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Welcome to the Retirement Learning Center’s (RLC’s) Case of the Week. Our ERISA consultants regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, Social Security and Medicare. This is where we highlight the most relevant topics affecting your business. A recent call with a financial advisor in Maryland is representative of a common question on plan notices.
Yes, the Universal Availability (UA) notice for a 403(b) plan can be provided in written format or electronically if employees have effective access to the electronic system and the notice is reasonably designed to ensure that eligible employees receive it.
Under the UA rule, if an employer permits one employee to make salary deferrals to the 403(b) plan, the employer must extend this offer to all eligible employees of the organization. A few exclusions can apply (see Issue Snapshot - 403(b) plan - The universal availability requirement for more details).
As part of the UA rule, Treasury Regulation (Treas. Reg.) §1.403(b)-5(b) requires that eligible employees have “an effective opportunity” to make elective deferrals (including designated Roth deferrals). Whether an employee has an effective opportunity is determined based on all the relevant facts and circumstances, including notice of the availability of the election, the period of time during which an election may be made, and any other conditions on elections.
The employer must distribute the UA notice at least annually, and the timing of the notice should be such that an employee has a reasonable amount of time to decide whether and how much to defer to the plan. The IRS does not specify a bright-line number of days; however, industry practice treats 30–60 days before the plan year or enrollment window (and within 30 days of hire for newly eligible employees) as a reasonable period to provide a meaningful opportunity. Document the rationale and distribution dates to demonstrate good-faith compliance.
Under Treas. Reg. §1.401(a)–21(a)(5), an electronic medium form of delivery of the UA notice is acceptable if the electronic system is “reasonably designed” to deliver the information in a manner no less understandable than paper, and if the consumer-consent or effective-access requirements are met. If relying on the effective-access route, the employer should document how access is provided.
When delivering the UA notice electronically, employers must inform employees how to obtain a paper copy at no charge and provide a reasonable alternative for employees without electronic access (for example, printed notices, workplace kiosks, or mailing). Employers should maintain records showing distribution and any employee requests for paper copies.
Conclusion
The UA notice for a 403(b) plan can be delivered in paper form or electronically, if certain conditions are met. Documenting the process of how the UA notice is delivered is a key compliance step.