I. Plan Adoption. A. Formal Adoption of the Plan. B. Plan Approval. C. Bonding Requirements

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3 Introduction This Guide is a quick reference tool for 401(k) defined contribution qualified retirement plan plan administrators. Under all 401(k) retirement plans, the plan administrator is the person directly responsible for managing the daily operations of the plan. For most plans, the employer sponsoring the plan serves as the plan administrator. Depending upon your company, the employer may perform the plan administrator duties or they may be delegated to a representative of the employer. For ease of reading, all references to you or employer in this Guide include persons working on behalf of, or assisting, the employer in carrying out the plan administrator responsibilities. This Guide is intended to alert you to various concepts and issues that are common to 401(k) plan operation. This Guide serves its purpose by bringing to your attention important issues and requirements characteristic of 401(k) plans. It is not intended as a comprehensive reference book for ensuring compliance with all rules under the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code (IRC), which govern retirement plans. This Guide is not a substitute for the competent tax and legal advice that you may require from time-to-time while performing your duties as plan administrator. It will enable you, however, to identify plan administration issues that may require the assistance of tax professionals. Your 401(k) basic plan document and adoption agreement specify the areas of plan operations for which you are responsible as plan administrator. Depending upon your relationship with your prototype plan sponsor, you may directly or indirectly be involved in the following areas: formulating plan policy consistent with plan documentation; determining participation, contribution, and distribution eligibility; maintaining plan records; preparing and filing government reports; and communicating regularly with employees participating in the plan. You should clarify areas of responsibility for plan administration with your prototype plan sponsor to ensure that you timely perform all plan operations for which you are responsible. 1

4 If a plan is not operated by the terms of its document or is otherwise noncompliant with Department of Labor (DOL) or Internal Revenue Service (IRS) requirements, plan disqualification could result. The DOL and the IRS provide correction programs to help plan administrators identify and correct plan defects. I. Plan Adoption A. Formal Adoption of the Plan Depending upon the legal status of your company, formal steps may be required to adopt the plan. For example, if your company is organized as a corporation, a resolution by the board of directors adopting the plan should be placed in the corporate records. If your company is a partnership, you should consult the partnership agreement to determine the steps necessary, if any, to formally adopt the 401(k) plan. If you do not have a written partnership agreement, consult with your attorney to determine whether your state law requires any special procedures to adopt the plan. B. Plan Approval If you have adopted a standardized prototype plan, you generally can rely on the favorable opinion letter issued to your prototype sponsor concerning the tax qualification of your plan. In the event you have maintained another qualified retirement plan, or if you have adopted a nonstandardized prototype plan, you may wish to obtain a determination letter from the office of Employee Plans Determinations of the IRS, approving the tax qualified status of your 401(k) plan. C. Bonding Requirements ERISA requires that certain persons who have direct or indirect access to, or control over, plan assets be bonded by a corporate surety company, unless the employer sponsoring the plan has no common law employees. All plan fiduciaries and others handling plan assets must be insured for acts of fraud or dishonesty involving plan assets. Generally, the bond must equal 10 percent of the value of the assets handled or administered by an individual during a plan year, although there is a minimum coverage amount of $1,000 and a ceiling of $500,000. The maximum bond for plans that hold employer securities is increased to $1,000,000. 2

5 II. The 401(k) Employee Communication Process An effective 401(k) employee communication program is vital to your 401(k) retirement plan s success. Consequently, you should begin educating your employees about the plan as soon as possible. Maximum participation in your plan by rank and file employees may be essential because of the special IRC nondiscrimination tests that generally apply to 401(k) plans. Studies demonstrate that the factors that most favorably influence employee participation in 401(k) plans include tax savings through employee 401(k) contributions, liberal matching contributions by employers, and manageable distribution provisions. So, your employee communication program should be centered around these themes. To ensure maximum participation, you also should assure employees that the value of all employee 401(k) contributions (and employer contributions if this is a SIMPLE 401(k) plan) made to the plan will remain theirs and will not be forfeited to the employer. A typical 401(k) employee communication program may involve several steps. As soon as possible after the plan is adopted, efforts should be undertaken to inform employees that the plan has been adopted and is in the process of being implemented. An announcement should be prepared and distributed to employees, highlighting the basic features of the plan and providing notice of a date and time when a general informational meeting concerning the plan will be held for employees. Your prototype sponsor also may offer preprinted documents and brochures that explain plan features and benefits. These brochures should be distributed to employees along with the general announcement before the informational meeting. After the employee announcement is distributed, an informational meeting should be held to discuss the plan in further detail. The meeting provides a more in-depth, thorough explanation of plan eligibility and contribution features, investment options under the plan, and other important facets of plan participation. Employees should be presented with a written summary that details information unique to the employer s plan, such as entry dates, contribution formulas, vesting schedules, and other features. An opportunity should then be provided for employees to ask questions about the material presented at the informational forum. 3

