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Guide to Required 401k Participant Disclosures

Plan sponsors are required to provide certain information to 401k plan participants as well as notify them of changes. While most rely on their record keeper, third party administrator or advisor to help, it is still the responsibility of the plan sponsor to make sure proper notifications are made. Here’s a simple guide to what plan sponsors need to know.

Plan-related information includes the following:

  • Circumstances under which participants and beneficiaries may give investment instructions.
  • Any limitations or restrictions on the ability to give investment instructions.
  • Plan provisions related to voting, tender, or similar rights.
  • Identification of the plan’s investment options.
  • Identification of any plan-designated investment managers available to manage all or a portion of a participants’ account.
  • A description of any arrangements that allow the selection of investments beyond those designated by the plan, such as “self-directed brokerage accounts” or “brokerage windows.”
  • Plan administrative fees such as accounting, legal, trustee, recordkeeping, and other administrative expenses that are deducted from participant accounts and that are generally allocated on a plan-wide basis.
  • Individual account fees that may be deducted from participant accounts for a service or transaction they select, such as fees for loans, brokerage accounts, or overnight delivery. Keep in mind that individual fees also include shareholder fees deducted from participant accounts, such as short-term redemption fees.

Investment performance must be shown in a chart which allows participants to compare with other funds.

Information may be delivered electronically or in print but participants may elect to receive it in print if requested. Notification of changes should be made 30-90 days prior or as soon as practical if not feasible.

Participants who must receive notifications include:

  • Those with account balances which may also include beneficiaries, terminated employees and alternative payees;
  • Eligible employees not yet participating; and
  • Employees not yet eligible but may roll in money from another account.

Though changes to investment options require notice, it is not clear if changes to an existing fund’s share classes trigger notice.

 

 

Fred Barstein

Fred Barstein

Founder & Editor-in-Chief at 401kTV | TRAU | TPSU
Fred Barstein is the Founder & Editor-in-Chief of 401kTV. Fred is also the Founder and CEO of The Retirement Advisor University (TRAU), a collaboration with UCLA Anderson School of Management Executive Education and The Plan Sponsor University (TPSU).Mr. Barstein was also Founder and Editor-in-Chief of NAPA Net.
Fred Barstein
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