OUR THOUGHTS ON:

'Tis the Season to Be... Notified: 401(k) Plan Sponsors and Notification Requirements

401(k) Plans

By Jason Lumpkin

If you are a sponsor of a 401(k) plan for your employees, chances are that your plan is subject to one or more “notification requirements” that must be met in order to adhere to certain rules and regulations.  In general, these requirements relate to notices prescribed by the Internal Revenue Code that should be distributed to participants within a reasonable time prior to the beginning of each plan year.  This requirement is deemed satisfied if the applicable notice is provided 30-90 days before the beginning of the plan year.  As such, for plans operating on a calendar-year basis, November 30 is the “deadline” to provide one or more of the following notifications:

Notice Content Recipient
Safe Harbor Notice Description of safe harbor contribution formula (matching or nonselective), including other general plan information (i.e. provision related to 401(k) contribution changes/amounts, distribution options, vesting, etc.) All employees eligible to participate in the plan.
Qualified Default Investment Alternative (QDIA) Notice Identification of QDIA and an explanation of the participants’ right to direct the investments of their accounts. All participants who have not made investment elections under a plan that allows participants to direct the investment of their account.
Automatic Enrollment Notice The amount of 401(k) contributions that will be automatically implemented in the absence of a participant’s actual election, including an explanation regarding the participant’s right to waive participation or elect a different rate. All employees eligible to participate in the plan.
Participant Level Fee Disclosure (404(a)(5)) A description of any and all fees that may be charged against a participant’s account, whether direct or indirect, as well as a detailed description of the plan’s investment options and any fees associated with those options. All employees eligible to participate in the plan.

The notice requirements referenced above may also require delivery to new employees as they become eligible to participate in the plan throughout the year.

‘Tis the season to ensure that your plan is meeting its annual communication requirements.   

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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.

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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2018 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

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