6 At a minimum, the following areas should be addressed at the employee meeting: plan benefits, sample benefit projections, investment options available under the plan, operational features of the plan, and the scheduling of individual meetings with employees eligible to participate. To accomplish these objectives, many employers find that a question and answer format is effective. This type of format is understandable and provides a nuts-and-bolts approach to the information dissemination process. Finally, individual meetings with employees should be held following the informational meeting. During the course of the individual meetings, the employer (or its designated representative) should review projections unique to the particular employee that demonstrate plan benefits based on the employee s wage deferrals into the plan. If your plan provides matching contributions, this additional incentive also should be emphasized. Next, a payroll deduction form should be discussed with the employee. If the employee is in a position to do so, this form should be completed and executed during the meeting. If your plan allows for employee investment direction, information about this process also should be provided to employees at the individual meetings. If possible, you should have employees complete and sign a participant investment form at this time. The individual employee meeting also is an opportune time to obtain signed beneficiary designation forms from employees. Finally, you may use the individual meeting as an appropriate time to present a copy of the summary plan description (SPD), which describes benefits and features unique to your plan. 4

7 III. 401(k) Plan Operations and Administration Once you have successfully completed the employee communication process and plan participants have begun making elective deferrals, there are several areas of 401(k) plan operation and administration that you must understand. A. Plan Eligibility and Participation After initial participant enrollment in your plan has been completed, you will periodically need to review the conditions for plan eligibility and participation as new employees become eligible to participate in the plan. As new employees become eligible, you should provide them with all the information distributed during the initial employee communication program, including the SPD. Refer to your plan documents for plan specifics concerning minimum age and service requirements and plan entry dates and procedures. B. Plan Contributions At a minimum, your plan allows for pre-tax elective deferrals (unless your plan is a frozen plan) and may allow Roth elective deferrals. Your plan documents will indicate whether your plan allows for Roth elective deferrals. Pre-tax and Roth elective deferrals are the contributions made to the plan by employees, generally through a payroll deduction process. Under certain circumstances, elective deferrals can be made from bonuses. Refer to your plan document to determine if the employee must make an affirmative election to begin contributing or if your plan employs the automatic enrollment or an automatic contribution arrangement method for contributing. Pre-tax elective deferrals are not subject to federal income tax withholding, but are subject to FICA and FUTA tax. Roth elective deferrals are subject to federal income tax as well as FICA and FUTA. Refer to your adoption agreement to determine the type of compensation from which elective deferrals may be made under your plan. Many 401(k) plans provide for (or may require in the case of 401(k) safe harbor and SIMPLE 401(k) plans) an employer contribution that matches employee 401(k) contributions. These contributions are called matching contributions. Typically, an employer or the plan document will limit the match to a percentage of elective deferrals or a compensation ceiling. Refer to your plan documents to determine if your plan allows or requires matching contributions and, if so, to find the matching contribution formula and vesting schedule. 5

