For small businesses, electronic document delivery is key to reaping the full benefits of retirement modernization


The COVID-19 pandemic has been a severe stress test for the nation, revealing a number of severe socio-economic deficiencies and vulnerabilities. A major vulnerability is the fact that a quarter of American adults have no retirement savings at all and millions more are not saving enough. With ten thousand Americans turning 65 every day until 2030, the retirement savings deficit is an imminent threat to the economic security of millions of Americans and a ticking time bomb for the American economy.

One of the main causes of the retirement security crisis is the mismatch between the importance of small businesses as employers and the cost to these businesses of providing retirement plans for their employees. More than half of all American workers are employed by small businesses, yet the cost of providing employee retirement plans has historically been beyond the means of many companies. As recently as 2020, half of all workers in the private sector — 55 million Americans — did not have access to a pension plan through an employer.

Fortunately, two important pieces of legislation – one already signed into law, the other introduced in both the House and the Senate on a bipartisan basis – will dramatically improve the retirement security of millions of American entrepreneurs, small business employees and gig economy workers. On December 20, 2019, the Preparing Every Community for Retirement Enhancement (SECURE) The law has been enacted. Among others important reformsthe SECURE Act modernizes the Retirement Security Act to allow small businesses and startups to join together to provide their employees with multi-employer 401(k)-style retirement savings (MEP) products.

Then on May 5, 2021, the Securing a strong retirement law – often referred to as “SECURE 2.0” – was defeated by the House Ways and Means Committee by a unanimous vote. Two weeks later, on May 21, 2021, Sens. Rob PortmanRobert (Rob) Jones PortmanUkrainian Ambassador to Meet Senators on Capitol Hill Gibbons Leads Ohio GOP Senate Primary: Five Things to Know About Ukrainian President Zelensky Poll MORE (R-Ohio) and Ben CardinBenjamin (Ben) Louis CardinUkrainian forces need more weapons, senators’ ambassador warns. Lawmakers will receive a briefing from the Biden administration on Thursday. (D-Md.) have reintroduced their Security and Retirement Savings Act, which largely parallels the House bill. SECURE 2.0 would build on the original SECURE Act by making a number of additional improvements pension law, in particular:

  • Require that most employers who establish defined contribution plans after 2021 automatically hire new employees;
  • Allow 403(b) plans – primarily used for employees of public schools, churches and other tax-exempt organizations – to participate in MEPs;
  • Increase in the catch-up ceilings for pension contributions for people aged 62, 63 and 64.
  • Further expand the eligibility of long-term part-time workers to contribute to their employer’s 401(k) plan by shortening the eligibility period that begins in 2021 from three to two years; and,
  • Allow employers to make matching contributions under a 401(k) plan, 403(b) plan, or SIMPLE IRA with respect to “qualified student loan payments.”

But a SECURE 2.0 provision threatens to blunt the legislation’s full beneficial impact for new and small businesses. The provision would amend the Employees Retirement Income Security Act of 1974 (ERISA) to require defined contribution plans to provide paper statements at least once a year, unless a participant decides otherwise. and defined benefit plans provide paper statements once every three years, unless a member decides otherwise. In other words, the section would make paper statements the default option.

The requirement – ​​a major departure from current rules, which allow all pension statements for retired members to be transmitted electronically provided certain requirements are met – is highly problematic for several reasons. First, the requirement is completely inconsistent with the continuous digitalization new and small businesses — a process that the COVID-19 pandemic has accelerated by at least a decadeaccording to consulting firm McKinsey & Co. Indeed, the bipartisan infrastructure bill signed into law in November included $65 billion to ensure every American has access to broadband and to facilitate the continued digitalization of commerce and commerce. education.

Second, the provision is a glaring exception to the country’s broader efforts to combat climate change. In 2020 alone, Fidelity Investments used more than 10,000 tonnes of paper in customer communications required by regulations – paper mailings that resulted in carbon dioxide emissions equivalent to the electricity consumption of more than 3,000 homes. Americans for an entire year.

More fundamentally, the provision is completely unnecessary — we know it’s because the Department of Labor’s Employee Benefits Security Administration just released a major report on the matter. On December 27, 2020, President TrumpDonald TrumpArizona GOP asks court to overturn vote-by-mail system McCarthy slams GOP members who spoke at white nationalist conference: ‘Unacceptable’ First jury trial against defendant starts riot from January 6 MORE signed on Consolidated Credits Act of 2021, which directed the Department of Labor to review a July 27, 2020 safe harbor regulation that allows electronic delivery of pension documents and to assess the impact of the rule on older adults and rural populations .

The Department released its report on January 26, concluding, “Our preliminary assessment is that the settlement in question is unlikely to adversely impact the populations identified in the explanatory statement due to the specific safeguards of the settlement.

The report went on to explain that the Safe Harbor rule “does not apply to individuals who do not have access to web-based communications” and pointed out that retirement savers could “request hard copies of disclosures and opt out of electronic delivery entirely, at any time, and free of charge.” The Department pointed out that the consumer protections in the 2020 regulations were designed “specifically to protect” rural, remote and elderly retirement savers.

The COVID-19 pandemic has accelerated the shift to technology-powered e-commerce by at least a decade, dramatically changing the nature and functioning of the U.S. economy. Meanwhile, the strength of the post-COVID economic recovery depends on a more entrepreneurial, flexible, technologically sophisticated and resilient US economy.

SECURE and “SECURE 2.0” provide the legal framework to meet the post-pandemic retirement security needs of small business employees, entrepreneurs, long-term part-timers, independent contractors and economy workers on demand. But the full benefit to new and small businesses of the pension modernization legislation hinges on the electronic delivery of pension plan documents.

John Dearie is the president of the Center for American Entrepreneurship.


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