Retirement Topics - Notices

 

Plan administrators must give employees certain written information about their retirement plan. Some of this information must be provided regularly and automatically. Other kinds of disclosures are available upon written request, free of charge or for copying fees. Plan administrators can give notices to participants electronically (online) if it meets certain conditions.

Participant Events

Plan Events

Electronic Notices

Participant Events

Notice when employee starts in plan

An employer should provide several documents, depending on the type of retirement plan and when the employee meets the eligibility requirements. These include a summary plan description, enrollment package, beneficiary designation form, and salary deferral election form.

Notice for automatic enrollment

Prior to automatically enrolling an employee in either an EACA or QACA plan, the employer must give the employee a notice PDF at least 30 days, but no more than 90 days, before the employer automatically enrolls the employee. If the employee is newly hired and the plan has immediate eligibility, then the employer may give the employee this notice on the date he or she is hired.

Notice of an individual's benefits

The individual benefits statement (IBS) shows the benefits earned by a participant and his or her vested amounts. It must be given to a participant upon his or her written request, but no more than once in a 12-month period, and automatically to certain participants who have terminated service with the employer. Plans that provide for participant-directed accounts must furnish individual benefits statements on a quarterly basis. Plans that do not provide for participant direction must furnish statements annually.

The statement should identify the participant's accrued benefit and vested pension amount. An accrued benefit for a participant in a defined contribution plan (e.g., profit-sharing plan), is the amount in that participant's individual account at any given time. In a defined benefit plan, the accrued benefit is the benefit that will be provided when the participant reaches the plan's normal retirement age. A vested benefit is the portion of the participant's benefit that is not at risk of being forfeited.

Notice of domestic relations order

A divorce, separation, or other domestic relations proceeding may result in an order or decree that divides a participant's retirement plan benefit between the participant and an alternate payee. An alternate payee may be the participant's spouse, former spouse, child or other dependent. These orders are commonly referred to as DROs, domestic relations orders. The plan administrator is required to pay benefits in accordance with any qualified domestic relations order.

Notices of survivor annuities

QJSA: Certain retirement plans may contain a QJSA feature that provides a participant with a lifetime annuity plus a survivor annuity for the participant's spouse if the spouse outlives the plan participant. It is given between 30 and 180 days prior to the date benefits are paid. The QJSA notice explains:

  • the QJSA's terms and conditions,
  • the effect of waiving the QJSA and choosing a different benefit payment form,
  • a participant's spouse's or non-spouse beneficiary's right to not consent to waiving the QJSA,
  • the participant's right to revoke a waiver, and
  • the participant's right to revoke the election of the benefit (with spousal consent) during the immediate 90-day period before the date benefit payments begin.

QOSA: A QOSA notice must be given to plan participants in plans that contain a qualified optional survivor annuity (QOSA) feature. A participant who waives a QJSA may elect to have a QOSA. The amount paid to the surviving spouse under a QOSA is equal to the certain percentage (as chosen) of the amount of the annuity payable during the participant's life.

The QOSA notice is given between 30 and 180 days prior to the date benefits are paid. The QOSA notice explains:

  • the QOSA's terms and conditions,
  • the effect of waiving the QOSA and choosing a different benefit payment form,
  • a participant's spouse's right to not consent to waiving the QOSA, and
  • the participant's right to revoke a waiver.

QPSA: A QPSA notice is given in certain retirement plans that contain a QPSA feature. Certain retirement plans may contain a QPSA feature that provides the surviving spouse with an automatic preretirement survivor annuity if the participant dies before distribution of benefits has commenced. The notice must be given to a participant during the time beginning when he or she is age 32 and ending with the close of the plan year before the participant is age 35 or within one year from when an employee becomes a plan participant if he or she is hired after age 35. The QPSA notice explains:

  • the terms and conditions of the QPSA,
  • what will happen if the participant and spouse waive the QPSA,
  • the spouse's right to not sign the waiver, and
  • the participant's right to revoke such a waiver.

Notice that a lump sum is eligible for rollover

A participant should receive this notice when he or she receives a distribution from the plan that is eligible to be rolled over. The plan is also required to offer a non-spouse beneficiary the opportunity to roll over the deceased participant's account balance and must notify the non-spouse beneficiary that the deceased participant's account balance is eligible for rollover.

The notice should describe the effects of rolling an eligible rollover distribution to an IRA or another plan and the effects of not rolling it over, including the automatic 20% withholding. Notice 2009-68 PDF contains two sample explanations that satisfy the requirements of the notice employers must provide to employees leaving with retirement assets. The sample explanations state, in plain language, an employee's options when receiving an eligible rollover distribution. The sample explanations include information on distributions from a designated Roth account under an employer plan and explain rules that apply in special situations, such as when a distribution is made to a surviving spouse or other beneficiary.

