CLE401kGuy

Missed sending Disclosure

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A 401k plan converted from one investment product to another product with the same recordkeeper.    A couple, but not all, funds in the plan's core lineup changed and the account number changed.   Discovered that the notice to the participants announcing the change was not delivered.   Is the fix to forward the notice now to communicate the change?   What other correction would / should be made?   Thank you

I googled on the topic, but did not find this situation addressed in the 401k fix-it guide and no articles or citings came up regarding the specific topic.... 

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Assuming that there was not a blackout period and this was simply a change of funds...

The requirement to provide a notice 30-60 days before the available investments change is part of 404(c). Therefore the plan was not in compliance with 404(c) during the period of time from when the investments changed to at least 30 days after the date that the notice was provided. Plans are not required to comply with 404(c) so there isn't a risk of disqualification, but the sponsor could potentially be at risk as a fiduciary for any losses that occurred. Essentially a participant could come back and say, if I had been provided this notice in a timely manner I would have done X, but since I wasn't given the opportunity, the investments did Y and I'm holding the plan sponsor responsible for the difference.

I don't think there is a prescribed correction for this type of failure. What I would say is give out the notice now, and if anyone raises a stink, be prepared to credit them any earnings that they might have earned had they been able to make a timely election.

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