Between talk about the "fiscal cliff" and "shared responsibility," it makes me wonder how plan sponsors and fiduciaries are going to manage to keep their plans looking the same way for an entire plan year. It seems like every day new issues are presented that might require employers to have to change their benefits plans. Unfortunately, most time when people talk about changing plans, they overlook some of the rules relating to changes, particularly notices to participants.
ERISA has a rule about "summary of material modifications" that provides that notice of plan changes have to be distributed to a participant within 210 days of the end of the plan year that the change is effective. This applies to welfare plans and retirement plans alike. For group health plans, if the material modification is a material reduction in benefits, the summary has to be distributed 60 days after the effective date of the reduction. PPACA gives us a rule that provides that if a health plan makes a mid-year plan change that changes one of the terms in their summary of benefits coverage, the plan has to give a notice to participants 60 days prior to the effective date of the modification. The notice of the changes would satisfy both the SMM requirement and the SBC notice requirement. So you might have to issue a notice in 60 days or not depending on the change.
Retirement plans have notices too. Not only do the SMM rules apply, but there are special rules about notice requirements like a 30-day advance notice of amendments to 401(k) plan to eliminate matches or a 60-day advance notice of an intent to terminate a plan. So mid-year changes to retirement plans can trigger an obligation to provide notices to participants prior to the change. In the case of either welfare plans or retirement plans, failure to provide proper notice could constitute a breach of fiduciary duty, which creates its own potential liability.
The point is that changes can be made to plans mid-year or end of year, or both, be they retirement or welfare, and that plan sponsors can modify their plans to fit their changing needs. But it is imperative to know the timing restrictions and notice requirements in advance of making those changes so you don’t run into problems. Don’t assume, ask an expert.