Notice Obligations When Ending Employer Matching Contributions

For business owners who may be reevaluating their employer matching contributions to retirement plans, it's important to remember that the terms of the plan dictates whether advance notice is required before terminating matching contributions.  The plan terms will dictate whether the matching contribution is mandatory or discretionary (participants must be given notice either way via the plan's SPD).  Changes must be made in accordance with the plan's amendment process itself.  To change required matching contributions, the plan must be amended and any changes disclosed to participants in a summary of material modifications (SMM, or a revised SPD).  The SMM must be issued within 210 days after the end of the plan year (advance notice, however, is likely the best way to avoid future problems in the fiduciary context).  In discretionary situations, no advance notice is required (though likely advisable).  In the safe harbor context, the employer must provide annual advance notice of the plan's safe harbor design (which includes a description of the matching contributions required to achieve safe harbor status).  Any changes to the employer match must be provided in the annual notice (and a plan amendment and revised SPD or SMM would be needed).  For more information on the rules governing employer matching contributions, visit Tax Facts Online. Read More: Link to Q3775.