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Understanding Participant Notice Delivery Requirements

As a plan sponsor, one of your key compliance responsibilities is delivering participant notices. There are eligibility notices when it’s time for employees to get started in the plan, annual notices that explain fees and plan provisions, and situational notices if you make certain changes to your plan. It’s considered an area where many plan sponsors fail to fulfill their duties, especially to former employees who still have a participant account balance in their plan.

Here’s a quick refresher, to help ensure you are properly delivering important plan information to your plan participants.

Plan Notice Requirements: a High Level Overview

Whether you use traditional or automatic enrollment with immediate or delayed eligibility, you’re required to provide notices before eligibility or a participant’s first contribution. You need to provide other notices annually. Examples include 404(a) participant fee disclosure as well as notices based on plan features like automatic enrollment, qualified default investment alternative (QDIA), and safe harbor.

Notices for new plans, plan transitions, and plan changes, including investment and expense changes, typically need to be distributed at least 30 days before the effective date(s). There’s variation in timing and who needs to receive each notice, so it’s important to check the details.

Until recently, notices had to be sent via paper handout or mail (especially to former employees). In early 2020, the DOL finally allowed for electronic delivery.

Delivering Notices Via Email

To take advantage of email delivery, you needed to first notify a plan participant (by paper/hard copy) of the following:

1) That some or all plan documents will be furnished electronically.

2) That they have the right to request and receive paper copies of some or all of the covered documents (or to opt-out of electronic delivery altogether).

3) The procedures for exercising such rights.

The challenge with e-mail disclosure is when an email bounces back (which can be especially common with former employees). Email delivery systems must include invalid electronic address alerts. Once an email bounces back, the problem must be fixed by sending the notice to a secondary email address on file (work email vs. personal email). If this issue is not able to be resolved, the individual must be treated as if they had opted out of electronic delivery and be sent a paper version of the documents as soon as possible, until a new valid email address has been obtained.

Delivering Notices Via Website

The DOL also allows plan sponsors to furnish retirement plan documents electronically by making the documents available on a website. When using this method, a “notice of internet availability” must be distributed to the email address (or “smart” device number) provided to the plan by the participant (or assigned to the participant by the employer, such as a work email address). The notice of internet availability informs a participant that a retirement plan document has been made available on a designated website. The notice must lead a participant directly to the document itself, or to a login page that enables access to a link to the document when a participant logs in.

Your Duty to Safeguard Data  

As part of the fiduciary duty to act in the interest of participants, you must take measures to ensure data protection. This means making sure that all electronic data storage arrangements are secure. It also includes providing education to participants to help them keep their information safe. And it extends to the duty to prudently select and monitor service providers to ensure that their systems for furnishing documents are secure.

Some Best Practices

To help make your life easier, it’s totally acceptable to combine some of these notices (and your employees will likely appreciate it). For example, a safe harbor notice can include both the QDIA notice and the annual fee notice.

In addition, always confirm with your recordkeeper whether they will be providing these notices or whether they expect you to do so. Many plan recordkeepers are able and willing to assist you with this task. They may be able to distribute transition, eligibility, annual and other notices to employees (including mailing the notices, potentially for a fee). Many can also let you know when it’s time to deliver notices and provide a template for each notice.

Finally, it’s very important to maintain records. If your recordkeeper prepares and sends out the notices on your plan’s behalf, ask for copies of the notices and keep them as part of your plan’s files in case you later need to prove to a government auditor that the plan satisfies its notice obligations.

To review comprehensive information on participant required notices, please visit:

Pensionmark Financial Group, LLC (“Pensionmark”) is an investment adviser registered under the Investment Advisers Act of 1940. Pensionmark is affiliated through common ownership with Pensionmark Securities, LLC (member SIPC).