8 In lieu of matching contributions, an employer who maintains a 401(k) safe harbor or SIMPLE 401(k) plan may choose to make nonelective contributions to the accounts of employees who have met the plan s eligibility requirements, entered the plan, and have earned a minimum amount of compensation even if some employees are not otherwise contributing to the plan. Some regular 401(k) plans (not a 401(k) safe harbor or SIMPLE 401(k) plan) also provide for a profit sharing contribution to be made annually, subject to employer discretion. Your adoption agreement will indicate whether your plan provides for a profit sharing contribution and, if so, the contribution and allocation formula and vesting schedule that applies to these contributions. Regular 401(k) plans may allow employees to make additional contributions on an after-tax basis. These are called nondeductible employee contributions. Your plan documents will determine whether your plan provides for nondeductible employee contributions. Because regular 401(k) plans are subject to special nondiscrimination tests, your plan also may provide for special contributions called qualified nonelective contributions (QNECs) and qualified matching contributions (QMACs). These contributions are typically made only to satisfy any deficiencies in your plan s 401(k) nondiscrimination testing. Your plan documents will determine whether QNECs and/or QMACs can be made under your plan. All pre-tax elective deferrals, Roth elective deferrals, 401(k) safe harbor minimum matching and nonelective contributions, SIMPLE 401(k) matching contributions and nonelective contributions, nondeductible employee contributions, QNECs, and QMACs are nonforfeitable when made. This means employees are 100 percent vested in these contributions at all times. Profit sharing and matching contributions made to regular 401(k) plans, however, may be subject to vesting schedules. Your plan documents will indicate whether a vesting schedule(s) applies to these contributions. Your plan documents also will indicate the rules and procedures for determining vesting if an employee incurs a break in employment. 6

9 C. 401(k) Plan Testing To maintain its favorable tax status, your 401(k) plan must pass several tax qualification and nondiscrimination tests each plan year. Some tests must be met each day of the plan year, while others must be satisfied only on one day out of each quarter of the plan year. In either event, the reason for the various tests is to ensure that those employees who are highly compensated do not receive, or have available to them, disproportionately more valuable benefits than those received by, or made available to, nonhighly compensated employees. The IRC defines highly compensated employees in detail. Generally, each employer will have at least one highly compensated employee against whom the benefits received by, or made available to, nonhighly compensated employees will be measured. The various qualification and nondiscrimination tests that your 401(k) plan is subject to include the following. General Nondiscrimination Rules IRC Section 401(a)(4) prohibits qualified retirement plans from discriminating in favor of highly compensated employees. Under these rules, plan contributions and benefits must be nondiscriminatory in amount; plan benefits, rights, and features must be available to employees in a nondiscriminatory manner; and the plan cannot be discriminatory in the effect of plan amendments and terminations. The Treasury regulations provide three tests that can be used to ensure compliance with these rules. Minimum Coverage Rules IRC Section 410(b) requires that a minimum number of nonhighly compensated employees be covered by the plan in relation to the number of highly compensated employees covered by the plan. Generally, a plan passes this test if at least 70 percent of the nonhighly compensated employees are covered by the plan on one day of each quarter during the plan year. Top-Heavy Rules IRC Section 416 provides that a plan is top-heavy if more than 60 percent of all plan assets are held in the accounts of key employees. The IRC defines key employees in detail. In the event your plan is top-heavy, you must follow special rules that may include a minimum contribution for nonkey employees. Plans that meet the ADP/ACP safe harbor requirements also are generally deemed to meet top-heavy testing requirements. NOTE: The top heavy rules do not apply to SIMPLE 401(k) plans. 7

10 Annual Additions Rule IRC Section 415 limits the contribution amount that can be allocated to an employee for any plan year. The maximum amount that may be allocated to any employee during any plan year is limited to the lesser of 100 percent of the employee s compensation or $40,000 (indexed annually). The IRC defines annual additions in detail. 402(g) Limitations Employee deferrals must always be made prospectively and may not exceed the annual dollar limit prescribed under IRC Section 402(g) for an individual employee. The limit requires that 401(k) plan employee deferrals made during an employee s tax year (generally the calendar year) do not exceed the required limitations ($11,000 indexed annually). If an employee exceeds the limit, an excess deferral exists and the employer must take steps to correct the excess. Actual Deferral Percentage (ADP) Test IRC Section 401(k) limits the percentage of compensation that highly compensated employees may defer into the plan each year in relation to the percentage deferred by nonhighly compensated employees. This test is called the Actual Deferral Percentage (ADP) test, and involves a series of mathematical computations. If your plan fails the ADP test, you should consult your plan documents to determine the steps necessary to correct the excess contributions. This likely will involve returning the elective deferrals to highly compensated employees or making a qualified nonelective or matching contribution (QNEC or QMAC). The ADP test will be deemed satisfied, however, if you use an available ADP test safe harbor. NOTE: The ADP test does not apply to SIMPLE 401(k) plans. Actual Contribution Percentage (ACP) Test IRC Section 401(m) requires that the matching or after-tax contributions made or received by highly compensated employees be compared with those made or received by nonhighly compensated employees. This test is called the Actual Contribution Percentage (ACP) test. This test involves a series of mathematical computations similar to those used in the ADP test. If your plan fails the ACP test, you should consult your plan documents to determine the steps necessary to correct these excess aggregate contributions. The ACP test will be deemed satisfied, however, if the employer uses an available ACP test safe harbor. NOTE: The ACP test does not apply to SIMPLE 401(k) plans. 8

