Is there a difference between active and non-active participants regarding noticing?
Yes and no. (I know you hate it when I answer this way.)
Before we answer the question, let’s define the difference between active and non-active participants. An active participant is a current company employee who actively defers a portion of their payroll into the retirement plan. A non-active employee is typically defined as an employee eligible to participate in the retirement plan but has opted not to defer money. For example, some non-active employees have never been active and therefore have no balance in the plan, but they are still eligible to participate. Other non-actives may have contributed to the plan previously, but due to any of a number of circumstances, they’ve decided to stop making contributions.
Many notices go to both active and non-active employees, but plan sponsors may utilize some different approaches with non-actives. All the standard, required notices that discuss how the plan operates, how the participants benefit from it, or organizational procedures related to it are required to go to both active and non-active employees. These include all of your traditional annual notices:
- The Summary Annual Report
- The Summary Plan Description
- The Qualified Default Investment Account notice
- The Safe Harbor notice (if applicable)
Additionally, all actives and non-actives should receive notices that explain upcoming plan changes, including plan amendments or fund change notifications.
In addition to the standard required notices, some plans have a different set of marketing communications that they send to non-active employees. These notices remind the non-active employee that they’re eligible for the plan and have opted not to take advantage of it. Sending these notices has a few benefits:
- First, the plan was implemented to benefit the employees and ensure they have a positive experience with the employer, so when an employee utilizes any employer benefit, it increases the likelihood that they’ll stay with the company.
- Secondly, from a compliance standpoint, reaching out to non-active employees helps keep their contact information accurate. Like employees who have left the company, current employees who aren’t active in the plan are a subset of the plan’s participants who historically don’t maintain up-to-date contact information. Typically, non-participating eligible employees aren’t concerned about plan communication until they begin to contribute, so they’re not motivated to keep their information current. However, from a plan sponsor’s point of view, maintaining communication and verifying receipt of information is non-negotiable, as it is required to meet the Department of Labor’s (DOL) compliance requirements.
Plan Notice can support these efforts if you’re interested in outsourcing this responsibility. We provide both the notices and the proof of receipt to both active and non-active employees. Plan Notice can also help support your efforts to communicate with non-active employees and explain the benefits of utilizing the retirement plan. In this way, we can help you increase participation among this employee group.
