Do you have a defined contribution plan that allows participant-directed investments? If so, read on.
Participants generally will be responsible for the investment results of their accounts if the applicable regulations under ERISA section 404(c) are followed. But what if a participant fails to direct her or his own investments? If the 404(c) rules regarding qualified default investment alternatives (QDIA) are met, participants will be treated as exercising control over their accounts even if they fail to direct their own investments and their accounts are invested in a QDIA. To comply with the 404(c) rules and insulate plan fiduciaries from liability with regard to QDIAs, you must give an annual notice to the plan participants.
Notice must be given at least 30 days before the start of each plan year and must inform the participants that their accounts will be invested in a default investment if they do not choose an investment. Failure to provide such notice could subject plan fiduciaries to liability for any loss incurred by investing a participant's account in the default investment. Department Of Labor regulations require specific disclosures to be addressed in the notice.
Please contact us if you have questions or need help drafting a notice.