As we have discussed in previous blog posts, the Plan Sponsor of a 401(k) Plan has specific requirements related to disclosures that must be made to employees and/or participants for your Company 401(k) Plan. The rules regarding the information that must be included in these disclosures and the timeframes for the required distributions have not changed. However, due to the Covid-19 Pandemic, the Department of Labor has issued new rules regarding the delivery of these notices recognizing that many employees are now working from home. This rule will be effective 60 days after it is published in the Federal Register; however, the DOL has indicated that it will not take action against companies that implement before that date as long as they implement all components of the new regulation. So, as a Plan Sponsor, you can implement it immediately if needed.
So, what are new rules?
- Companies can use electronic means to distribute notices. This includes sending them to participants/employees via e-mail, text message, or including them on the company website or intranet. Note that this regulation only applies to retirement plans (not health and welfare plans) and it only includes DOL notices. IRS required notices are not included.
- This is a voluntary safe harbor election. The Plan Sponsor does not need to file with the DOL or request acceptance to implement. They can begin using these new rules immediately.
- The initial notification that the Plan Sponsor is moving to electronic notifications must be distributed in paper format, i.e. handing a paper document to participants, sending via mail, using a delivery service, etc. This notice should state that future notices will be handled electronically and state the process to be utilized. The notice must include statements that the participant/employee can opt-out of electronic notices at the beginning of the new process and at any time later. They also can request paper copies of notices at any time from the Plan Sponsor and these must be provided without charge.
- If the notices are to be placed on a company intranet or website, they must remain on the site for a minimum of one year or until they are superseded by a more current version.
- If the notices are to be placed on a website the Plan Sponsor must provide a notice of internet available to all employees/participants. This notice must describe the information that will be posted and provide a hyperlink or address indicating the location of the documents. The notice must also include the opt-out provision.
- If e-mail or text addresses are used, the system must be able to verify the accuracy and availability of the address. A process must be established to follow-up if e-mail is rejected or text messages cannot be delivered as the phone number is no longer being used.
- All of the above requirements apply to all participants including those that have terminated service with your company and any beneficiaries that may be receiving benefits under the Plan.
We encourage all Plan Sponsors to review this new regulation as it may provide a more efficient way to distribute the required notices for your 401(k) Plan.
Retirement plans can be very complex. As an innovative firm Summit CPA specializes in 401(k) audits. We have the ability to offer assistance entirely off-site with little or no distraction to your daily office routine. We also offer flat-fee pricing so there are no surprises on your bill when the job is complete. For assistance contact our office at (866) 497-9761 to schedule an appointment.