Retirement plans exist to provide retirement savings for participants. As a result, the participants need to be informed about plan provisions and their rights at various times. Sometimes it’s when they become eligible for the plan, before the start of a new plan year, or after the end of the plan year. Certain variables affect which of these may apply, such as plan provisions, plan type, and investment provider. Here are some items that may be prepared by your service providers for distribution to your plan participants:
- Participant Fee Disclosure:
- Pertains to participant-directed accounts.
- Provides certain plan information as well as fees that may apply.
- Investment Comparative Chart:
- Pertains to participant-directed accounts.
- Provides plan investment information such as past performance, expense ratio, and fees.
- Automatic Enrollment Notice:
- Pertains to 401(k) plans that include automatic enrollment provisions.
- Provides the default deferral rate that will apply unless they make a different deferral election and the instruction for how to do so.
- Safe Harbor Notice:
- Pertains to plans with Safe Harbor contribution provisions.
- Provides information about contribution and vesting provisions.
- Qualified Default Investment Alternative (QDIA) Notice:
- Pertains to plans that allow for participant direction and utilize a qualified default investment for those participants who don’t make an election.
- Provides information about the investment option that will be used for their contributions if they do not make an investment election.
- Universal Availability Notice:
- Pertains only to 403(b) Plans.
- Provides information regarding the opportunity to contribute to the 403(b) Plan.
While these notices are provided to participants when they become eligible for the plan, they also need to be provided on an annual basis. Other notices are due following certain events:
- Summary Plan Description (SPD):
- This is a simplified version of the plan document provisions which needs to be provided within 90 days of when the employee becomes eligible for the plan.
- Updated copies must be provided every 5 years if there are changes to the plan. Every 10 years if no changes are made.
- Summary Annual Report (SAR):
- Summarizes the plan information on Form 5500 for the participants, such as total plan contributions, distributions, fees, plan asset balance, and participant count.
- Distributed within 2 months after the Form 5500 filing deadline, including extensions.
- Annual Funding Notice (AFN):
- Pertains to defined benefit plans, including cash balance plans, that are covered by the Pension Benefits Guaranty Corporation (PBGC).
- Due 120 days after the close of the plan year for large plans and the earliest of the day that the Form 5500 or the date that it’s due, including extensions, for small plans.
- Summary of Material Modifications (SMM):
- Provides information regarding changes made to plan provisions by a plan amendment.
- Due no later than 210 days after the close of the plan year for which the modification was adopted.
This list does not cover all possible notices that are required for your plan participants, but being familiar with the terminology of these common notices will help you understand the information that is being shared with participants. As plan design changes take place, your notice requirements will too, so it’s important to understand what information is required to keep your participants informed.
This newsletter is intended to provide general information on matters of interest in the area of qualified retirement plans and is distributed with the understanding that the publisher and distributor are not rendering legal, tax or other professional advice. Readers should not act or rely on any information in this newsletter without first seeking the advice of an independent tax advisor such as an attorney or CPA.
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