11 To perform the various nondiscrimination tests described above, the plan administrator often must calculate each participant s compensation first. The type of compensation used for each test, however, can vary. Some tests allow the plan to define the compensation type, while others have statutorily defined compensation types. Refer to your plan documents for details. ADP/ACP Testing Safe Harbors If you have a traditional 401(k) plan, you may be able to avoid ADP/ACP testing by adopting and satisfying certain safe harbor provisions. These provisions require specific employer contributions to be made, based on elections made in your plan s adoption agreement. You must also comply with specific safe harbor notice requirements to eligible employees at required times. D. Handling Distributions Your plan documents specify the forms of benefit distribution available under the plan. Some plans require that plan benefits be distributed in the form of an annuity unless this option is properly waived. Your plan documents will determine whether distributions from your plan may be taken in forms other than an annuity, or whether a waiver is required to do so. Triggering Events In general, a participant (or his beneficiary) may begin receiving a distribution of benefits upon one of the following events: attainment of normal retirement age (as defined in the plan), death, disability, attainment of age (employee 401(k) contributions only), severance of employment, plan termination, or sale of all corporate assets. Refer to your plan documents to determine the specific circumstances under which your participants may receive distributions. Participant Notice The plan administrator must give a notice that describes tax treatment options to participants who request a payment from the plan. Generally, you must furnish this notice to the participant at least 30 days, but no more than 180 days, before the distribution. 9

12 Eligible Rollover Distributions Many different types of plan assets may be rolled over to an IRA or another employer s qualified retirement plan. Distributions that may be rolled over are called eligible rollover distributions. Most distributions are eligible rollover distributions except (but not limited to) the following: required minimum distributions; distributions that are part of a series of substantially equal periodic payments that will last for the participant s lifetime (or joint lives of the participant and beneficiary) or for a specified period of 10 years or more; distributions paid to nonspouse beneficiaries of deceased participants; certain distributions to correct plan excess contributions; and distributions of assets from the plan due to hardship. Any amount paid to an employee in the form of an eligible rollover distribution from one eligible retirement plan may be rolled into another eligible retirement plan may be rolled into another eligible retirement plan. Eligible retirement plans are as listed below. Governmental 457(b) plan IRA 403(a) qualified annuity plan 401(a) qualified plan 403(b) plan Roth elective deferrals and the associated earnings, however, may be rolled only to a Roth IRA or another Roth 401(k) or 403(b) plan that separately accounts for the rollover amounts. In addition, after-tax contributions may be included in an eligible rollover distribution provided the receiving plan is an IRA or a retirement plan that separately accounts for the after-tax amounts. Refer to your plan documents to determine which types of rollovers are allowed in your plan. 10