The employer must give the notice between 30-180 days before an employee receives a distribution. However, the employee may waive the 30-day period. If a participant dies, then his or her spouse or beneficiary, if unmarried, must receive this notice.

Notice given to participants when they leave a company

This notice describing participants' benefits and the procedures to obtain them must be given to participants within 90 – 180 days of when they have retired or quit working. The information given to a participant will vary depending on:

  • the type of retirement plan,
  • the reason the participant stopped working, and
  • the participant's age.

The notice must explain a participant's right to defer receiving his or her account balance and the consequences of taking money out of a retirement plan now rather than later.

The documents provided to participants who are no longer working should contain enough information for the participant to understand their benefits and how to apply for them. The documents might contain information:

  • describing the benefits that are available;
  • identifying when benefits may be or will be paid; and
  • listing the steps that must be taken to receive the benefits (including when and how a participant should apply).

Notice of suspension of benefits

This notice is given to employees when they work after the plan's normal retirement date, or if they are rehired after attaining normal retirement age, and their benefit payments are suspended. It should describe why and when an employee's benefit payments are being suspended. The notice should contain:

  • a description of the specific reasons why benefit payments are being suspended 
  • a general description of the plan provisions relating to the suspension of payments 
  • a copy of the specific plan provisions
  • a reference to the applicable Department of Labor regulations at DOL Regulation Section 2530.203-2
  • a description of process for appeal of the suspension and for resumption of benefits, if applicable
  • information about any offsets of suspendible amounts paid during employment

A participant should receive a suspension of benefits notice in the first month the benefit is suspended. For late retirement, that is the month the participant attains normal retirement age. For rehired retirees, that is the first month that a retirement benefit is suspended.

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Plan Events

Notice when plan applies to IRS for a determination letter for qualification or plan termination

When a plan sponsor submits an application to the IRS for a determination letter on the qualified status of a new or amended plan or on plan termination, participants are allowed to comment to the IRS and/or DOL regarding the plan's qualification and must be notified of their right to comment with an Interested Party Notice. The notice should contain the following:

  • a description of the class or classes of interested parties to whom the notice is addressed;
  • a description of the class of employees eligible to participate in the plan;
  • the plan's name and identification number and the name of the plan administrator;
  • the applicant's name and taxpayer identification number;
  • that an application for a determination of the qualified status of the plan is being made to the Internal Revenue Service, and whether the application relates to an initial qualification, a plan amendment, plan termination, or a partial termination;
  • whether or not the Internal Revenue Service has issued a previous determination letter;
  • a statement that any person to whom the notice is addressed is entitled to submit or request the Department of Labor to submit to EP Determinations a comment on the plan's qualification;
  • the specific dates by which a comment must be received;
  • the number of interested parties needed for the Department of Labor to comment; and
  • a description of a reasonable procedure whereby additional information will be available.

    Notice must be mailed or sent (electronic media permissible) in a manner reasonably calculated to ensure that each interested party is notified. Notice must be mailed before the application is submitted to the IRS, between 10 and 24 days before the application date.

Notice when the plan is amended

When the plan is amended or when the information in the Summary Plan Description (SPD) has changed, participants should receive a Summary of Material Modifications (SMM). The SMM would generally include changes to the following:

  • name and address of the employer, plan sponsor, plan administrator, trustees;
  • collective bargaining agreements;
  • vesting;
  • eligibility for participation & plan benefits;
  • circumstances which may result in plan disqualification;
  • circumstances which may result in denial or loss of benefits or ineligibility;
  • plan year-end date; and
  • benefit claim procedures and remedies available for denied claims.

The SMM must be provided no later than 210 days after the close of the plan year for which the modification was adopted. The SMM or changes in information in the SPD don't need to be furnished separately if the changes or modifications are described in a timely SPD.

Notice when the end of the plan year has passed

When the end of the plan year has passed, participants should receive a Summary Annual Report (SAR). The SAR should include the following:

  • administrative expenses incurred by the plan;
  • amount of benefits paid to participants and beneficiaries;
  • total value of plan assets;
  • a pension plan's compliance with the minimum funding standards; and
  • right to receive a copy of the full annual report, or any part thereof.

The SAR is provided the later of nine months after the end of the plan year or two months after the Form 5500 is due (if an extension has been granted by the IRS).

