Required Employee Notices for 401(k) Plans

The Department of Labor (DOL) requires qualified retirement plans to distribute various annual notices to eligible participants each plan year.  While this can be a daunting task for some employers (The fee disclosure notice could qualify as a book!), the purpose is to equip participants with information to assist them in managing their retirement accounts.  Here is a brief description of the most common notices:


For plans that utilize automatic enrollment, an Automatic Enrollment Notice must be distributed to all eligible participants 30-90 days prior to their initial investment and before the beginning of each plan year thereafter.  For plans that provide for immediate eligibility, the notice will be treated as timely if it is provided prior to the pay date for the payroll period the employee becomes eligible.  The notice should describe the automatic enrollment process, the percentage that will be deferred if the employee does not make an affirmative election, the default investment, the participant’s right to opt out of the plan or to elect a different percentage, and procedures for changing the deferral percentage and /or investments.  It should also include additional plan-related information such as possible company contributions, vesting schedules and withdrawal provisions.   


A retirement plan that offers a Safe Harbor contribution is required to distribute a Safe Harbor Notice to all eligible participants 30-90 days prior to the start of each plan year.  Newly eligible participants should receive the notice no more than 90 days before becoming eligible.  The notice informs eligible participants of the Safe Harbor match or Safe Harbor non-elective contribution that the company intends to make for the upcoming plan year.  The Safe Harbor Notice should include the plan name, the formula used to calculate the Safe Harbor contribution, any other possible contributions that may be made, a definition of eligible compensation, the method by which participants make deferral elections, and withdrawal and vesting provisions.  For companies that make a Safe Harbor contribution on a contingent basis, there are two parts to the Safe Harbor notice.  The initial notice, distributed 30-90 days prior to the beginning of the plan year, states that the company is considering whether or not to make a Safe Harbor contribution for the upcoming plan year and will let participants know their final decision 30-90 days prior to the end of the plan year.  A supplemental notice must then be distributed 30-90 days prior to the end of the plan year informing all eligible participants of the company’s final decision.


If the plan provides for individual accounts in which participants direct investments, Department of Labor regulations require a Participant Fee Disclosure Notice be distributed to all eligible participants when they are first able to invest in the plan and annually thereafter.  In addition, a supplemental notice should be distributed any time there is a change made to the participants’ investment options or fees.  There is a lengthy list of information that must be included with this notice.  Basically, the notice must include general plan-related information, must disclose plan-related administrative fees that may be charged to a participant’s account as well as individual expenses that may be charged to a participant’s account, and must contain a comparative chart of the investment alternatives offered by the plan. 


For plans that utilize a Qualified Default Investment Alternative (QDIA) for any participant who has failed to make investment elections, a QDIA Notice must be distributed to all eligible participants at enrollment and annually thereafter.  This notice describes the investment(s) that will be used as the default in the event a participant does not make an investment choice for his account. 


There are other notices that could apply to a qualified retirement plan.  Be sure to consult with your Third Party Administrator and Financial Advisor to ensure you are meeting all of the various notice requirements for your plan.


Andrea joined RMS in December, 2007 and became an Account Executive in 2012. She is a graduate of Missouri Western State University with a Bachelor of Science in Business Administration with an emphasis in Finance. Andrea is a Qualified 401(k) Administrator, Qualified Pension Administrator, an Enrolled Retirement Plan Agent, and holds the Employee Stock Ownership Plan Administration certificate through ASPPA. She is a member of the ESOP Association, the National Center for Employee Ownership, and the American Society of Pension Professionals & Actuaries. She devotes most of her time to ESOP and defined contribution plan administration.

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