Can you believe December is only a few days away?! It’s true. And that means it’s time for 401(k) plan sponsors to buckle down because the deadline to provide year-end notices to employees is Dec. 1.
Section 401(k) plan Safe Harbor notices, Qualified Default Investment Alternative (QDIA) notices and Automatic Contribution notices, which are the most common year-end notices plan sponsors manage, must be provided to employees at least 30 days prior (and no more than 90 days prior) to the new plan year, which means if you haven’t gotten yours out already, there’s still time – barely.
Not sure where to start? Read on to learn what your responsibilities as a plan sponsor entails. If you still aren’t sure what to do next or if you need some help getting your notices out on time, email your request to Rea & Associates immediately.
What Information Plan Sponsors Must Provide To Employees
Standard Safe Harbor Notices
The standard safe harbor arrangement meets the nondiscrimination requirements as long as it provides the employee at least one (of the two) safe harbor employer contributions. The plan sponsor must also provide each eligible employee the opportunity to participate in the arrangement.
The notice you provide to employees must include:
- A description of the safe harbor employer contribution
- Other contributions (if any) made under the plan
- The conditions under which additional contributions are made
- The compensation upon which all deferrals are based
- Any scheduled changes to the plan that will apply in the new plan year
QACA Safe Harbor Notices
Only slightly different from the standard safe harbor option, the qualified automatic contribution arrangement (QACA) Safe Harbor refers to the absence of an election to defer, eligible employees who choose to participate are treated as though they have elected to defer a certain percentage of their compensation into the plan. The notice requirement is similar to the Standard Safe Harbor, however this version must also describe the automatic contributions that will be made on the employee’s behalf, the employee’s right to elect not to have elective contributions made, and how contributions made under the QACA will be invested in the absence of any investment election by the employee.
The qualified default investment alternative (QDIA) provides 401(K) plan fiduciaries limited liability when dealing with the investments of participant accounts without affirmative participant investment elections. Plan sponsors must provide their employees with a QDIA notice prior to their first investment in the plan and every year thereafter at least 30 days before the beginning of each plan year. Plans that would require QDIA notification include:
- An investment alternative that is a target date, lifecycle fund or portfolio
- A balanced fund or portfolio that meets certain requirements
- A managed account that uses a target date or life-cycle approach
Automatic Contribution Notices
Some plan sponsors have opted to include an automatic contribution feature to the 401(k) plans offered to their employees. This is an easy way to help employees to start saving for their retirement, but you must remember to provide plan participants with an annual notice that outlines:
- Participant rights and obligations under the arrangement, which includes the right to decline automatic contributions or to choose to allocate a different percentage of their compensation to the plan
- How the automatic contributions are invested
Each one of these notices must be provided to eligible plan participants at least 30 days before the beginning of each plan year. For more insight into your requirements as a plan sponsor, email Rea & Associates today and ask to speak with one of our retirement plan specialists.