Numerous laws and regulations require plan sponsors to provide retirement plan participants notice of various plan documents or occurrences. Even though each plan is different, the following will help to identify some general plan-related notices and specific notices for defined contribution (DC) and defined benefit (DB) plans.
General retirement plan notices
Some notices must be sent to all participants regardless of the plan type:
Summary plan description (SPD). Even though plan participants don’t typically receive a copy of the actual plan document, each participant should receive an SPD. This summary must be written in such a manner that it’s easy to understand and must address:
• When employees become eligible to participate in the plan,
• What types of benefits the plan offers to participants, and
• When the plan can distribute benefits.
Plan sponsors must provide an SPD within 90 days of an employee becoming a participant in the plan and periodically thereafter. For example, you should provide an SPD whenever the plan is amended or restated in its entirety.
Summary of material modifications (SMM). Plan sponsors may change a certain feature of the plan or the government might pass legislation that requires a particular change to the document. In these instances, instead of providing a complete SPD, you can give participants a summary of the changes. Participants should receive the SMM within seven months following the end of the plan year when the amendment occurred.
Notice of significant reduction in future benefit accruals. If a plan amendment relates to a significant reduction, or even elimination, of plan benefits, the plan sponsor must distribute a notice of significant reduction in future benefit accruals at least 15 days prior to the effective date of the amendment (45 days for plans with 100 or more participants). This type of amendment applies only to plans with specific funding requirements, such as DB plans and certain DC plans, such as money purchase plans.
Individual benefit statement. With some frequency, participants in all types of plans should receive an individual benefit statement. Participant-directed investment plans — typically 401(k) plans — must issue statements at least quarterly. In contrast, DB plans must distribute statements to participants every three years.
DC plan notices
The following notices are applicable to DC plans:
Summary annual report (SAR). Annually, participants in all DC plans must receive a SAR outlining the financial information reported on the plan’s annual return.
Blackout notice. If an individual account plan restricts a participant’s ability to access his or her account, and the period exceeds three business days, the participant must receive a “blackout notice.” For example, you need to provide a blackout notice if the plan changes investment platforms to allow time for the funds to transfer. You must distribute this notice to participants at least 30 days before the blackout period begins and must define the period during which participants cannot access their accounts.
Automatic enrollment notice. If your plan has an automatic enrollment feature, you must provide notice at least 30 days before a participant’s eligibility date and before the start of each subsequent plan year of the right to opt out. The notice must define the percentage of salary that will be withheld and the manner in which it will be invested, as well as guidance on opting out or making changes to the deferral percentage and the investment selection.
DB plan notices
The following notices apply to DB plans:
Annual funding notice. A DB plan administrator must distribute a funding notice annually. For large plans (100 or more participants), the administrator must distribute the notice within 120 days of the plan year’s end. For small plans, the notice should be distributed by the earlier of the deadline for filing the Annual Return Form 5500, or the date the return is actually filed.
Notice to participants of underfunded plan. If the DB plan isn’t at least 80% funded according to calculated funding requirements, you must distribute a notice of an underfunded plan. In addition to defining the plan funding level, this notice also provides information regarding the guaranteed benefits. You must distribute this notice within two months after the plan’s annual return due date (nine months after the end of the plan year).
The previously discussed notices are the most common, although you may need to distribute other plan-related notices from time to time. Check with your benefits specialist or plan administrator named in the SPD if you have questions about any of the notices relevant to your retirement plan.