PLANSPONSOR - November - December 2023 - 38

FIDUCIARY FORUM
Annual Notice Season
Some of these documents are legally required and should be reviewed
A
s the year speeds toward a close and we approach the
holiday season, we also head into open enrollment and
annual notice season for calendar-year welfare and
retirement plans. Although many of the notices likely get dumped
in the trash or turned into paper airplanes, a large percentage are
legally required and do include important plan information. We
have prepared a list of some commonly required retirement plan
notices-whether all are required depends on the plan's terms.
As plan fiduciaries consider which notices they must provide,
it is a good idea for them to review what the notices say. While
many annual notices are prepared and distributed by a plan
service provider, that does not mean they should not be reviewed.
In fact, too often we see the same notice duplicated year after year
without being updated, despite legal and plan changes. Plan fiduciaries
need to read through the contents of these notices, even if
it requires an extra cup of coffee. The following are a few of the
notices they particularly should pay attention to:
401(k)/401(m) safe harbor notice - For 401(k) plans relying
on a safe harbor to satisfy nondiscrimination tests, an annual safe
harbor notice is generally required between 30 and 90 days before
the beginning of the plan year. A good rule of thumb is to send it
out in November after the IRS issues its annual limits.
The regulations provide a list of what must be included in the
notice. As plan provisions change, the plan descriptions likely need
to be updated. For example, the safe harbor notice must include
information regarding withdrawal rights-plans implementing
new withdrawal provisions permitted under the SECURE [Setting
Every Community Up for Retirement Enhancement] 2.0 Act of
2022 may need to update their notice accordingly. We also recommend
that the notice include a statement reserving the right to
stop matching contributions and to cease being a safe harbor plan.
Annual automatic contribution arrangement notices -
There are multiple types of automatic contribution arrangements-
ACA, the basic automatic contribution arrangement, EACA [eligible
automatic contribution arrangement] and QACA [qualified automatic
contribution arrangement]- and their differences are
beyond the scope of this column. For plans with one of these provisions,
an annual notice satisfying both Department of Labor and
IRS requirements should be provided. The timing may vary a bit
depending on the type of automatic arrangement and the DOL or
38 PLANSPONSOR.COM November - December 2023 Art by Joseph Ciardiello
IRS requirements, but sending in November generally meets the
annual need for a calendar year plan.
Qualified default investment alternative notice - To ensure
plan fiduciaries some protections with respect to employees being
defaulted into a QDIA, a notice explaining the QDIA and the plan's
rules for changing investment elections must be supplied annually.
The DOL has a sample notice that may be used as a template.
404a-5 notice - The DOL imposes a requirement to provide
participants with an annual disclosure regarding plan investment
options and related charges. This notice does not have a specific
deadline but must be supplied at least once in any 14-month
period. From a convenience standpoint, we've found, many plans
include this information with the other annual notices they send.
Summary annual report - For calendar year plans that filed
an extension to submit their Form 5500, the deadline for the
SAR is December 15. The DOL has produced a model form of
SAR that may be used. As plan information can change from
year to year, we recommend comparing the draft SAR with the
DOL's requirements.
Annual notice for unenrolled participants - Plans wishing
to take advantage of the new SECURE 2.0 rules eliminating many
notices for unenrolled participants must still send an annual
reminder notice to such participants. For plans with no openseason
election period, the notice must be given within a reasonable
period before the start of each plan year. The DOL included
this section in a recent request for information, so we may see
guidance regarding this new optional notice at some point.
Some additional notices may need to be sent, on a regular
basis or due to certain events-e.g., a blackout notice. Keeping
on top of notice obligations, as well as regularly reviewing the
actual documents to make sure they're up to date and accurately
reflect plan terms, can help fiduciaries satisfy their obligations
to ensure participants get the information they need-even if
they aren't actually reading it.
Summer Conley is a partner in the Los Angeles office of
Faegre Drinker Biddle & Reath LLP. Michael Rosenbaum is
a partner in the firm's Chicago office. Heather Bader, also
a partner in Los Angeles, contributed to this column.
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