Non-Participating Employees
Communication Responsibilities
Today we will be discussing obligations when sending notices to eligible but non-participating employees.
Plan sponsors bear the responsibility of ensuring every eligible employee, whether they're currently participating or not, has clear awareness of their eligibility to participate in the four-oh-one-k plan, and comprehensive knowledge about the operation of the plan. This enables each individual to make an informed decision regarding participation at any time.
It's not uncommon for some plan sponsors to overlook non-participating employees, given the relatively limited liability these individuals present. If an employee doesn't possess assets in the retirement plan, changes to the plan have minor economic implications for them. However, compliance risks lurk in this area. Operational errors or the absence of proper noticing can result in fines and fees imposed by the Department of Labor, should the plan be found non-compliant.
From the Department of Labor's viewpoint, inadequate notification to non-active employees equates to a form of discrimination. This is because these employees lack the necessary information to leverage their benefit options. An absence of notice and communication could potentially foster a class of employees treated differently, thereby triggering a Department of Labor investigation leading to fines and fees.
For these reasons, it's crucial for plan sponsors to distribute all required notifications to every eligible employee, whether they're actively participating or not. Additionally, confirming receipt of all notices establishes a solid proof of compliance, useful in case of an inquiry from the Department of Labor, IRS, or legal counsel concerning your plan's operations.
To support this process, Plan Notice sends and verifies all required notifications to both active and eligible non-participating employees. Engaging our services indemnifies you from any potential fees or costs that may stem from improper notifications, including those that may arise from a Department of Labor investigation around lack of communication to eligible non-participating employees.
For more information regarding sending notices with non-participating employees, don't hesitate to contact us today.
