November 20— The Pension Rights Center, a nonprofit consumer advocacy organization, charges that a new proposed Labor Department regulation would undermine the rights of workers and retirees to receive critical retirement information.
The Department of Labor, the agency charged with protecting workers’ and retirees’ retirement rights, should withdraw its proposed rule (Default Electronic Disclosure by Employee Pension Benefit Plans Under ERISA, RIN 1210–AB9) that would make it harder for workers to get the information they need to prepare for retirement and monitor their pension and 401(k) plans, the Pension Rights Center said this week.
The deadline to comment to the agency on the proposal is Friday, November 22.
“The new DOL proposed regulation is a consumer nightmare,” says Karen Friedman, the executive vice president of the Pension Rights Center, a nonprofit organization that protects the retirement security of workers, retirees and their families. “Instead of ensuring that people get the information that enables them to protect themselves, the agency has created an Alice in Wonderland scheme of electronic notifications that will have millions of workers and retirees and spouses scrambling down a rabbit hole of confusion to find documents – they now may never find again.”
Under the federal retirement law known as the Employee Retirement Income Security Act (ERISA), administrators of retirement plans are required to furnish understandable, important disclosures to workers, retirees and spouses so that they know their rights, know what benefits they’re entitled to, are aware of the fees they’re being charged, and can observe whether or not the plan is being managed to protect their interests. These disclosures are critical to helping workers plan for and achieve retirement security.
Currently, unless employees work at a computer – are “wired at work” as the Labor Department calls it – or have told their employer that they want to go “paperless,” they receive information about their plan on paper through the mail.
However, caving in to lobbying by the financial services industry, the DOL now proposes not only to reverse the current system, but to replace it with something called, “notice and access.” Under the proposal, employers are permitted to send employees e-mails and texts telling them that one or more important documents are available on a website. Employees would then need to find a computer in which to download and print the document if they wanted to read paper copies.
“If this rule is adopted, employees and retirees would get one paper notice telling them that they have a chance to opt out of this electronic notice regime, and if they miss the chance it looks like they may be on a perpetual hunt for documents,” Friedman observed. “We’re not even sure what the process is for them to opt into paper…it’s not spelled out.”
Consumer Protections Weakened
Studies show that access to the internet and broadband still varies substantially by education, age, income, race and ethnicity and geography. Making a new form of electronic delivery the default means of delivering retirement information would effectively weaken consumer protections for participants and beneficiaries, the very people whom the disclosures are intended to protect.
Currently, longstanding regulations require plans to furnish disclosures and take steps to ensure actual receipt of the disclosure by participants and beneficiaries.
However, the proposed regulation reverses the system from one requiring actual receipt of paper disclosures sent by mail to a default system of electronic hide and seek. Plans would not need to send an electronic version of the disclosure to the consumer. They would only need to electronically notify participants that a disclosure document is available on a website, then the burden would fall on participants or beneficiaries to take the numerous steps to find it.
This new proposed regulation is a giveaway to the financial services industry and shifts costs on to consumers.
For further information, contact Karen Friedman at 202-296-3776.