204(h) Notices

Question 1

Section 204(h) requires plan sponsors to notify participants of what?

Answer 1

Plan must notify participants if there is significant reduction in future accruals, retirement subsidies or early retirement subsidies.

Not needed for optional forms or ancillary benefits.

Question 2

Does 204(h) apply when a business is sold?

Answer 2

Yes if there is an amendment which reduces accruals under the plan.

Does not apply if a plan states that accruals will cease upon a ptp’s termination from employer and the plan is merged into the buyer’s plan.

Question 3

Does 204(h) apply when terminating a plan?

Answer 3

Yes - needs to refer to a specific date.

Question 4

Who needs to get a 204(h) notice?

Answer 4

Any participant whose benefit would reasonably be expected to be reduced.

Note: this extends out to Employee organizations representing affected participants, AP of participants, and anyone the participant asks be sent a 204(h) notice and employers contributing to multiemployer plan

Question 5

When must you provide a 204(h) notice by?

Answer 5

45 days before EFFECTIVE date of the amendment

15 days before instead if

a. plan has less than 100 employees
b. is a multiemployer plan
c. part of an acquisition/disposition

Question 6

What type of plans are exempt from 204(h)

Answer 6

Stock bonus plans and profit sharing plans. (any DC plan that is not subject to minimum funding rules.)Less Tested: plans with less than 100 ptps and 0 covered employees

Question 7

What must be included in a 204(h) notice?

Answer 7

Notice must give sufficient info forparticipants to understand, also be providedwithin reasonable time before effective date

Question 8

What is the penalty for non-compliance with 204(h)?

Answer 8

1. $100/day/affected ptp from date failure occurs to when it is corrected
   a. This is capped at 500,000 per year if reasonable diligence was performed
2. No excise tax if did not realize failure existed and fix it within 30 days after they first knew.

Affected participants are anyone who needed to get a 204(h) notice. For the reasonable diligence, it’s something like reasonably believing the 204(h) notices will all get to ptps on time, but lost in the mail and didn’t know.

Question 9

Situation: Converting Money Purchase Plan into a Profit Sharing Plan.Do you need a 204(h) notice? Is this a partial/full/no termination of the Money Purchase Plan?

Answer 9

You need a 204(h) notice because there is a reduction of benefits under the Money Purchase Plan.It is not a partial termination of the Money Purchase Plan.

Question 10

T/F Can you post a 204(h) notice in the workplace and satisfy requirement?

Answer 10

False, must send out to ptps.

Question 11

What are the consequences if a plan admin fails to provide a 204(h) notice at all?

Answer 11

This is an egregious failure and ptp get the larger of the benefit with/without the plan amendment.

Question 12

What are the two types of employers that are exempt from 204(h) notices?

Answer 12

Church and Governmental Plans

Question 13

Can a 204(h) notice be given by email?

Answer 13

Yes as long as it is an integral part of their job. If not an integral part of their job then the date thay have been notified is when they open the email.

Question 14

Does a 204(h) notice apply to:

1. 401(k) plan
2. Money Purchase Plan
3. Profit Sharing Plan
4. Stock Bonus Plan

Answer 14

Only the Money Purchase Plan.