Notice for SIMPLE IRA plans

If an employer adopts a SIMPLE IRA plan, it must notify each employee of the following information before the beginning of the election period.

  1. The employee's opportunity to make or change a salary reduction choice under a SIMPLE IRA plan.
  2. The employees' ability to select a financial institution that will serve as trustee of the employees' SIMPLE IRA, if applicable.
  3. The employer's choice to make either matching contributions or nonelective contributions.
  4. A summary description provided by the financial institution.
  5. Written notice that the employee's balance can be transferred without cost or penalty if the employer uses a designated financial institution.

Election period. The election period is generally the 60-day period immediately before January 1 of a calendar year (November 2 to December 31 of the preceding calendar year). However, the dates of this period are modified if the employer sets up a SIMPLE IRA plan in mid-year (for example, on July 1) or if the 60-day period falls before the first day an employee becomes eligible to participate in the SIMPLE IRA plan.

Notice for safe harbor 401(k) plans

When the plan is intended to be an IRC section 401(k) or (m) safe harbor plan, an annual notice must be provided to all employees eligible to participate in the plan. The notice must contain the following:

  • the safe harbor matching or non-elective formula used in the plan;
  • level of matching contributions, if any, other contributions under the plan, and the conditions under which they will be made;
  • the type and amount of compensation that may be deferred;
  • the method of making deferrals under the plan;
  • the periods available for making elections;
  • the withdrawal and vesting provisions applicable to contributions under the plan; and
  • how to obtain additional information about the plan.

The notice must be given to each eligible employee within a reasonable period (at least 30 days and not more than 90 days) before each plan year and other times where an employee doesn't receive the annual notice because he or she becomes eligible after it has been distributed.

Notice when a 401(k) plan fails nondiscrimination tests

When an IRC 401(k) plan fails the actual deferral percentage (ADP) test or actual contribution percentage (ACP) test, the plan administrator should issue a notice of correction letter to all affected highly compensated employees, or when applicable, a notice that a corrective distribution is being made.

If the plan corrects the tests via distributions, the plan sponsor will send the participant a letter that describes the refund process and any taxability issues. The participant will also receive a check for the amount of the distribution and a Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. The Form 1099-R amount will include the returned contributions and any income earned on that amount.

Returned excess contributions or excess aggregate contributions, along with earnings, are reported on Form 1099-R as taxable to the recipient in the year of distribution.

Notice that employer has not made a required defined benefit contribution

When the employer fails to make a required plan contribution under the minimum funding standards, notice is required unless there is a pending funding waiver request. The notice is a document provided to each participant, beneficiary and alternate payee under the plan stating that the employer did not make a required funding contribution. Notice must be given before the 60th day following the due date of the quarterly or other required contribution.

Notice that the plan has reduced benefits

This notice must be given to plan participants, beneficiaries and each employee organization representing participants in a pension (defined benefit, target benefit or money purchase) plan when their future benefit accruals will be significantly reduced by a plan amendment or some other employer action, such as a merger. The notice is generally referred to as an ERISA Section 204(h) Notice.

The notice must state the specific provisions of the amendment causing a reduction in future accruals and its effective date. This summary will not explain how the individual benefit of each participant or alternate payee will be affected by the amendment. The notice should be written in a manner that would be understood by the average plan participant and must provide sufficient information to allow a participant or beneficiary to understand the magnitude of the reduction.

It should be given at least:

  • 45 days prior to the effective date of benefit reduction
  • 30 days for an early retirement subsidy in a merger or acquisition, and
  • 15 days for other mergers or if a small pension plan is involved.

Notice of a defined benefit plan's annual funding

Defined benefit plans must give each participant an annual funding notice no later than 120 days after each plan year. It must include, among other things, the plan's funding percentage, a statement of the value of the plan's assets and liabilities and a description of how the plan's assets are invested as of specific dates, and a description of the benefits under the plan that are eligible to be guaranteed by the PBGC. Small plans (100 or fewer participants) must give the notice upon the earlier of: the date that Form 5500 is filed or the due date of Form 5500 (including extensions).

Section 436 notice

This notice must be given by a plan administrator of a single-employer defined benefit plan to participants within 30 days after a plan has become subject to a funding-based limitation on benefit accruals and distributions under IRC Section 436.

