As we begin the last quarter of the year, if your company sponsors a calendar year 401k plan, don’t forget about participant notice requirements. They must be furnished by December 1, 2012 and may impact the operation or qualification of your plan. Here is a checklist that may be helpful, but check with us if you are not certain which of these requirements apply to your plan.
Required for 401k plans that are designed to satisfy the safe harbor plan design rules which 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) 30-90 days prior to the first day of the plan year. The minimum required safe harbor contributions are either:
- A 3% non-elective contribution that goes to all eligible employees or
- A match contribution equal to at least 100% of the first 3% deferred by participants and 50% of the next 2% deferred.
Qualified Automatic Contribution Arrangement (QACA)
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% and then escalate to at least 6% (but no more than 10%) in 1% increments annually, or they start at 6% (at minimum) initially and do not require escalation. The employer must contribute the same safe harbor contribution described above under Safe Harbor. The QACA notice must be given to all eligible employees (whether they are participating or not) 30-90 days prior to the first day of the plan year.
Eligible Automatic Contribution (EACA)
Required 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. The EACA notice must be given to all eligible employees (whether they are participating or not) 30-90 days prior to the first day of the plan year.
Qualified Default Investment Alternative (QDIA)
Required for participant-directed 401k or 403b plans that intend to comply with the safe harbor rules for default investments which reduces the fiduciary risk associated with plans that allow participants to allocate their plan investments from a menu of investment funds. The QDIA notice must be given 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 401k plan fee disclosure requirement that just became effective August 30 of this year. The required notice includes a tabular disclosure showing performance over a 1, 3 and 10 year period, investment fees and 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.
You may combine these notices into a single notice, and you must provide these notices during the plan year to newly eligible employees or rehired participants.
Contact our Ohio Pension Administration Team
Does that list of requirement leave your head spinning? Worried that your plan might not be in compliance with some of the regulations described above? Noncompliance opens your plan, and you as a fiduciary, up to liability. You are responsible for compliance, but that doesn’t mean that you have to do it alone. Contact Rea & Associates. Our Ohio retirement plan services professionals will help you stay compliant give you peace of mind knowing that your plan is meeting all the requirements.