401(k) Required Plan Notices
Retirement Plan Notices
Employers must provide participants of 401(k) plans with various documents and disclosures. Sometimes, the information given to participants can be slightly overwhelming, but there is essential information they should know to stay informed about their 401(k) plan. In addition, many of the documents given to employees are required. For example, some of the notices employers must provide employees with include the following:
The Summary Plan Description (SPD)
The summary plan description is a general summary of important plan information. Eligible employees must receive a copy of this within 120 days of adopting a retirement plan and 90 days of becoming eligible for the plan. The summary plan description reviews information such as:
What are the eligibility rules (including minimum age or service requirements)?
What is the plan's vesting schedule?
Does the plan allow for loans?
Does the plan offer a match, and how is it calculated?
These documents give plan participants basic information regarding the plan.
Summary Annual Report (SAR)
Summary Annual Reports must be provided to participants nine months after the plan year-end or two months after a 5500 extension, if applicable. It is a one-page summary of the 5500 and finances. This disclosure must be given to participants promptly, or there can be significant penalties.
Annual Fee Disclosure Notice
The annual fee disclosure notice gives information about the 401(k) plan fees and investments. These fee disclosures cover individual costs related to participant accounts, fund expense ratios, and historical investment performance. Unfortunately, this notice is one of those necessary disclosures that participants often overlook. As a result, many participants are unaware of the fees deducted from their accounts.
Quarterly Account Statements
Participants are to receive quarterly statements no later than 45 days after the end of the quarter. Sometimes recordkeepers will send these notices out on behalf of the plan. Other times the plan sponsor will need to give these statements out directly to participants. These statements will show the account value, the vested portion of the account, and the value of each investment in the plan.
These four documents are some of the most common 401(k) disclosure documents you will run across as you manage your company's 401(k) plan. Other required disclosures are dependent on the language in your plan design. Here are some common notices you may need to distribute based on your plan design.
Safe Harbor Notices
If your plan is a safe harbor 401(k) plan, you must provide safe harbor notices to employees. These notices inform employees of their rights and obligations under the plan, and the minimum benefits-eligible employees will receive in either match or non-elective contributions. The IRS website gives the distribution timeline as follows, "at least 30 days (and no more than 90 days) before the beginning of each plan year… in the year an employee becomes eligible; generally, no earlier than 90 days before the employee becomes eligible and no later than the eligibility date." (IRS, 2022)
Automatic Enrollment Notices
These notices inform employees that they will automatically differ a portion of their income into the retirement plan. The Department of Labor outlines three things these notices must specify:
" The deferral percentage
The participant's right to change that percentage or not to make automatic contributions
The default investment."
Participants must receive these notices at least 30 days before their eligibility to participate in the plan (Department of Labor, 2022).
QDIA Notices
A Qualified Default Investment Alternative (QDIA) Notice accompanies plans with a QDIA. A QDIA is a default investment that occurs when participants don't make an affirmative investment election. For example, you may have an automatic enrollment set up in your plan. If a participant is automatically enrolled, where will that money be invested? A common approach is having a target-date fund as the QDIA and enrolling the participant into a fund based on their age (Department of Labor, 2008).
Conclusion
This list is incomplete with all the possible notices you may need to give participants of your company's 401k. Instead, this list summarizes some of the most common required notices. Talk to your advisor and TPA to better understand what you must give to participants to stay compliant.
Bibliography
Department of Labor. (2008, April 29). Field Assistance Bulletin No. 2008-03. Retrieved from Department of Labor: https://www.dol.gov/agencies/ebsa/employers-and-advisers/guidance/field-assistance-bulletins/2008-03#:~:text=Under%20the%20Department's%20QDIA%20regulation,make%20a%20permissible%20withdrawal%20as
Department of Labor. (2022, November). AUTOMATIC ENROLLMENT 401(K) PLANS FOR SMALL BUSINESSES. Retrieved from Department of Labor: https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/publications/automatic-enrollment-401k-plans-for-small-businesses.pdf
IRS. (2022, 11 1). Operating a 401(k) Plan. Retrieved from IRS: https://www.irs.gov/retirement-plans/operating-a-401k-plan