a letter to view a paper document than they are to view a document attached to an email. Educational researchers have also found that many people read with greater comprehension when they are reading content on paper rather than on a computer or smart phone.

Among its recommendations, PRC urged the DOL to:

• Ensure that (1) all new employees get an initial paper notice telling them that they have the right to choose that all their retirement plan disclosures, not just their benefits statement, be on paper and (2) the notice includes the plan sponsor’s name, contact information and telephone number so employees can opt into paper disclosure and have the ability to prove their rights to plan benefits if ever needed.
• Develop a model notice to help plan sponsors understand their responsibilities on furnishing paper copies of individual benefit statements.
• Require that all participants and beneficiaries, whether they are getting their statements on paper or electronically, are allowed to access documents available on the plan website.