DOL Revolutionizes 401(k) Information for Participants

April 2, 2011

Where 401(k) plan participants have the right to direct the investment of their accounts, a Department of Labor final regulation will soon dramatically change the information required to be made available to them.

If you are a plan sponsor, it is your responsibility to make sure that participants receive the disclosures outlined below.

The following disclosures are mandatory 

Information about the plan

  • General structure and mechanics
  • Fees and expenses for general plan administrative services that may be charged to individual accounts, such as expenses for the following:
    • Legal
    • Recordkeeping
    • Distributions
    • Accounting
    • Processing loans
  • Participants must receive, quarterly, a statement showing such plan administrative expenses and a description of the services provided


Information about participant rights

  • Rights to give investment instructions
  • Limitations on these rights
  • Investment alternatives and options


Information about investment alternatives
(Required to be presented in a comparative format that allows easy comparison of the options available)

  • For options with a fixed or stated rate of return
    • The rate of return
    • The term of the investment
    • Any fees or restrictions on purchases, withdrawals, or transfers from these investments
  • For options with variable rates of return
    • One, five, and 10-year returns
    • Fees
    • Annual operating expenses
    • An example of the impact of these fees over time
    • The type or category of the investment
    • A website where participants can access or obtain additional information
    • An appropriate benchmark
    • Returns for the benchmark over one, five, and 10-year periods


Special disclosures for plans using an annuity contract

  • Name of the contract
  • Objectives and benefits of the product
  • Limitations or restrictions
  • Any fees that will reduce the value of allocations, such as the following:
    • Market value
    • Mortality and risk expense adjustments charges
    • Surrender fees
    • Distribution and administration fees
  • A statement that any guarantees are subject to the financial strength of the provider


When is compliance required? 

Compliance is due by the first day of the plan year beginning on or after November 1, 2011 (January 1, 2012 for calendar year plans). Information must be available for participants no later than the date on which they are first eligible to direct their investments, and then annually thereafter, even if the plan is actually holding nothing for the participants.


What should plan sponsors do? 

If you are a plan sponsor or plan administrator, it is imperative that you fulfill your fiduciary responsibilities. The new regulation requires plan providers to disclose information that you may have never seen before.

Review and investigate the information, compare it to other alternatives for reasonableness, and make certain to provide it to your plan participants. For most employees today, company 401(k) plans are going to be the primary source of retirement income. The new DOL regulation is designed to make certain that investors in these plans understand all the parameters associated with the plan they are investing in and the particulars about their investment choices.

If you haven’t had an objective party conduct a review of your retirement plan design and investment options, please call Jesse Nelson at 800-236-2246 or contact one of our other Schenck Investment Solutions professionals today.

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