The U.S. Department of Labor’s Employee Benefits Security Administration has issued a final rule that will require 401(k) and other retirement plans to give employees more information about the fees and expenses associated with their plans -- generally starting in 2012 for calendar-year plans.
The purpose of the regulation is to make sure that participants and plan beneficiaries who can self direct the investment of any of the assets in their individual plan accounts have the information they need to make informed decisions about the management and investment of their accounts. You will have to provide the disclosures to each participant and beneficiary.
For plan years beginning on or after November 1, 2011, participants and beneficiaries must receive various plan- and investment-related information on or before the date they can first direct their plan investments, and you must provide follow-up disclosures annually. All information should be given in a format that makes it easier for participants to comparison shop among your plan’s investment choices.
Plan-related Information
General information must be disclosed about the structure and mechanics of the plan, such as*:
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A current list of investment options offered by the plan
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An explanation of how plan participants may give investment instructions
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If applicable, a description of any brokerage window, self-directed brokerage account, or similar arrangement that enables a participant to select investments beyond those designated by the plan
Your disclosures must explain any fees and expenses for general plan administrative services that may be charged to or deducted from participants’ accounts, such as the costs of legal, accounting, and recordkeeping services. You also must explain any individual expenses that may be charged to or deducted from the individual account of a specific participant or beneficiary based on the actions taken by that person. Examples include fees and expenses for plan loans and for processing qualified domestic relation orders (QDROs).*
In addition to the information that must be furnished up front and annually, participants and beneficiaries must receive statements, at least quarterly, of individual-account plan-related fees and expenses. The statements must show the dollar amount of the plan-related fees and expenses (whether administrative or individual) actually charged to or deducted from the individual accounts, along with a description of the services for which the charge or deduction was made. You may include these specific disclosures with your plan’s quarterly benefit statements.
Investment-related Information
The following investment-related information must be disclosed*:
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One-, five-, and 10-year returns for mutual funds and other plan investment options that do not have a fixed rate of return
Annual rate of return and investment term for fixed rate investments
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The name and one-, five-, and 10-year returns of an appropriate broad-based securities benchmark index (matching plan investment performance data periods)
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For mutual funds and other plan investment options that do not have a fixed rate of return, total annual operating expenses expressed as both a percentage of assets and as a dollar amount per $1,000 invested
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For both variable and fixed rate investments, any shareholder-type fees or restrictions on purchases or withdrawals
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An Internet website that provides access to specific additional information about the plan’s investment options for individuals who want more or more current information
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A glossary of terms to help participants understand the plan’s investment options or a website address where they can access such a glossary
Model Investment Chart
You must present your plan’s investment-related information in a chart or similar format designed to make it easy for participants and beneficiaries to compare each of the investment options available under your plan. The final rule includes a model comparative chart.**
* This list is not all-inclusive.
** You can view the chart at http://www.dol.gov/ebsa/modelcomparativechart.doc