Comminications and Disclosure

[Guest Karenm]

I was wondering if you have to provide a notice to participants in a 401(k) plan when deferrals will cease (due to proposed acquisition). I cannot find this and I was sure that I had read that somewhere.

While I am here, I told a client they had to provide a notice (every year) to participants in the participant directed 401(k) plan if they were going to make quarterly statements available online rather than mailing them or sending electronically. Notice just says statements are at www. ........ TPA said I was wrong, so I get nervous.

Thanks

[JanetM]

Your first question.... are you asking if you give advance notice to participants who will cease participating due to their being aquired by a new owner. Answer is NO. Normally in these deals everything is kept pretty quiet until the deal closes and is announced. When the announcement is made there is usually a short meeting held with employees to announce all the changes. Notice of cessation of Deferrals and changes to other employee benefits are done then.

Second question. You have to provide quarterly stmts in participant direceted plans. You can allow the participants to go online and elect electronic delivery or paper statement. You can't just say the statement is online at www.accountstmt.com.

[Guest Karenm]

Hi

Thanks so much for responding, I am not very good at writing out my questions.

With regard to the cessation notice; I have a client that on 1/1 told employees that they should not participate in the plan for the "short plan year" because there was going to be an asset acquisition on 3/1/2008. My concern is that they stopped the contributions without notice and in anticipation of an acquisition date. The acquisition is going to happen and employees will become employees of the acquiring employer on 3/1/2008 with immediate eligibility into the 403(b) plan. However, I was concerned how this would be addressed in a termination submission.

With regard to the participant statement notice, I understood the DOL to say in the interim guidance that the cost of convienence (posting statements to a the secure website instead of mailing), would be yet ANOTHER annual notice to explain that the quarterly statement requirement was being satisfied by posting the statements on the website.

I probably should not name names but lets just say I do not trust the recordkeeper to notify the Plan Sponsors if a statement is returned for address change, etc. and these clients have a great deal of turnover so I thought the client was safest to provide the annual notice to ensure receipt. I am very nervous I have got this wrong since I already opened my mouth and no one on the planet seems to agree with me (I am sure it is not big deal; I just wrote to about 25 clients with this advice; any help will be really appreciated so I can take it all back if need be)!!

Thanks again.

[JanetM]

Well with more facts here is my opinion.

If a 401k in in place, you would have to give notice to terminate the plan before you suspend deferrals, if not you are not operating in accordance with the plan. You could suggest it, but not demand it without the notice. Not sure why it would matter, they would just have two years of deferrals in the old plan and after 3/01 contributions go to the new plan.

Am confused now. Are you asking if there is annual notice requirement if you only have stmts available online? I am not sure about that becuase I don't think you can mandate all electronic participation. Not all participants use the internet. If someone askes for paper you have to give it.