Retirement plans: Secure 2.0 Act changes requirements for notices, statements

Among the many provisions of the Secure 2.0 Act, several deal with the paperwork responsibilities that fall on retirement plans.

The Secure 2.0 Act, which became law on December 29, 2022, amends some sections of the Employee Retirement Income Security Act (ERISA) that deal with notices and statements.

Let’s take a closer look at two provisions of this new law:

How Section 320 impacts retirement plans

Section 320 of the new law acknowledges that some of the currently required paperwork is “unnecessary,” such as certain notices which go out to unenrolled participants.

Currently, employees who haven’t elected to participate in retirement plans must be provided with various types of notices to inform them of their options and rights. One example: Notices must be sent regarding different investment options available under the plan.

But you don’t have to send certain notices to unenrolled participants anymore, according to Section 320 of the Secure 2.0 Act. Only minimal notification must still be provided. The law requires retirement plans to send eligible individuals:

• annual reminder notices of their eligibility to participate in the plan and any applicable election deadlines, and
• any required documents that unenrolled participants request that they otherwise would have received.

That assumes the unenrolled participant has already received the summary plan description and other notices related to plan eligibility.

The annual reminder notice should be sent in connection with your annual open enrollment period. If you don’t have such a period, then the notice should be provided within a reasonable period before the beginning of the plan year.

So, what information must be included to comply with ERISA?

The annual notice should inform the unenrolled participant of his or her eligibility to participate in the retirement plan. Key benefits and rights under the plan must also be included in the annual notice. Be sure to focus on:

• employer contributions, and
• vesting provisions.

Section 320 is effective for plan years beginning after December 31, 2022.

How Section 338 impacts retirement plans

The Secure 2.0 Act contains another provision affecting paperwork requirements for retirement plans. It’s Section 338.

This provision addresses paper statements and is effective for plans years after December 31, 2025.

For defined contribution plans, at least once every year, the benefit statement must be provided on paper – unless the participant elects otherwise.

For defined benefit plans, at least once every three years, the benefit statement must be provided on paper – unless the participant elects otherwise.

Look for the Department of Labor (DOL) to update its regulations and guidance to account for Section 338 of the Secure 2.0 Act.

First, the DOL has been instructed to revise its regulations under ERISA, covering electronic delivery. The DOL regulations must explain that retirement plans need to give each participant a one-time initial notice on paper before delivering any pension benefit statements electronically. The initial notice to the participant should explain that he or she has the right to request that documents be provided on paper, rather than electronically.

Second, the Secure 2.0 Act requires the DOL to revise its guidance. The law says the following five elements must be included in the guidance to retirement plans that disclose required documents or statements electronically.

1) Participants can request that any disclosure required to be delivered on paper instead be delivered electronically.

2) Each paper statement affected by the amendment should include:

• an explanation of how to request that statements and other documents required under Title I of ERISA be delivered electronically, and
• the plan sponsor’s contact information, including a telephone number.

3) A retirement plan can’t charge any fee to a participant for the delivery of paper statements.

4) Documents provided through electronic delivery need to include an explanation of how to request that documents be provided on paper.

5) A retirement plan that furnishes paper benefit statements can furnish a duplicate electronic statement.

The DOL is required to update its regulations and guidance by December 31, 2024. We’ll keep you posted.