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401(k) Challenges

Are You Overwhelmed With 401(k) Paperwork? The RETIRE Act Can Help

Currently, you must opt-in to receive 401(k) statements electronically, instead of via snail mail. A proposed law could change that, making e-statements the norm and saving the industry millions in the process.

Articles by Jon

By Jon Stein
CEO & Founder, Betterment  |  Published: October 28, 2016

Snail mail is currently the default method for receiving your 401(k) statements. The RETIRE Act would make e-statements the default.

If passed, the RETIRE Act could save the retirement industry millions of dollars, reduce costs for consumers, and help the environment.

Lost in the take-out menus, unwanted catalogs, and junk mail that pile up in your mailbox are updates from your 401(k) plan manager. It’s easy to see how these important notifications can get overlooked.

This may soon change, however, if a new bill passes to get these communications out of your mailbox, and into your email inbox.

Currently, when you participate in your employer-sponsored 401(k) retirement plan, you’re automatically set up to receive all of your important information and statements in paper, via snail mail.

Now, the Receiving Electronic Statements To Improve Retiree Earnings Act, or RETIRE Act, would automatically make electronic statements the norm, rather than requiring 401(k) plan participants to opt out of paper statements. The bill was introduced to the House of Representatives last year, however it must still receive signoffs from the House, Senate, and president.

There are a number of reasons why the act is a good thing.

Savings for 401(k) Administrators

Currently, employers waste a lot of money by sending statements via snail mail. The representatives who presented the bill to Congress estimate that it costs up to $60 million to send a single four-page notice to all U.S. retirement plan participants, and that’s a conservative estimate.

Under the RETIRE Act, you could still opt in to paper statements at any time—it just wouldn’t be the default. So employers (401(k) plan sponsors) wouldn’t have to waste millions of dollars sending mail to employees (401(k) plan participants) who will just end up tossing or shredding it.

According to the SPARK Institute, a nonprofit organization that provides research to help shape retirement policy, electronic delivery could lower costs by 36%.

Savings for Consumers

The savings from going paperless should be passed to consumers in the form of lower expenses. According to the same research by the SPARK Institute, the RETIRE Act could save the retirement industry and everyone impacted around $200 to $500 million a year, which would directly benefit individual plan participants.

Digital Is Preferred

In a survey conducted by market research firm Greenwald & Associates, 84% of 401(k) plan participants said they wouldn’t mind if electronic delivery was the default.This option also makes sense for many investors who are already viewing their financial statements online. For them, e-statements would make their information more accessible. Close to 60% of respondents agreed that when information is sent electronically it’s easier to locate and that they’re less likely to lose it.

You May Actually Read Your 401(k) Statements

Paper mail can pile up, but under the RETIRE Act your 401(k) statements are less likely to join the clutter. Digital statements means accessing, reading, and archiving your statements that much easier.

Better Financial Education and Tools

401(k) administrators will have more opportunities, and incentives, to create compelling educational content.By sending statements via email, administrators can also provide useful links to additional tools and resources. According to SPARK research, simply being exposed to online tools encourages 401(k) participants to save more for retirement.

Environmental Benefits

This legislation would remove thousands of pieces of paper from the mail every day, according to Rep. Jared Polis (D-Colorado). In addition to reducing how much paper we use, making communication more digital would also mean saving on the cost of fuel and vehicles to ship that paper all around the country.

If the RETIRE Act passes, it will change the face of the retirement industry by lowering costs for consumers and improving the standard of customer education and care. It would also allow financial companies to redirect their resources toward other things that really matter to consumers—such as customer service, better investment options, and easy-to-use Web interfaces.

The proposed bill embraces innovation and technology, and will streamline the retirement industry in total operations and cost.

Just as Betterment has revolutionized the way hundreds of thousands of customers now receive personalized, transparent, and low-cost financial advice with an innovative technology, the RETIRE Act aims for progress based on laws written in 1974 and 1986. It acknowledges that we live in a digital world and it’s time to move the industry forward.

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