The Pension consultants at Planmark regularly receive calls on a broad array of technical topics related to qualified retirement plans. A recent call with a plan sponsor in Atlanta is a commonly asked question about delivering participant notices. The plan sponsor asked:
“These rules about electronic delivery of 401(k) plan notices to participants are confusing. Can you give me simple summary of the requirements?”
The IRS dictates the rules for electronic delivery of rollover distribution notices and safe harbor notices.
In contrast, DOL has jurisdiction over other plan notices, such as the summary plan description and summary annual reports, and has issued its own electronic notice rules
While the IRS’ and DOL’s rules for electronic delivery of plan notices are similar, there are important differences. Therefore, it is important to know which governmental administrative branch has jurisdiction over the particular notice to be provided: the IRS or the DOL.
To address the case at hand, the IRS provides two methods for electronic delivery of the “402(f)” rollover distribution notice and 401(k) safe harbor notices: the “consent” method and the “effective access” method. A general description of the two methods follows.
Under this method, a participant must affirmatively consent to receive an electronic notice before the notice is sent. Consent must be in a manner (either electronically or in hard-copy form) that reasonably demonstrates that the participant can access the notice in the electronic form that will be used to provide the notice.
Before a participant may consent to electronic delivery, the plan sponsor must provide the participant with a disclosure statement that describes:
- Scope of the consent
- Right to withdraw consent
- Right to receive a paper copy upon request
- Hardware and software requirements
- Procedures for updating contact information for the participant
As an alternative method to the consent method, effective access is satisfied if at the time the applicable notice is provided, the participant is readily able to access the electronic medium used to send the notice and has been advised that they may request that the notice be sent in written form at no charge.
The Resource Desk is staffed by the pension experts at Planmark Financial Group, Inc., a third-party plan administration firm. Any information provided is for informational purposes only. It cannot be used for the purposes of avoiding penalties and taxes. Planmark does not provide tax or legal advice.
Consumers consult with their tax advisor or attorney regarding their specific situation.