Timely distribution of required plan notices is a critical component of fiduciary responsibility under the Employee Retirement Income Security Act of 1974 (ERISA). Notices such as Summary Plan Descriptions (SPDs), Summary Annual Reports (SARs), and fee disclosures serve as essential instruments for informing participants and ensuring regulatory compliance.
Failing to distribute these notices on time can lead to compliance issues, participant confusion, and even penalties. As a plan sponsor or fiduciary, it’s your duty to ensure that participants receive accurate and timely information about their benefits and any changes to the plan.
Why Timely Notice Distribution Matters
- Compliance: Meets all ERISA and Department of Labor (DOL) requirements for participant communications.
- Transparency: Informs participants about their rights, plan features, and any updates.
- Trust: Enhances participant confidence in plan management and oversight.
- Risk Mitigation: Reduces the risk of regulatory scrutiny, penalties, or participant complaints.
Commonly Required Notices Include:
- Summary Plan Description (SPD) – Must be provided within 90 days of plan enrollment and updated every 5 years if changes occur.
- Summary of Material Modifications (SMM) – Required within 210 days after the end of the plan year in which a material change was made.
- Summary Annual Report (SAR) – Due within 9 months after the plan year ends, or 2 months after the Form 5500 is filed.
- 404(a)(5) Fee Disclosures – Must be provided annually and upon request, detailing plan fees and investment options.
- Blackout Notices – Required at least 30 days in advance of any period when participants cannot direct investments or obtain loans/distributions.
Your Action Plan
- Create a Distribution Calendar: Develop a comprehensive schedule that outlines when each notice is due and who is responsible for sending it. Align this with your plan year and audit cycle.
- Use Multiple Communication Channels: Leverage email, secure portals, and physical mail (if necessary) to ensure all participants receive the notices, especially those without regular digital access.
- Track and Document Distribution: Maintain detailed records of when and how each notice was distributed. This documentation is critical in the event of a DOL inquiry or participant dispute.
- Review and Update Notices Regularly: Ensure that all notices reflect the most current plan provisions and regulatory requirements. Outdated or inaccurate notices can be just as problematic as missing ones.
- Engage Your Service Providers: Coordinate with your TPA, recordkeeper, and legal counsel to ensure notices are accurate and distributed on time. Don’t assume someone else is handling it—verify and document.
Final Thoughts
According to ERISA, fiduciaries are obligated to act with care, skill, and diligence in the best interest of plan participants. Timely and accurate communication is a cornerstone of this responsibility. Proactively managing the distribution of required notices ensures compliance and fosters transparency and trust with your participants.
Please set aside time this week to review your notice distribution process—or establish one if it doesn’t currently exist. Taking this step is an effective means of strengthening your fiduciary oversight responsibilities.
For any further questions, please feel free to reach out to me at sahsan@mjlm.com
Stay tuned for more tips to keep your EBP in top shape!
