QUESTION: Our company sponsors a 401(k) plan and currently matches participants’ elective deferrals. Due to financial difficulties, however, management has decided not to make matching contributions next year. Do we need to provide advance notice to participants?
ANSWER: The answer depends on your plan’s design and, in certain circumstances, past practice in providing advance notice. As explained in more detail below, your plan’s terms determine whether matching contributions are required or discretionary, and those terms must be disclosed to participants in the plan’s summary plan description (SPD). Any changes in the plan’s terms must be made by following the plan’s amendment procedures and disclosing the changes to participants in a summary of material modifications (SMM) or a revised SPD. Finally, safe harbor matching contributions have specific notice requirements in addition to the SPD or SMM requirements.
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