Cyber for Plan Sponsors

Retirement Plans: Notice Failure?



Among the many requirements for 401(k) plans are the timely dissemination of a variety of standard notices to participants. ERISA experts remind us that adhering to notice requirements is critical: failure leaves participants without information that impacts their decision-making. Don’t assume third party providers are providing notifications: monitor!


Types of Notices

Foley & Lardner offer a summary of many (but not all) of the standard notices that must be provided to 401(k) participants, emphasizing that the new Lifetime Income Disclosures became effective this year. This new notice was mandated by 2019s Secure Act to increase awareness about how retirement savings play out as a monthly income source. If you need to catch up on this, now’s a good time to review the Department of Labor’s fact sheet on income illustrations. Other examples of standard notices required for 401(k) plan participants include:

  • 401(k) Safe Harbor Notice
  • Automatic Enrollment Notice (Non-QACA)
  • Qualified Default Investment Alternative (QDIA) Notice
  • Fee Disclosure Notice
  • Blackout Notice


Liabilities and Penalties

Under the high standards of ERISA law, notification failures or delays pose a big risk for retirement plans and their fiduciaries. As Foley & Lardner explains:


Failing to provide required notices can subject the plan, and its fiduciaries, to liability. Notice failures can result in penalties imposed by the Internal Revenue Service or U.S. Department of Labor, or lawsuits from participants who were not informed about important information that affected their decision-making. For many safe harbor plans, providing the safe harbor notice is a pre-condition for qualifying for the safe harbor. And ensuring that all of your plan’s required notices have been timely provided makes for a smoother audit process, whether it be the plan audit for your Form 5500 or a governmental audit of your plan.


Understanding the challenges plan sponsors face in keeping up with all of the requirements and evolving expectations, Colonial Surety offers Fiduciary Liability Insurance at locked in rates. Annual premiums cost less then one hour of ERISA legal advice. We even include Basic Cyber Liability Insurance for added protection. Armed with Colonial’s Fiduciary-Cyber Pack, if you face claims of alleged or actual breaches of duty in connection with the employee retirement plan, you’ll be covered for defense costs and penalty limits up to $1,000,000. Plus, in the event of a cyber breach, your business—and plan—will receive support at every stage of incident investigation and breach response, as well as coverage against lawsuits or regulatory actions related to the breach. At Colonial, we make it so efficient and reasonable for plan sponsors to secure insurance, that you can do it in minutes, now: Fiduciary with Cyber Liability Insurance Here.


Magic Wand for Notifications?

Alas, when it comes to ensuring that all required notifications are provided, on schedule, to participants, there is no magic wand to replace careful attention to plan administration throughout the year. JD Supra’s legal experts do, however, offer these tips:


  • It’s okay, and often helpful to employees, to combine some of these notices. For example, a safe harbor notice can include both the QDIA notice and the annual fee notice.


  • Always confirm with your 401(k) recordkeeper whether they will be providing these notices or whether they expect you to do so. Also, for the new lifetime income disclosure, if your recordkeeper has not yet confirmed that they will be ready to provide this notice on your plan’s behalf, reach out to your account representative for a discussion on this topic.


  • If your recordkeeper prepares and sends out the notices on your plan’s behalf, ask for copies of representative notices and keep them as part of your plan’s files in case you later need to prove to a government auditor that the plan satisfies its notice obligations.


Plan sponsors will also find it helpful to know that when errors are detected, EBSA encourages fiduciaries to bring plans into compliance, and administers the Voluntary Fiduciary Correction Program to assist in doing so. Remember too, that Colonial Surety’s three point coverage package offers plan sponsors across the country protection, efficiency and value. Conveniently, Colonial provides: the required ERISA bond to protect the assets of the retirement plan from theft; Fiduciary Liability coverage to protect you and your assets from personal liability; and, Cyber Liability coverage to safeguard your company and plan from covered losses and expenses in the event of a cyber breach.

Proceed with confidence: Three Point Coverage Package.


Serving customers since 1930, Colonial Surety is the trusted source for the pension industry to secure legally required ERISA bonds, fiduciary liability insurance and cyber-liability insurance. We help safeguard plan sponsors, pension professionals and financial advisors — and keep their businesses compliant — with pain-free, efficient, and friendly service every time.


Colonial Surety Company is rated “A Excellent” by A.M. Best Company, US Treasury listed and in business all across the country.