As an employer, staying compliant with 401(k) participant disclosure rules isn't just a regulatory obligation—it's essential to keeping your employees informed about their plan’s benefits and safeguarding your company from potential penalties. Imagine facing IRS sanctions or even plan disqualification simply because of missed deadlines or overlooked details in your 401(k) disclosures. The good news? These consequences are easy to avoid with the right knowledge and support.
The Employee Retirement Income Security Act (ERISA) mandates specific participant disclosure requirements for 401(k) plans to ensure participants have the information they need to make informed decisions about their account. These requirements can seem daunting to employers given the number of mandatory disclosures – not to mention their various deadlines. In truth, they can be straightforward to manage with the right knowledge and support.
Below is a summary of the various participant disclosures that could apply to a 401(k) plan, along with guidelines for their distribution. If you are responsible for your company’s 401(k) plan, this information can help you ensure your plan’s participant disclosure requirements are met. If you have further questions, your 401(k) provider should be able to help.
All 401(k) plans have participant disclosure requirements. Below is a summary of the participant disclosures that apply to all 401(k) plans, regardless of their features.
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Document |
Content |
Deadline |
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Describes a participant’s rights, benefits, and responsibilities under the plan in understandable language. |
Plan participants must receive a SPD within 90 days of the date they become eligible for plan participation. Plan participants must receive an updated SPD every five years if there have been any material changes. If no material changes have occurred, participants receive an update every 10 years. |
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Describes certain information reported by the year’s Form 5500. |
Plan participants must receive a SAR within 9 months after the end of the plan year, or two months after the Form 5500’s filing deadline (if later). |
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Benefit Statements |
Describes the participant’s total and vested account balance as of the last day of the statement period, the value of each investment.
Plans with participant-directed accounts must also describe the amount of fees deducted from the participant’s account during the statement period. |
Plans with participant-directed accounts – participants must receive a statement quarterly, within 45 days after the end of the quarter. Plans that prohibit participant direction – participants must receive a statement annually. |
401(k) plans with certain features must distribute additional disclosures to participants. Below is a summary of the feature-based disclosures that could apply. These disclosures are typically distributed at the same time when more than one applies.
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Document |
Content |
When Applicable |
Deadline |
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Describes the administration fees that may be deducted from participant accounts and the past performance, benchmark performance, and fees of each investment option. |
Plan allows participants to direct the investment of their account. |
Initial notice – plan participants must receive within 90 days of the date they can first direct their investments. Annual notice - plan participants must receive an updated notice within 14 months of the date they received their last notice. |
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Describes the plan’s features, including employer contributions and vesting schedules. |
Plan is designed to meet safe harbor 401(k) requirements. |
Initial notice – plan participants must receive within 90 days of the date they become eligible for plan participation. Annual notice - plan participants must receive 30-90 days before the start of each new plan year. |
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Automatic Enrollment Notice |
Describes the plan’s automatic enrollment feature, including a participant’s right to make their own deferral election. |
Plan includes an automatic enrollment feature. |
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Qualified Default Investment Alternative (QDIA) Notice |
Describes the QDIA, including the circumstances under which participants may be defaulted into the fund. |
Plan’s default fund meets QDIA requirements. |
401(k) plans must notify participants when certain events occur. Below is a summary of the event-based disclosures that could apply.
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Document |
Content |
When Applicable |
Deadline |
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Summary of Material Modification (SMM) |
Describes the changes to the plan and SPD information. |
SPD must be updated to reflect a plan change. |
Plan participants must receive a SMM within 210 days after the end of the plan year in which the change is adopted. An updated SPD can be distributed in place of the SMM. |
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Fee Change Notice |
Notifies plan participants about an upcoming change to the fees that may be deducted from participant accounts. |
Fee Notice must be updated to reflect a fee change. |
Plan participants must receive 30-90 days before the fee change takes effect.
An updated fee notice can be distributed instead |
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Investment Change Notice |
Notifies plan participants about an upcoming change to the plan’s investment menu. |
Fee Notice must be updated to reflect an investment change. |
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Notifies plan participants about an upcoming “blackout.” A blackout is 3 or more business days in which participants won’t be able to direct assets, obtain loans or take a distribution. |
A blackout is necessary (most often due to 401(k) provider change). |
Participants must receive 30-60 days prior to the blackout. If circumstances make this timing impossible, the notice should be distributed as soon as possible. |
401(k) plan participants have the right to receive certain plan information upon request – including latest SPD, the latest Form 5500 filing, any collective bargaining agreement that covers the plan, the trust agreement, a contract, or other instruments under which the plan is established or operated.
It is always acceptable to distribute participant disclosures in paper form – either by distributing copies at a company meeting or by mailing them to each employee’s last known address. Posting a required disclosure in a break room or other common area is not acceptable.
Participant disclosures may also be distributed electronically if certain requirements are met.
Failing to distribute required disclosures to your 401(k) plan participants can lead to severe consequences, including IRS sanctions and plan disqualification. However, with the help of a qualified 401(k) provider, you can ensure all requirements are met efficiently and correctly. Providers prepare necessary documents, guide you on deadlines, and keep your plan compliant with the latest regulations.
Take action now by reviewing your current disclosure process and partnering with an experienced provider. Regular check-ins with your provider can help you stay on top of disclosure requirements and avoid any potential issues.