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Monday, December 3, 2012

AARP recently released survey results where plan participants were asked whether they preferred paper or electronic retirement plan disclosures.  AARP is touting this as proof positive that plan participants prefer paper over electronic disclosures.

In a prior life, I (Chris) used to help analyze test results, including those from self-report surveys.  Anyone who has done that work knows that how you ask the question matters greatly.  One of the key findings the AARP cites as strong evidence that participants pine for papyrus is this:

If forced to choose only one method for receiving retirement plan documents, three quarters (75%) of all respondents ages 25+ prefer paper over online.

Sure, except that question assumes a false dichotomy.  Even though many plan sponsors and many in the retirement plan industry have a strong preference for electronic disclosure (which, by the way, helps participants retirement savings accumulation in the form of reduced fees), no rational person is suggesting that we make everyone get their plan communications online or via email.  There are too many older participants who are unfamiliar with technology or those of low income who have insufficient access to electronic delivery methods.  They deserve as much disclosure as the iPhone-toting technology native in her 20’s who has never picked up a newspaper.

The more telling statistic to us is this one:

Only one-fifth of respondents (including just 27% of the younger age group), believed that a default in favor of electronic delivery should be the rule.

That, to us at least, is surprising.  We would have thought the number much higher, especially for the younger age group.
Nevertheless, one can explain the results in part by saying that people frequently have a preference for the status quo (as long as it works).  Inertia controls, and human nature falls victim to it.  Currently, a majority of participants receive paper disclosures because the electronic delivery rules can be onerous for employers to navigate successfully.  Participants feel that something isn’t broken, so why fix it?  If the current default was electronic delivery with an option for paper, then the survey results might have cut in the other direction, at least for the younger group.

Interestingly, the survey asked about home computer access, but did not ask about work-related computer access (which is the touchstone the Department of Labor  uses in its electronic delivery safe harbor).  That probably would not have changed the results at all, but the disconnect between the question and the rules is interesting (if only for ERISA nerds).

Of course, the more critical question is what happens to all that paper when it’s delivered?  Is it read and understood or is it likely to be stuffed in the circular file along with the third class mail?  Because there are so many notices sent under the current disclosure regime, one might logically conclude that landfills are a primary situs for the paper disclosures (or perhaps recycling centers, for the more eco-minded).  If the disclosures came electronically instead, would there be a greater chance of them being read or would the delete icon work overtime?  We suspect the answer relates back to human nature.  If you are tech savvy and read what comes across your screen, odds are better that you would read it if were provided electronically than if it were mailed to you.  And, if you are one of those folks who still relishes the morning newspaper and the feel of newsprint on your fingers, you might be more inclined to read your mail.

The results of the AARP survey, while informative and surprising in some ways, cannot necessarily be read to say that there shouldn’t be liberalized rules for electronic delivery.  Additionally, there does not necessarily need to be an all-or-nothing approach.  Why not have an electronic default for some communications, but paper for others?  Or liberalize the consent requirements, particularly for frequent, repeated disclosures?  As the amount and frequency of required disclosures increases (and it seems always to be heading in that direction), consideration needs to be given to how the disclosures can be better packaged and delivered.  Consolidating and (truly) simplifying disclosures and delivery methods is of benefit to plan sponsors because it reduces their administrative burden and to participants because it makes the amount of information they receive less overwhelming, allowing many of the important matters to be sufficiently prominent.


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