As the calendar year comes to a close, plan sponsors should begin preparing annual notices. For plans using the calendar year, numerous notices are due to be given in the next few months. Here are some highlights of notices that must be sent to either participants, the IRS or the Department of Labor (DOL) in the next three months.
October to December
Many notices due during this time period deal with safe harbor plans and plans that include automatic enrollment opportunities. They include:
Safe Harbor 401(k) Plan Annual Notices
Sponsors of traditional safe harbor 401(k) plans must provide an annual notice to participants describing the safe harbor employer contributions. The notice must also provide details on other plan features, such as withdrawal provisions. You must give the notice at least 30 days, but not more than 90 days, before the first day of the plan year. Thus, for calendar-year plans, notice can be provided as early as October 2, but no later than December 1.
Safe Harbor Contingent Notices
Plans may also have to provide a safe harbor contingent notice if they want to preserve the ability to adopt a 3% qualified non-elective contribution safe harbor design before the end of the plan year. This notice must be given to eligible employees that this action may be taken. The timing of this notice is the same as for the safe harbor 401(k) annual notice.
Automatic Contribution Arrangement Notices
There are three types of automatic contribution arrangements:
- Automatic contribution arrangements;
- Qualified automatic contribution arrangements, which contain certain employee and employer contribution requirements that exempt the plan from annual nondiscrimination testing requirements, making it a “safe harbor” plan; and
- Eligible automatic contribution arrangements, which permit penalty-free distribution of “accidental” automatic deferrals and provide a six-month period to distribute excess contributions and excess aggregate contributions without imposition of a 10% excise tax.
Notices for these arrangements must provide employees with information that enumerates their rights and obligations under the plan, explain the employee’s right to elect not to have deferral contributions made or elect a different contribution percentage, and detail the default investment provisions in the absence of an investment election.
Generally, for all three types of automatic contribution plans, you must provide an initial notice of eligibility to the participant, generally at least 30 days, but not more than 90 days, from eligibility. Then, annually you must give the notice at least 30 days, but not more than 90 days, before the first day of the plan year.
Required Minimum Distributions (RMDs)
Employers must make RMDs by December 31 for eligible employees.
Annual Participant Fee Disclosure Notice
Employers must provide this notice, sometimes referred to as a Section 404(a)(5) notice, to participants annually within a 14-month period, recently amended from a 12-month period. Many plan sponsors choose to provide this notice with other year-end required notices.
January and Beyond
Starting in January, plan sponsors have IRS filings to be aware of:
IRS Form 1099-R
Plans use this form to report distributions, including direct rollovers, from qualified plans or 403(b) plans. You must provide it to plan participants by February 1 of the year following the calendar year in which the distribution was made. Plans will then have to file the form with the IRS by February 29 (or March 31 if filed electronically) of the year following the calendar year in which the distribution was made.
IRS Form 945
This form reports income tax withheld from distributions made from qualified plans and 403(b) plans. It must also be provided to participants by February 1 of the year following the calendar year in which the distributions were made. You can extend the filing deadline by 10 days to February 10 if tax payments were made on time and in full.
These are just a handful of the annual notices and reports that employee benefit plans must provide each year. For a comprehensive list for your specific plan, contact your benefits specialist.
For more information on year-end notices that you should provide clients, contact Stephanie Zaleski at [email protected], or call her at 312.670.7444. Visit ORBA.com to learn more about Employee Benefit Plans Services.