13 Direct Rollover Procedures IRS regulations allow the plan administrator to establish reasonable procedures that participants must follow to elect a direct rollover. You also may ask participants and the provider of the receiving IRA (or a representative of the new employer s plan) to provide reasonable information about the IRA or plan as a condition of the direct rollover. When issuing a check for a direct rollover, the regulations specify that the check is to be made payable to the trustee, custodian, or issuer of the IRA or new plan. For example, if your former employee John Q. Smith elects a direct rollover to his IRA at ABC Bank, the payee line of the check would read ABC Bank as the trustee of John Q. Smith s IRA. 20 Percent Withholding Eligible rollover distributions that are not directly rolled over to an IRA or another eligible plan are subject to mandatory 20 percent federal income tax withholding. In other words, a plan participant who requests a check payable to himself or herself instead of a direct rollover will receive only 80 percent of the payment. This is because you (as the plan administrator) are required to withhold 20 percent of the payment and send it to the IRS as income tax withholding to be credited against the participant s income tax liability. Note that the participant cannot waive withholding on any eligible rollover distribution that is paid directly to the participant. E. Other Distribution Issues Required Minimum Distributions Special distribution rules come into play when plan participants reach age Similar rules also apply to distributions to beneficiaries of deceased plan participants. Generally, plan participants must begin taking distributions when they reach their required beginning date. The required beginning date is generally April 1 of the year following the year in which a participant turns age or, if later, April 1 of the year following the year in which a participant who is a nonfive percent owner separates from service. Once triggered, a required minimum distribution (RMD) must be taken annually by December 31. In general, the amount of the RMD will be determined by dividing the balance in the employee s individual account by the applicable life expectancy factor. 11

14 In-Service Distributions of Employer Contributions In addition to the previously described standard triggering events, profit sharing plans (including 401(k) plans) may allow plan participants to take in-service distributions of employer contributions. An in-service distribution provision permits participants to take distributions from the plan before incurring a triggering event. The maximum amount that an employee may withdraw as an in service distribution is the vested portion of her account balance. The amount, however, may be further limited depending on the length of time the employee has been a participant in the plan and depending on whether the in-service distribution is taken on account of financial hardship. Refer to your plan documents to determine if your plan allows these types of distributions. Hardship Distributions of 401(k) Plan Deferrals Your plan documents will indicate whether hardship distributions of elective deferrals are available under your plan. Amounts that can be distributed due to hardship include elective deferrals and earnings on elective deferrals credited to a participant s account by December 31, Hardship distributions that occur before the time an employee reaches age are subject to a mandatory 10 percent penalty tax payable to the IRS. To qualify as a hardship distribution, both of the following requirements must exist: 1) The distribution must be made on account of an immediate and heavy financial need experienced by the employee, and 2) the distribution must be necessary to satisfy the immediate and heavy financial need. Your plan provides that the following are the only situations that constitute an immediate and heavy financial need for hardship distribution purposes. Medical expenses of the employee, spouse, beneficiary, or dependents of the employee Purchase of a principal residence for the employee, excluding mortgage payments Rent or mortgage payments needed to prevent the eviction of the employee from, or foreclosure of the mortgage on, the principal residence of the employee 12

15 Tuition and fees for the next 12 months of post-secondary education for the employee, spouse, children, beneficiary, or other dependent of the employee Funeral expenses of the employee, spouse, parent, beneficiary, or dependent Repair of damage to the employee s principal residence that would qualify for the casualty deduction Under your plan, if an employee takes a hardship distribution, elective deferrals and nondeductible employee contributions must be suspended for at least six months following receipt of the hardship distribution by the employee. Distribution Incident to a Divorce Under limited circumstances, distribution of a participant s benefits may be made pursuant or incident to a divorce or legal separation. In this event, you must take steps to ensure that any distribution relating to child support, alimony, or marital property is considered a qualified distribution according to the terms of the plan. To accomplish this, it will be necessary that you obtain a qualified domestic relations order (QDRO). Your plan documents incorporate the IRC rules governing QDROs. Your legal counsel should review any domestic relations order that concerns plan assets in connection with your plan documents to determine whether the order is a qualified domestic relations order under the plan. Once this determination has been made, you must notify all persons affected by your decision within a reasonable time. Any distribution of benefits made pursuant to a QDRO is nontaxable to the participant if the alternate payee is the spouse or former spouse of the participant. IRS Tax Levies Generally, plan assets may not be levied upon by creditors of plan participants. A limited exception to this general rule exists for the benefit of the IRS, which is recognized as the tax collector for the United States Government. The IRS may attempt to satisfy a tax lien through levy upon plan assets. Under these circumstances, an IRS form called a Notice of Levy will be served upon the financial organization in custody of your plan assets. It will then be incumbent upon the financial organization to follow the appropriate steps required by law. 13