Notice of waiver of minimum funding requirement

This notice must be given to plan participants, beneficiaries and alternate payees when the employer requests a waiver of the minimum funding requirement from the IRS. The notice should contain the following:

  • name of the plan and the plan sponsor;
  • the plan year for which the waiver is being requested;
  • right to submit relevant information regarding the application for waiver of the minimum funding requirement;
  • right to receive a copy of the latest annual plan report;
  • the present value of vested benefits under the plan;
  • the present value of benefits, calculated as though the plan terminated;
  • the fair market value of plan assets; and
  • the interest rate used in calculating the present values.

    It should be given within 14 days of the date that the application for a funding waiver is filed with the IRS.

Notices for multi-employer plans in critical and endangered status

This notice must be given to participants in multiemployer defined benefit pension plans that are in, or will be in, endangered or critical status for a plan year to inform them of this status. Beneficiaries, the bargaining parties, the Pension Benefit Guaranty Corporation and the Department of Labor must also be notified. It must be given no later than 30 days after the plan actuary certifies that it is in either critical or endangered status.

Notice of blackout period

In an individual account plan, the plan may impose a blackout period where there is a temporary suspension, limitation or restriction on the ability of participants to direct or diversify assets, to obtain loans, or to take plan distributions. The most common reasons for imposition of a blackout period include changes in investment alternatives or recordkeepers, and corporate mergers, acquisitions, and spin-offs that affect the pension coverage of groups of participants. When a blackout period of three or more business days is imposed, affected participants and beneficiaries should be notified.

A blackout notice should contain information on the expected beginning and end date of the blackout. The notice should also provide the reason for the blackout and what rights will be restricted as a result. The notice must specify a plan contact for answering any questions about the blackout period. For additional information on blackout notices, see DOL Regulation Section 2520.101-3(e)(2) (Final Rule PDF) and the Department of Labor - Employee Benefits Security Administration.

Each participant should receive a blackout notice at least 30 days, but not more than 60 days, in advance of any blackout. If extenuating circumstances prevent the plan administrator from sending the notice out at least 30 days prior to a blackout period, the administrator must provide the notice as soon as administratively possible under the circumstances.

Notice that the employer is terminating the plan

When a plan is to be terminated, participants should receive a written notice of the company's intention to terminate the plan and a notice of plan benefits. See Terminating a Retirement Plan.

Notice of intent to terminate: The Notice of Intent to Terminate should contain sufficient information to notify the participant of the termination of the plan. The notice might include identifying information such as:

  • the plan name and number;
  • the proposed termination date;
  • a statement concerning the cessation of accruals (benefit accruals are ceasing); and
  • a statement that there are sufficient plan assets to meet the accruals provided under the plan.

The notice must be provided to all affected plan participants and/or beneficiaries at least 60 days and no more than 90 days before the proposed date of termination.

Notice of Intent to distribute benefits: The notice is provided to each affected participant or beneficiary and specifies the amount of the participant's benefit as of the proposed termination date. The notice should identify the amount and form of each participant's benefit including any personal data used in determining the amount of the benefit, including lump sum conversions, mortality and interest rates used to compute the benefit. It should be provided promptly to any affected participant or beneficiary after the proposed termination date and on or before the distribution date.

Notice that a terminated plan has been abandoned

This notice must be given by a qualified termination administrator to a plan participant of a terminated plan that has been abandoned, apprising the individual of his or her account balance and requesting that such individual elect a form of distribution.

Notice when excess pension plan assets are to be transferred

An employer sponsoring a defined benefit plan may transfer excess pension assets to fund retiree health benefits or retiree group term life insurance. All plan participants should receive a notice of the employer's intent to transfer these assets. The notice should contain plan and financial information concerning the transfer of excess defined benefit assets. Participants and beneficiaries should receive the notice no later than 60 days before the transfer date.

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Electronic Notices

Many participant notices required by the IRS can be given electronically if the notice meets certain conditions. See Treasury Regulations Section 1.401(a)-21 relating to the use of an electronic medium to provide applicable notices and to make participant elections.

  • The electronic system must be reasonably designed so that the notice is conveyed in a manner that is no less understandable than if given in a paper document.
  • The electronic notice must meet the consumer consent requirements or meet the exemptions from them:
    • Notice isn't provided verbally.
    • Recipient must give electronic or written consent to have the notice delivered electronically
    • Disclosure statements must be provided to the recipient before they can consent to receive the notice electronically.
    • After the participant agrees to receive notices electronically, the plan administrator must notify the participant of a change in the hardware or software needed to access the notice (but only if the change could cause the recipient to not be able to access the notice).
  • The plan administrator meets the exemption from consumer consent requirements:
    • The electronic media used to send the notice must be a medium that the recipient can access.
    • When the electronic notice is sent, it must advise the recipient that he or she may request in writing at no charge.

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