All of this confusion and conflicting requirements may cause fatigue among plan participants in enrolling in new products. It could also lead employees to opt out of retirement benefits that otherwise would be auto-enrolled in them. Make no mistake, plan participants highly favor auto-enrollment…. Sponsors may want to consider how new proof of identity requirements may cause form fatigue among their participants new to enrolling.
REAL ID is making it really hard to open new accounts. The change in identity verification requirements may only impact not yet enrolled plan participants. Yet, for participants who may be opening multiple accounts (such as those who’ve moved or younger participants) the increase in requirements could deter their interest in enrolling in benefits. With less than a year to comply with the REAL ID requirements, the new scrutiny many participants are facing outside of their benefits process may be something plan sponsors should consider.
The start of a new job may coincide with the start of new housing, banking, and driver’s licenses. Each of those types of accounts now has different requirements for establishing identity. Additionally, even those who aren’t relocating for work may need to change their basic identification (“ID”) to comply with new federal regulations, and soon.
The department of homeland security (DHS) has made clear that the deadline for travelers to have identification compliant with the REAL ID requirements is coming soon.[1] “On May 7, 2025, U.S. travelers must be REAL ID compliant to board domestic flights and access certain federal facilities.” States have begun to fold those requirements into their licensing process. The REAL ID process has been delayed multiple times, partially due to working out kinks in the process and partially due to the pandemic. The multiple rounds of delays may have some Americans confused as to not only how but when to comply with that new law. And that’s not all that may be confusing.
“Requirements are largely similar across the states, but as of 2021, according to DHS, states are no longer required to collect a social security document from a Real ID applicant. They still must collect and retain the number as part of the application process to verify that information with the Social Security Administration as currently required by the Real ID regulations.”[2] That means participants moving, either for new employment or having finished higher education, may find that they need different documents to get similar IDs. And, some states, such as California, allow their residents to do most of the application online which may save time at the DMV.[3] Others, such as Tennessee require all the work to be completed at the DMV.
With different requirements among states plan participants’ patience for forms may be waning. Many were already complaining about additional requirements for opening accounts with financial institutions, such as banks or lenders due to the PATRIOT Act and its requirements. Credit card applications are another area that can be confusing. One might think they’d fall into the category of lenders, but under the PATRIOT Act, “For a credit card account, the bank may also obtain CIP identifying information about the customer by acquiring it from a third-party source prior to extending credit to the customer.”[4]
All of this confusion and conflicting requirements may cause fatigue among plan participants in enrolling in new products. It could also lead employees to opt out of retirement benefits that otherwise would be auto-enrolled in them. Make no mistake, plan participants highly favor auto-enrollment. In fact, support for auto-enrollment is increasing. “Among retirement plan participants surveyed in late 2022, 71% agreed employers should auto-enroll workers at a 10% default, compared with 47% in 2021 and 46% in 2020.”[5] Yet, while auto-enrollment is growing, many plan sponsors do not have provisions for it, as yet, in their plans. Those sponsors may want to consider how new proof of identity requirements may cause form fatigue among their participants. They may want to consider streamlining their onboarding forms by breaking up content among screens.
[1] https://www.dhs.gov/real-id
[2] https://abcnews.go.com/GMA/Travel/new-real-id-requirements/story?id=110078396
[3] https://abcnews.go.com/GMA/Travel/new-real-id-requirements/story?id=110078396
[4] https://www.fdic.gov/sites/default/files/2024-03/fil21012b.pdf
[5] https://www.plansponsor.com/auto-enrollment-gains-in-popularity-among-retirement-plan-participants
These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, Advisors and Plan Sponsors should consult with their compliance, finance and legal teams.
Before leaping into the unknown, we recommend a thorough examination of your plan. Because we are experts in the field, we know the marketplace and know what your existing vendor is capable of offering. Through this examination, we can help you optimize the service you receive.
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