Updated August 24, 2023
SECURE 2.0 introduced a number of provisions that seek to lessen the administrative burden for employers sponsoring retirement savings programs. Among them, several provisions impacting required plan notices and disclosures.
The Department of Labor (DOL) and IRS want to ensure that employees have adequate information to make informed choices about retirement plans. Over time, this amounted to a large volume of required notifications and disclosures that significantly burdened employers and proved ineffective.
These communications are required for current employees, whether or not they actively participate in a savings program, former employees with plan benefits, and their beneficiaries.
Simplified Disclosures for Unenrolled Employees in Effect
Beginning on January 1, 2023, Section 320 of Secure 2.0 no longer requires employers to provide the numerous required notices to “unenrolled participants” so long as they receive an Annual Notice of Eligibility to participate during the annual enrollment period and, upon request, are given any documentation they are entitled to receive from the plan.
Who is an Unenrolled Participant? It is any employee without a plan balance who is eligible to enroll in a 401(k) or a 403(b) plan who received a Summary Plan Description and any other required notices at the time of initial enrollment.
What is an Annual Notice of Eligibility? It is a reminder notice about the eligibility to participate in the plan and the benefits of participating, along with the applicable deadlines.
What Actions Should be Taken? While simplified disclosure for unenrolled participants is optional, employers may find it helpful to make plan administration easier. Those interested in using the new option should consider updating their policies and procedures to set up two groups for distributing notices:
Group 1 – Participants who contribute or have a balance in the plan.
Group 2 – Eligible employees who are not participating in the plan and have no account balance.
Plan Sponsors should consider informing all employees about the updated communication approach so that “unenrolled participants” know they will receive fewer notices about the plan.
Additional Consolidation of Notices to Come
The lawmakers gave the Treasury and the DOL until December 31, 2024 to issue new regulations to allow employers to consolidate required plan notices.
More Simplification and Clarification
Other sections of the Act provide for additional simplification and clarification, including annual defined benefit plan funding notices and description of benefits/risks associated with taking a pension lump sum.
Let Pinnacle Plan Design Help
Consultants at Pinnacle Plan Design are actively monitoring new guidance concerning SECURE 2.0. This represents our understanding of the laws at this time. Additional guidance will provide additional clarity. If you have any questions about the changes to the plan notice and disclosure rules, don’t hesitate to contact us at (520) 618-1305.