RegulationAugust 3, 2020

Advocacy Group Calls New Labor Department Rule ‘Anti-Consumer’

Pension Rights Center says the policy contradicts recent Supreme Court ruling and DOL guidance.

Reported by Michael Katz

The Pension Rights Center (PRC), a pension advocacy group, has called a new Department of Labor (DOL) disclosure rule “anti-consumer,” saying it will adversely affect people’s ability to plan for retirement and prove their entitlement to benefits. The new rule allows retirement plans to send individuals a notice by text or email telling them that key information about their plan is available on a website, rather than having to send the information directly to the participants.

The rule allows plan administrators who satisfy specified conditions to provide participants and beneficiaries with a notice that certain disclosures will be made available on a website, or to furnish disclosures via email. However, anyone who prefers to receive paper disclosures can opt out of electronic delivery entirely.

“The department expects the rule to enhance the effectiveness of ERISA [Employee Retirement Income Security Act] disclosures and significantly reduce the costs and burden associated with furnishing many of the recurring and most costly disclosures,” said the DOL’s Employee Benefits Security Administration in a summary of the rule.

“In addition to benefiting workers, this rule will immediately assist employers and the retirement plan industry as they face a number of economic challenges due to the COVID-19 emergency, including logistical and other impediments to compliance with ERISA’s disclosure requirements.”

But the PRC is urging plan participants to reject the paperless option and tell their pension and 401(k) administrators that they want to continue receiving a hard copy of their retirement information, and not a text or email telling them where they can find the information online.

The advocacy group warned that the new rule change doesn’t take into consideration the “huge digital divide” in the country that is based on geography, education, income, race/ethnicity, and age.

“We are astonished that in the midst of an unprecedented health crisis and economic collapse that the Department of Labor would issue a regulation that will leave so many workers, retirees, and their spouses in the dark about their retirement plans and benefits,” Karen Friedman, executive vice president of the PRC, said in a statement.

Prior to the rule change, which took effect July 27, plans sent out information on paper through the mail, unless participants previously requested to go “paperless.” PRC said that although retirement plans are still allowed to operate under the old rule, in reality, most won’t stay with the old option. The group said notice-and-access is easier and cheaper for plans, and that “many workers and retirees will pay a steep price,” adding that “their chances of getting the information they are legally entitled to receive will be greatly diminished.”

The PRC also argues that the new rule contradicts the DOL’s own guidance. It said that because plans are not required to check if participants have logged into the website and read the retirement plan information, the rule goes against the Labor Department’s interpretation of federal pension law that requires plans to use information delivery methods that are “reasonably calculated to ensure actual receipt of the information by plan participants.”

The PRC also said the new rule “sidesteps” the Supreme Court’s recent decision in Intel Corporation Investment Policy Committee v. Christopher M. Sulyma, which ruled that a notice-and-access method of disclosure does not ensure employees and retirees have actual knowledge of retirement plan information on a website.

“At a time when people need information to protect themselves more than ever, this rule is like a cruel game of hide and seek,” said Friedman, “where workers and retirees are blindfolded and sent into an electronic abyss where they will have to fumble around searching for the information they will need to protect their future.”