If you are a private sector employee or you a small business owner, chances are you most probably participating in a 401(k) plan. The plan number refers to the Internal Revenue Code Section that created the plan. New changes are in the horizon for 401(k) plans.
Two of the most important changes that may go into effect in April 2012 are requirement to disclose 401(k) plan expenses and comparison of the plan performance to an appropriate bench mark. There has been one extension of the implementation of these rules and this time it may go into effect in April.
Based on your quarterly statement, you may think that your plan doesn’t charge any fees. But all plans include charges for managing the investments, recordkeeping fees, and other fees such as interest charges for obtaining a loan or hardship withdrawal. The Labor Department regulation now requires 401(k) plans to provide a detail report of fees to employers as well as participants.
The requirement to provide benchmarking information will assist the participant to compare investment strategy against popular bench marks such as 91-day T-Bills, S&P 500 Index, MSCI EAFE Index, BarCap Aggregate Bond and others.