An Engagement Chain
Art by Sarah Cliff
The U.S. Department of Labor (DOL) has published the proposed version of much-anticipated regulations to let employers and retirement plan providers make the electronic delivery of mandated disclosure documents digital by default.
Chris Spence, TIAA’s senior director of government relations, says his organization is a big supporter of default electronic delivery of retirement plan documents. “Why is this important? First, we think there will be cost savings and that these cost savings will be passed on to individual consumers,” Spence says. “There is also an engagement factor to consider.”
In TIAA’s experience, plan participants who utilize the online resources provided by plan sponsors tend to be more engaged with their retirement planning as a whole. Of total participants who log in to TIAA’s website, 88% have elected to receive documents electronically. Six times more customers who receive documents electronically log in to TIAA’s website than do customers who receive only paper documents.
The firm also sees spikes in logins and in engagement with its digital advice tools when quarterly statements are sent. TIAA believes this spike is largely due to e-delivery customers.
“When you deliver a statement electronically, you can link people directly to a secure website that allows them to manage their account,” Spence notes. “There are many tools and services made available online that just can’t be included in a paper statement.”
An extensive report published by SPARK [Society of Professional Asset Managers and Recordkeepers] Institute, “Improving Outcomes With Electronic Delivery of Retirement Plan Documents,” echoes and emphasizes these points. According to SPARK’s analysis, electronic delivery of plan documents allows participants to respond quickly to plan information received; it ensures information remains up to date and is accessed by participants in real time; and it provides information that can be more readily customized. Further, electronic delivery provides a better guarantee of actual receipt of information.
By breaking down two anonymized providers’ salary deferral data, the SPARK report points to substantial differences in deferral rates across those who have opted for electronic delivery versus those who have not.
For Provider A, the deferral rate of participants using e-delivery in the ages 55 to 64 cohort was 20% of income, compared with 9% for those in this age range not electing e-delivery. For the ages 25 to 34 cohort, those with e-delivery were deferring 11%, vs. just 6% for 25- to 34-year-olds not using e-delivery. The figures supplied by Provider B show equally wide gaps in deferrals across the two populations.
“Across all age classes, the participants electing electronic delivery defer at a rate twice that of their counterparts,” SPARK reports. Also of note, retirement plan providers found that participants choosing electronic delivery had a greater investment diversity.
Collectively, these higher deferral rates and investment diversity have led to larger account balances for participants who receive plan communications electronically, the report concludes.