Do I have noticing obligations toward eligible but non-participating employees?

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Definitely.

Plan sponsors are required to ensure that eligible employees—whether participating or not—are: 1) aware of their ability to participate and 2) aware of how the plan operates so that they can make an educated decision regarding participation at any point in time.

Many plan sponsors don’t concern themselves with non-participating employees due to the limited liability these employees create. If an employee doesn’t have assets in the retirement plan, changes to the plan will obviously have a little economic impact on them. However, operational and compliance risks in this area can create fines and fees for the plan if they don’t provide proper notice. From the Department of Labor’s (DOL) perspective, lack of proper notification to non-active employees is a form of discrimination because the employees aren’t provided the necessary information to take advantage of their benefit options. Lack of notice and communication could create a class of employees treated differently, potentially generating a DOL investigation that could end in fines and fees.

Therefore, plan sponsors should provide all required notifications to all eligible employees, whether those employees are actively participating or not. Additionally, verifying receipt of all notices creates proof of compliance you can provide in the case of a DOL, IRS, or attorney inquiry related to your plan’s operations.

If you’re interested in how Plan Notice can support this process, please contact us. Plan Notice sends and verifies all required notifications to both active and eligible, non-participating employees. When you engage our services, we indemnify you of any potential fees or costs associated with improper notifications, including any arising from a Department of Labor investigation around lack of communication to eligible, non-participating employees.

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