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401(k) Plan Disclosure: Knowledge Is Power

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in Human Resources,Office Management

Proposed regulations would require all 401(k) plans and other defined contribution plans, not just plans that choose to comply with Section 404(c) of ERISA, to disclose uniform and basic information to plan participants and beneficiaries. Information required to be disclosed, including fees, would have to be furnished in a comparative format (e.g., a chart). Plan sponsors that employ third-party administrators should work with them to ensure that new disclosure duties will be satisfied. Plan sponsors that administer their own plans must review their disclosure practices, and decide how fees will be broken out, calculated, and disclosed. The regs are proposed to become effective for plan years beginning January 1, 2009.

Something Old, Something New

ERISA Section 404(c) absolves plan sponsors of liability to employees who direct their investments if certain steps and disclosures are made. The proposed regs would level the playing field for plans that aren't now 404(c)-compliant. Plans that are 404(c)-compliant would have to add annual and quarterly disclosures related to fees to their current disclosure duties.


The proposed regs would require all defined contribution plans to disclose the following information to plan participants and beneficiaries prior to their participation in the plan, and at least annually thereafter. Disclosures may be part of a summary plan description.

  • General plan information, including investment options, how to provide investment direction, limits on such instructions, and designated investment managers.

  • Information on fees and expenses related to plan administration (e.g., legal, accounting, and record-keeping expenses), which, to the extent not included in investment-related fees and expenses, may be charged against participants' accounts, and the basis on which those fees are allocated (i.e., pro rated or per capita).

In addition, plans would be required to disclose the following information on a quarterly basis. Disclosure in benefits statements would suffice.

  • A statement of plan-wide expenses, including the dollar amounts actually charged during the preceding quarter to participants' accounts for administrative services, and a general description of the services to which the charges relate.

  • A statement of individual expenses related to qualified domestic relations orders, plan loans, investment advice services, etc.

The proposed regs would also require that investment-related information, including fees and expenses, be disclosed in a chart or similar format that would allow participants to easily compare the plan's investment options. A model chart has been developed in conjunction with these regs, and plan fiduciaries that use it will satisfy their disclosure obligations. However, the regs note that fiduciaries aren't obligated to adopt the model chart.


Click here for the model chart.

Click here to read the proposed regs.

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