[10108]
July 9, 1998
TO: PENSION COMMITTEE No. 44-98
PENSION OPERATIONS ADVISORY COMMITTEE No. 27-98
RE: IRS REQUEST FOR INFORMATION ON NEW PAPERLESS TECHNOLOGIES
______________________________________________________________________________
The Internal Revenue Service and Department of the Treasury are soliciting comments on the
use of new technologies in retirement plan administration. The request relates to a legislative directive,
enacted as part of the Taxpayer Relief Act of 1997, that requires the Department of the Treasury and the
Department of Labor to review regulatory requirements relating to retirement plans as they apply to the
use of new technologies, to issue guidance that would facilitate the implementation of these technologies
and to assure there are adequate protections for plan participants. Specifically, the Service and Treasury
are reviewing notice, election, consent, and disclosure requirements and also determining the extent that
the “writing” requirements of the Internal Revenue Code relating to retirement plans should be
interpreted to permit paperless transactions.
In Announcement 98-62, the IRS seeks comments describing new technologies commonly used
in plan administration and the manner in which the rights of participants are adequately protected when
using these technologies. The Service is particularly interested in comments regarding the paperless
administration of participant elections and consents, plan notices, plan loans and distributions. Spousal
consent rules will not likely be addressed in initial guidance.
Additionally, the IRS poses the following specific questions for comment:
1. Would it be preferable for guidance to focus on specific uses of existing technologies or to take the
form of generally applicable principles or standards?
2. To what extent, if any, do the terms “election” and “consent” imply a writing or signature
requirement?
3. To what extent should paperless identification mechanisms (such as PINs and passwords) be treated
as satisfying a legal “writing” or signature requirement?
4. Should the requirement to provide a notice during a specified period (such as the 402(f) notice) be
deemed satisfied if provided in writing on a less frequent basis and the participant is provided an oral
or recorded summary of the notice and an opportunity to obtain the full notice when initiating a
transaction to which the notice relates?
5. What are the appropriate standards for authentication, substantiation and security in paperless
administration and record-keeping?
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6. What are the appropriate standards for ensuring that participants have sufficient time and
opportunity to consider all relevant options when making retirement savings decisions? For
instance, should participants be able to review and change a transmitted election or instruction?
7. What types of new or paperless technologies do plan sponsors and administrators foresee using in
the future? What practical and legal issues might arise from their use and how might they be
designed to protect the rights of participants?
A copy of Announcement 98-62 is attached. Comments must be submitted by October 5, 1998.
Please note, the Institute will be arranging a conference call to discuss submitting a comment letter.
Russell G. Galer
Senior Counsel
Attachment