Does your 401k plan have a calendar year end? If so you have until December 1, 2012, to send notice requirements to plan participants or the operation or qualification of your plan could be impacted. Use this checklist of notices to get started:
Safe Harbor: This is required for 401k plans that are designed to satisfy the safe harbor plan design rules. These rules exempt plans from the annual nondiscrimination testing that may otherwise limit the ability of highly compensated employees from deferring the maximum allowed.
The safe harbor notice must be given to all eligible employees whether they are participating or not. And it must be given 30 to 90 days prior to the first day of the plan year. The minimum required safe harbor contributions are either:
– A 3 percent non-elective contribution that goes to all eligible employees.
– A match contribution equal to at least 100 percent of the first 3 percent deferred by participants and 50 percent of the next 2 percent deferred.
Qualified Automatic Contribution Arrangement (QACA): A notice is required for 401k plans that are designed to satisfy the automatic enrollment and escalation safe harbor plan design. These plans automatically enroll eligible employees at a minimum salary deferral level of 3 percent and then escalate to at least 6 percent (but no more than 10 percent) in 1 percent increments annually. Or they start at least at 6 percent initially and do not require escalation. The employer must contribute the same safe harbor contribution described above.
Ensure this notice is given to all eligible employees whether they are participating or not. It must also be given 30 to 90 days prior to the first day of the plan year.
Eligible Automatic Contribution (EACA): Provide this notice for 401k plans that are designed to enroll participants automatically at a salary deferral level that may be less than the QACA described above. Or for which the employer has chosen not to make the safe harbor contribution described above under safe harbor.
This notice must be given to all eligible employees 30 to 90 days prior to the first day of the plan year, whether or not they are participating in the plan.
Qualified Default Investment Alternative (QDIA): You are required to send this notice if you have participant-directed 401k or 403b plans that intend to comply with the safe harbor rules for default investments. This rule reduces the fiduciary risk associated with plans that allow participants to allocate their plan investments from a menu of investment funds.
Give this notice to all eligible employees at least 30 days prior to the first day of the plan year.
Annual Participant Fee Disclosure: This is the new fee disclosure requirement that just became effective August 30 of this year. The required notice includes a tabular disclosure showing:
– performance over a one, three and 10 year period.
– investment fees.
– information on how to change investments.
The notice must be given to each participant who can direct his own investment. Although these notices are required annually after August 30, 2012, calendar year plans may find it beneficial to provide these disclosures at the same time as year-end notices.
The good news is that all the above notices may be combined into a single notice. You also need to make sure they are provided to newly eligible employees or rehired participants during the plan year.
ERISA Compliance Help
Follow this checklist to help ensure that your plan remains compliant. Not sure which of these notices apply to your plan? Contact Rea & Associates. Our Ohio Retirement Plan Services team will help you to make sense of the myriad of IRS and ERISA requirements impacting your plan.
Tags: 401(k), Eligible Automatic Contribution, ERISA, fee disclosure, fiduciary, pension, pension plan, Qualified Automatic Contribution Arrangement, Qualified Default Investment Alternative, retirement plan, safe harbor