Having a 401k account is typically considered to be one of the most important, stable parts of a person's retirement plan. Every year, an updated set of rules and regulations regarding such accounts is released. This usually consists of changes to annual contribution limits, along with other elements. This year, however, will see a big change as it relates to the disclosure of fees and other expenses on each person's 401k account.
To advise you further, we have compiled some of the most important information concerning this change, which can help you strategize your 401k retirement plan more efficiently.
Who It Will Affect, When, and How
The new regulation set by the Labor Department won't affect everyone. As written, the regulation applies to sponsors of 401k plans and many 403b plans. However, sponsors of SEPS (Simplified Employee Pension Plans) and SIMPLE (Savings Incentive Match Plan for Employees of Small Employers) plans will not be forced to follow the new regulations. It also doesn't affect IRA's.
As for the when, the new information must be included in a new disclosure by August 30th, and the first quarterly statement with the new information must be provided by November 14th.
The how is separated into two basic categories, each of which may affect your 401k retirement plan. The first category includes disclosures that are related to investment, and the second category are ones related to the plan itself. For more information, let's take a closer look at each of these.
Disclosures Related to Investment
While there is no required model on how to present such information, a chart will be provided that will outline a participant's investment options. These disclosures must be done for a variety of products, such as insurance annuities, mutual funds, etc. This requirement will allow a participant to see all of his or her options in one convenient place, in a simple and direct way.
Keep in mind, however, that not all of the work is done for you. Some financial experts believe that the disclosures, although helpful, still don't do enough to personalize each statement. For some participants, this could translate to a bit of work as they attempt to decipher some of the information and complete their own calculations so that they can be aware of what the plan is actually costing them. However, some experts also say that providing such information wouldn't be cost-efficient and that with a little know-how, participants should be able to perform the calculations with relative ease. And if they can't, a financial expert can assist them.
Disclosures Related to the Plan
In addition to investment disclosures, each participant must be provided with a breakdown of administrative expenses incurred through the plan. Basically, this boils down to any fees or expenses, such as legal, record keeping, and otherwise, that they are not included in the first set of disclosures. These are typically much smaller in scope and cost, but they are required, nevertheless.
What to Look For
The new regulations set forth by The Department of Labor should help a number of participants as they relate to their 401k retirement plans. In addition to being informed of what fees and expenses they're paying and/or incurring, they can take a look at a variety of investment options that could help them plan for their future. Participants do need to be aware, however, that every plan in existence comes with some type of fees and expenses, so while you should pay close attention to the disclosures, try not to immediately panic if you see something you weren't aware of in the past.
If you would like a personalized look at your retirement accounts, contact us for your free, no-obligation appointment.
Source: http://firstsecurityfinancialshow.com/blog/bid/111415/Making-Sense-of-401-k-Disclosures
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