The hole goes into the return from the sump to break the back-siphoning that will occur when the pump stops. The overflows will also continue to overflow until the tank gets too low.. (Hopefully you have the kind that do not require to be primed and will start to overflow again when the pumps restart.) The trick is to make sure the sump can handle the back-siphoning until it reaches the hole, and the amount of water the overflow will continue to put into the sump until the main tank gets low enough. (The holes in the return should only be about 1/2 inch or so below the water level, the lower into the water, the more the sump will need to handle. You will most likely get a small jet spray out of the hole during normal operation.. so you need them just below the water line to avoid bubbles, and also in a good direction..
Once set, I would recommend performing your own power outage to make sure all is ok.. (and if not, you can restore power before you have a mess!!)