Can 403(b) Sponsors Rely On SECURE 2.0’s Unenrolled Participant Notice Provision?

Q: While we allow all employees the opportunity to make elective deferrals to our 403(b) plan, we have a large number of eligible employees who do not participate in our ERISA 403(b) plan, which creates a significant burden with respect to providing required plan communications to such participants. Does the unenrolled participant notice provision of the SECURE 2.0 Act of 2022 apply to 403(b) plans?

Kimberly Boberg, Kelly Geloneck, Emily Gerard and David Levine, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

A: Indeed it does, and it can provide significant relief for the administrative burden you describe. For our readers who may not be aware, Section 320 of SECURE 2.0 eliminated certain notice requirements under ERISA and the Internal Revenue Code for defined contribution plan sponsors (including 403(b) plan sponsors), provided that the sponsor furnishes unenrolled participants with (1) an annual reminder notice of their eligibility to participate in the plan and any applicable election deadlines, and (2) any document the participant would otherwise be entitled to receive (upon request).

For 403(b) plan sponsors that often have a large number of unenrolled participants due to universal availability rules, this provision comes as welcome relief from having to send so many communication pieces to these individuals.

NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice.

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