16 F. Plan Loans Under certain circumstances, plan participants may be eligible to receive loans from their plan assets. Refer to your plan documents to determine if your 401(k) plan offers a plan loan program. If a plan loan program is authorized under your plan documents, loan information must be provided to employees as part of the SPD. This information will contain the details and procedures unique to your 401(k) plan loan program. Generally, all 401(k) plan loan programs must have the following characteristics. Loans must be made available to all participants and beneficiaries on a reasonably equivalent basis. Loans must not be made available to highly compensated employees, officers, or shareholders in an amount or ratio greater than the amount available to other employees. Loans must be made in accordance with specific loan provisions as described in your loan disclosure. Loans must bear a reasonable rate of interest. Loans must be adequately secured. Loans must have level amortization, with payments at least quarterly. Loans generally must be repaid within five years. Loans must not exceed statutory limits. 14

17 IV. Summary of Reports and Notices The following is a summary of participant reporting and disclosure requirements. Your attorney or tax advisor should be consulted about questions that arise during the course of your plan operations. A. Participant Disclosure/Reporting REQUIRED REQUIREMENT DOCUMENT(S) TIMING A. Notification to Employees of District Submission for Determination Letter B. Employee 401(k) Payroll Deduction C. Self-Direction of Contributions Notice to Interested Parties Salary Reduction Agreement Investment Direction Form If the notice is personally delivered or posted, it must be presented not less than 7 days nor more than 21 days before the date the determination application is filed with the IRS. If delivered by mail, the notice must be mailed not less than 10 nor more than 24 days before the plan adoption date. The agreement must be completed and signed before payroll deductions start. The form should be completed when the Salary Reduction Agreement is signed. D. Designation of Beneficiary Waiver of Preretirement Survivor Annuity (PSA) Beneficiary Designation The beneficiary designation should be completed when an employee begins participation in plan. E. Disclosure of Vital Plan Features to Employees Summary Plan Description (SPD) Distribute the SPD to employees within 120 days after plan adoption. Distribute the SPD to each new participant within 90 days after plan entry and to each beneficiary within 90 days after commencement of benefits. 15

18 REQUIRED REQUIREMENT DOCUMENT(S) TIMING F. Disclosure to Employees of Plan Changes Summary of Material Modification (SMM) Distribute the SMM to employees within 210 days after the end of the plan year during which the change was adopted. The SMM must be distributed to each beneficiary receiving benefits and to each plan participant. G. Summary of Benefits Summary Annual Report (SAR) The SAR must be distributed annually, the later of nine months after the close of the plan year or two months after the SAR is due (in the case of an IRS granted extension) to each plan participant and beneficiary receiving benefits. H. Appealing a Claim Denial I. Distribution Incident to a Domestic Relations Order J. Distribution Reporting Requirements Explanation of Claim Denial Qualified Domestic Relations Order (QDRO) IRS Form 1099-R All participants or claimants must receive a written explanation of claim denial within the time allowed in the plan documents. Each affected participant and beneficiary must be notified promptly after receipt of a QDRO by the plan administrator. The plan administrator must determine whether or not the QDRO meets plan specifications and thereafter notify affected parties of such decision within a reasonable time. Payers of distributions must provide a Form 1099-R to each participant who receives a distribution. Forms 1099-R are due to participants by January 31 of the year after distribution. 16

19 REQUIRED REQUIREMENT DOCUMENT(S) TIMING K. Withholding on Distributions L. Description of Benefits Accrued M. Preretirement Survivor Annuity (PSA) Notice** N. Joint and Survivor Annuity (JSA) Notice** IRS Form W-4P or Substitute Form Statement of Accrued Benefits PSA Notice Form JSA Notice Form Generally, the notice must be given once a year to persons receiving periodic payments and each time a person receives a nonperiodic payment. An employer must provide a statement of benefits to participants at least quarterly for plans that allow participants to direct their investments. Plans that are not participantdirected must provide benefit statements at least annually. The notice must be given to each participant between the first day of the plan year in which he attains age 32 and the last day of the plan year in which he reaches age 34. If a participant enters the plan after age 32, provide notice within one year after the first day of the plan year in which the participant entered the plan. If a participant separates from service before reaching age 32, the PSA Notice must be provided within one year from separation. The notice, including a discussion of the optional forms of benefit under the plan, must be given to each participant no more than 180 and no less than 30 days before distributions commence. A participant may reduce the 30-day distribution waiting period to seven days. 17

