Save Trees, Grow Retirement Plans
Lyndsey Barnett and Ihsan Walker
SECURE 2.0 has changed the game again by now allowing employers to save time and money by eliminating certain notices to be sent to unenrolled employees. In the past sponsors were required to send voluminous documents disclosing their retirement and welfare benefits plans to both enrolled and unenrolled participants—but not anymore. The new law now eliminates the requirement to distribute these IRS and ERISA notices to unenrolled participants. An unenrolled participant is an eligible employee who has not elected to participate in a workplace retirement plan.
However, these participants cannot be forgotten altogether, to encourage participation, sponsors must still provide annual reminder notices to unenrolled employees regarding their eligibility to participate in the plan, and must provide any other required notice or document like SPDs, SMMs, SARs upon request. This must take place during the annual open season election period or a reasonable time before the beginning of each plan. Further, to qualify for this relief the unenrolled participant must have been given an SPD when they became eligible to participate.
This exception does not apply to unenrolled participants who are also eligible for any nonelective employer-funded benefit. For example, if your plan makes a profit-sharing contribution, employees eligible for that contribution would not be eligible for this relief even if they were not making deferrals. Yet, if the only employer contribution is a match and the employee does not elect to make deferrals, then the employee would be considered an unenrolled employee subject to this relief.
If you have any questions about who qualifies as an unenrolled employee, what notice they should be given or about SECURE 2.0 generally, please reach out to any attorney on our Employee Benefits team.