What might be a consequence of failing to provide adequate participant education in retirement plans?

Failing to provide adequate participant education in retirement plans can lead to increased compliance costs. When participants do not have a clear understanding of their retirement options, they may make uninformed decisions that can result in regulatory scrutiny or violations. This lack of knowledge can lead to higher administrative costs for the plan sponsor, as they may need to devote more resources to address compliance issues resulting from poorly informed participant behaviors.

Moreover, if employees do not participate or contribute adequately to their retirement plans due to a lack of education, this can trigger additional compliance complexities, such as top-heavy testing or nondiscrimination compliance, which can be expensive and time-consuming to manage. Proper education helps ensure that participants are equipped to make informed decisions, leading to smoother operations and compliance for the plan.