20 REQUIRED REQUIREMENT DOCUMENT(S) TIMING O. Distribution Tax Treatment Notice P. Notice of Distribution Options Any notice meeting requirements of IRC Sec. 402(f) Distribution Notice Form The notice must generally be provided to the participant no more than 180 days and no less than 30 days before distributions commence. Participant may waive 30-day distribution waiting period. The notice must generally be provided to the recipient no more than 180 days and no less than 30 days before distributions start. The participant may reduce the 30-day waiting period to 7 days. NOTE: The notice described in N, O, and P are often combined on one form. Q. Plan Blackout Notice of Plan Blackout R. SIMPLE Contributions Contribution Notice Form A blackout period that will last more than three consecutive business days should be preceded by notifying affected participants generally no later than 30 days before the blackout period starts. Employers must provide the notice to employees within a reasonable time before the 60th day before the beginning of each year. NOTE: This notice applies only to SIMPLE 401(k) plans. It does not apply to regular 401(k) plans. S. Safe Harbor Contributions Contribution Notice Form Generally, employers must provide the notice to each employee no earlier than 90 days and no later than 30 days before the beginning of each plan year. 18

21 REQUIRED REQUIREMENT DOCUMENT(S) TIMING T. Automatic Enrollment 401(k) Notice of Automatic Enrollment U. Default Investments Notice of Default Investments If an employer automatically enrolls employees as they become eligible for a 401(k) plan, the employer must notify employees of this plan feature, including the amount that will be automatically withheld and the default investment vehicle that will be used, if any. If an employer implements an eligible automatic contribution arrangement (EACA) or a qualified ACA (QACA), the employer must provide this notice no later than 30 days, but no earlier than 90 days, before the beginning of the plan year in which the EACA/QACA will be implemented, as well as annually thereafter and within a reasonable time before an employee becomes eligible. If an employer uses a qualified default investment alternative (QDIA), the employer must provide a QDIA notice to plan participants no later than 30 days, but no earlier than 90 days, before the plan intends to comply with the regulations, as well as annually thereafter. 19

22 B. IRS Disclosure/Reporting REQUIRED REQUIREMENT DOCUMENT(S) TIMING A. Application for Determination Letter (District Submission) Plan Document, Adoption Agreement, IRS Form 8717, Favorable Opinion Letter, Prior Determination Letter, IRS Form 5300, 5307, 6406 or 5310, and IRS Schedule Q (optional) The documents must be timely filed with the IRS after Notice to Interested Parties is given. B. Annual IRS Reporting IRS Form 5500-EZ for plans with more than $250,000 in assets covering the sole proprietor and spouse or the partners and spouses; Form 5500 and appropriate schedules depending on large plan or small plan designation The reports must be filed with the DOL by last day of seventh month following the close of the plan year. C. Distribution Reporting Requirements D. Annual Return of Withheld Federal Income Tax E. Annual Report of Federal Tax Liability IRS Form 1099-R Form 945 Form 945-A Must be filed with the IRS by February 28 of year after distribution. Must generally be filed by January 31 of the year following the year to which it relates. Attached to Form 945. Only certain depositors are required to file. 20

23 C. Department of Labor Disclosure/Reporting REQUIRED REQUIREMENT DOCUMENT(S) TIMING A. Disclosure of Vital Plan Features to Employees* B. Disclosure of Plan Changes to Employees* Summary Plan Description Summary of Material Modifications File with DOL if requested. File with DOL if requested. *The SPD, SMM, and SAR are not required if the business is wholly owned by an individual or the individual and spouse, and the individual and/or spouse are the only plan participants or if the plan covers only partners of the business and/or their spouses. **These requirements do not apply to Retirement Equity Act (REA) safe harbor plans. Refer to your plan documents to determine whether your plan is a REA safe harbor plan. 21

24 #279 (1/2012) 2012 Ascensus, Inc., Brainerd, MN