Missed quarterly contributionsParticipant Notices

[Guest guppy]

Plan Sponsors are required to provide notice to participants within 60 days of a missed quarterly contribution.

Is there any exemption from this notice for small plans (other than one life plans)?

If not, what is the feeling as to how well this requirement is being satisfied?

[Guest dsyrett]

To my knowledge, there is no exemption to this requirement for small plans.

My guess is that there are at least a few plans that are not meeting this rule.

[Guest Steve C]

See PBGC Technical Update 97-6 for a small plan exemption.

[MGB]

The requirement is to notify participants if the contribution is not made within 60 days. That does not say that the notice has to be sent in that time period. I know some plans that include the notice in their SAR the following year with the additional explanation that the amount has since been paid. Obviously, the intent is to notify participants within a reasonable time near the failure, but there are no official guidelines.

See ERISA 101(d)(1): "Such notice shall be made at such time and in such manner as the Secretary may prescribe."

They never have.

Note that the PBGC Technical Updates are at:

http://www.pbgc.gov/laws/techupdates/techupdt.htm

[Guest guppy]

Notice 97-6 waives the requirement to report the missed quarterly to the PBGC (reportable event), but to my knowledge does not waive the participant notice requirement under ERISA (101(d), I believe).

[AndyH]

MGB, the PBGC Schedule A instructions say that the notice is due 2 months following the 5500 due date for the prior year (including extensions), which makes it due the same day as the SAR.

[Guest guppy]

MGB, thanks - that is consistent with my understanding. I've also heard of plans that notify participants in advance on annual statements with a blurb that says they don't plan to make the quarterlies since the final amount may not be determined by the time payment is due.

[MGB]

I have reviewed the Schedule A instructions. The only participant notice that I could see discussed was the notice of a variable rate premium being paid.

Notices for missing a quarterly contribution are not a PBGC issue, it is a DOL issue.

Is there a reference there that I missed?

[AndyH]

I'm looking the 2003 instructions, instructions under Item 6 Plan Administrator Certification, page 37 of the 2003 instructions.

"The Participant Notice is due no later than two months after the due date (or extended due date) for the Form 5500 series for the prior plan year. For example, ....."

The Participant Notice is related to the variable premium. There is only one notice, not two. And this is where late quarterlies must be disclosed.

And as far as I can tell, if you never are required to issue the Notice, you never need to disclose late quarterlies.

At least this is how I understand these items.

[MGB]

I don't know how you are linking the participant notice for late quarterlies to the participant notice for variable premium payments. They are completely unrelated issues...one governed by the DOL and the other governed by the PBGC. They should have not bearing on each other whatsoever.

[david rigby]

... but it is common to combine them.

[AndyH]

I do see your point.

But the PBGC Notice must disclose the late or missed quarterlies by the SAR date and that would seem to satisfy the ERISA 101(d)(1) requirement, and I believe the PBGC Notice requirement makes you go back and disclose any previously undisclosed missed quarterlies (if and when the notice is required).

So it does not appear to me on the surface that these are totally unrelated, rather it seems that the second (PBGC Notice) is reinforcing the first.

But having said that, you would understand the leglislative history better than the rest of us, so I won't belabor the point.

[AndyH]

The following is on page 13.135 of the ERISA Outline Book, 2004 edition. This appears to be in error? We're sending Sal an email. Any ideas where this came from?

2. Notice of missed funding payments. If the employer fails to make a required installment or other payment required under the minimum funding standards, a notice of such failure must be given to each participant and beneficiary (including an alternate payee under a QDRO). ERISA §101(d). The notice is required before the 60th day following the due date of the installment or other payment. The minimum funding standards apply only to defined benefit plans, money purchase plans and target benefit plans.

There are no caviats, exceptions or exemptions that follow.

MGB, any thoughts? I agreed with you until a colleague found this (not that I still don't but I have to wonder where this came from).

[Harwood]

In the 2001 edition, p. 13.105 “Waiver pending. If application for a minimum funding waiver is pending at the time the installment or other payment is due, notice is not required. However, if the waiver is denied, notice must be provided within 60 days after the date of such denial. ERISA §101(d)(2)”

[MGB]

The 60 days is only the "trigger date". As long as you make the required payment within the 60 days, you don't need a participant notice. If you pass the 60 days (in either situation - regular or after a waiver denial), that triggers the participant notice. It does not define when the notice must be provided. The law says the Secretary will provide a time to make it...which they never have.

[Guest dsyrett]

Note that there is up to a $110 per day per person penalty (at a court's discretion) for failure to provide the notice. However without guidance on when to provide, it would be difficult to assess.

[AndyH]

My colleague heard back from Sal and the EOB will be changed, starting with the online version. As usual, MGB was right. Thanks again, Mark.

We need to check some citations to paraphrase Sal's comment correctly but first read of his comments is that the notice needs to be issued within a reasonable time, and there is some question as to what that means.

[Effen]

Diggin' Up Bones here  (any Randy Travis fans out there? )

Anyway, I was having a discussion with a colleague about the notification requirement for missed quarterlies.  I maintained the position stated in this old thread that basically says if a contribution is more than 60 days late, the participants must be notified within a reasonable period of time. 

He countered with this IRS website https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-notices that includes the statement: 

"Notice must be given before the 60th day following the due date of the quarterly or other required contribution."

I have searched for any regulations or notice that states this and couldn't find anything.  I found lots of publications, including a DOL guideline for participant notification published in 2020, as well as guidelines from Buck and Feranczy Law - all staying with the "as soon as practical".

Is this just an example of where the IRS website is wrong, or has there been an official change?