High Impact Tips for 401(k) Plan Sponsors: Information Overload!
For living in the information age, you’d think we’d have a better handle on it. We’re surrounded by volumes of information that is supposed to help us make better decisions, but unless we can corral, evaluate, and prioritize it, we’re just left with a lot of noise. And it is very hard to get away from that noise.
Maybe this is one reason why I like outdoors-y stuff so much. I dare you to furnish me with a Summary Plan Description when my bigger worry is how many ticks I’ll have in my hair after taking that last “trail.”
The reality is that retirement plans are fraught with regulations, and the general approach to regulations is “disclose the heck out of them” (I think that’s actually written in ERISA somewhere).
There is an upside to this, though. And that’s the opportunity for a plan sponsor to add value. The biggest way to do this is to…
Remember that information does not equal education, or even communication.
You would think that with the extensive requirements that plan sponsors must follow in communicating with participants, that the government has a pretty good idea of what is meaningful to employees. And that just following the letter of the law will result in happy, educated participants, better retirement outcomes, clouds parting, birds singing, etc. Right?
A lot of these disclosure requirements have some very good reasons behind them. Unfortunately, by the time the various legalists, lobbyists, and other -ists have had their say, the result is usually just more paper that participants don’t read because it is too overwhelming and confusing. Participants are not learning more, or even receiving your message in the first place. Back in 2012, I had to read the regulations surrounding the fee disclosure requirements that were new at the time, and I found it was actually quite funny reading the Paperwork Reduction Act explanation of how the new law was supposed to reduce the total amount of paperwork in circulation. Everyone who has worked with retirement plan disclosures for any length of time knows that exactly the opposite always happens.
That said, disclosures are important, and we have to live with them. And really, as I mentioned, the intent is good – it is just more a matter of information overload and lack of context. So when you give something to participants, take the time to explain it. For example, suppose that per a change in the plan’s employee cost-sharing policy, you need to send a revised disclosure to all participants. Rather than relying on them to read the disclosure and notice the changes from the last time the notice was distributed, consider providing an additional explanation of how it impacts them, the reasoning behind the decision, etc. You can reduce confusion and increase engagement, even if just a little bit, for very little effort.
And on a related note, a plan sponsor would do well to…
Learn to navigate the DOL regulations for electronic delivery.
Don’t fall into the trap of thinking that just emailing a required notice to everyone, or posting it on your company’s intranet or in the break room will count towards meeting disclosure regulations.
The government regulations were written for a paper-based society. And while electronic delivery guidelines and regulations have since been released, they are written as an add-on to this paper-based environment. There are very specific requirements that must be met for electronic delivery of communications. Generally, the gist is that if you want to email your participants something, for example, you need to make sure that everyone has access to a computer as a normal part of his or her workday, and are expected to have access to electronic employer information as a part of their regular job duties. For everyone else, you need to obtain written consent for electronic delivery, or else you must send via snail mail or hand-deliver.
There are other nuances to these rules. If you are not sure how or whether to deliver a specific notice electronically, you should reach out to your provider.
Yes, in the information age, overload is a reality. But with a bit of added perspective, participants will have just that much better of an understanding. So make sure you provide that context, all the while keeping the DOL delivery requirements in mind. And be grateful that we also live in the age of laser printers and copiers.
Scott Gehman, ERPA, CEBS
Retirement Plan Consultant