White House reviewing DOL proposal on 401(k) plan electronic document disclosures
Proposal listed as “economically significant," meaning likely to have an annual impact on the economy of $100 million or more.
The Labor Department has sent a proposed rule for electronic disclosures to participants in 401(k) plans to the White House’s Office of Management and Budget.
The proposal, titled “Improving Effectiveness of and Reducing the Cost of Furnishing Required Notices and Disclosures,” is the result of President Trump’s 2018 executive order, “Strengthening Retirement Security in America.”
Under the order, Labor was instructed to review whether ERISA’s retirement plan disclosure requirements, fashioned in 1986, should be updated to make the documents more understandable for plan participants, while reducing cost burdens on employers and other plan fiduciaries.
“This review shall include an exploration of the potential for broader use of electronic delivery as a way to improve the effectiveness of disclosures and to reduce their associated costs and burdens,” the White Houses executive order said.
OMB typically takes 30 days or less to review a proposal—it was delivered to the White House on August 16. If it satisfies OMB’s policy and cost review, the proposal will be released to the public.
“It’s significant in that it’s the last step before a proposed rule gets published,” said Kevin Walsh, a partner with The Groom Law Group. “It signals DOL has finished its work on it.”
In 2011, the Labor Department issued a technical release clarifying a safe harbor provision on the electronic delivery of plan documents. Under the safe harbor, documents can be electronically delivered as long as participants consent to receiving the information digitally and those participants have access to a computer as part of their core work responsibilities.
That guidance was seen as overly restrictive by industry advocates. In a 2011 comment letter to Labor, The SPARK Institute cited two of its sponsor members that claimed only 25 percent of their participants had elected to receive plan information electronically.
Exactly how the proposal addresses the existing safe harbor restrictions won’t be known until the proposal is released, said Walsh.
The proposal is listed as “economically significant,” meaning it is likely to have an annual impact on the economy of $100 million or more.
Walsh said a public comment period on the proposal can be expected.
“There will be plenty of time for DOL to finalize a rule before any possible change in administration in the next election,” he said.
“This is low-hanging fruit,” added Walsh. “The DOL’s disclosure rules were written for an era where the presumption was people didn’t have access to computers. It’s an area where it’s reasonable to ask what has taken so long for DOL to update the rules.”