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Federal law requires that company retirement plans provide certain documents, notices, statements, and other information to plan participants, beneficiaries, and alternate payees. We previously outlined the most important information about the specific types of documents and disclosures that must be provided by plans in our fact sheet about plan disclosures.
This fact sheet highlights important aspects of the information provided to you and explains the key documents and disclosures you should review so that you keep your retirement benefits protected.
Company-sponsored retirement plans must provide multiple forms of information and disclosures to plan participants, beneficiaries, and alternate payees:
Participants, beneficiaries, or alternate payees are entitled to receive plan information even if the participant is no longer employed by the employer offering the plan, as long as the participant remains enrolled in the plan.
Much of the information that the plan must provide is the same regardless of whether it is a defined benefit pension plan or a defined contribution plan (such as a 401(k) or 403(b) plan):
In general, plans provide information in four ways:
The plan must provide the required disclosures using methods that are reasonably expected to ensure actual receipt of the material by plan participants, beneficiaries, or alternate payees. Historically, all plans sent the information as paper documents through the mail. Beginning in 2002 employers were permitted to send disclosures electronically through e-mail with attachments without prior permission to employees who work with computers as part of their jobs. All other employees receive disclosures on paper unless they choose electronic delivery.
In July 2020, a regulation from the U.S. Department of Labor made a new type of electronic delivery, called “notice and access,” an additional option for delivery of plan information. Under “notice and access,” the plan sends an electronic notice to a participant’s computer or smartphone advising that certain disclosures are available on a website and how to access those disclosures.
An increasing number of plans are providing disclosures electronically by default (under the notice and access rule). However, in most cases participants can choose to receive disclosures on paper. If disclosures are automatically delivered electronically, the plan must give the participant the right to request a paper version of the document. If the participant notifies the plan that they want the paper version, the plan must provide the paper documents free of charge. Under “notice and access” the plan must also allow the individual to opt out of electronic delivery altogether and receive all required disclosures as paper documents free of charge. The plan must provide a telephone number to contact the plan administrator or other plan representative.
An exception to electronic delivery is in the case of a written request for copies of specific documents (see above) as these documents are generally provided in writing. The plan administrator must provide these paper documents but may charge a reasonable fee for the copies. If you are not receiving plan documents by paper or electronic mail, check your plan and employer websites, or contact the human resources office.
All information provided by the plan is important and should be reviewed promptly, but a few documents and statements are particularly valuable:
The Summary Plan Description (SPD) is a summary of the rules that describe benefits, rights, and obligations under the plan. All company and union plans are required to have these written rules. The plan must give all participants an SPD when they join the plan or within 90 days of enrolling in the plan.
The SPD explains the features of the plan and how and when you earn retirement benefits. Employers can change the rules of a plan, but your rights to retirement benefits usually will depend on the rules in effect while you are working and when you leave employment. You receive an updated SPD at least every ten years, or within five years if changes have been made to the plan. A participant, beneficiary, or alternative payee also may make a written request for a copy of the latest SPD. As an alternative to an updated SPD, you may receive a notification called a Summary of Material Modification (SMM) which explains a recent, significant change to the Plan.
The SPD contains crucial information about your right to retirement benefits and should be kept for future reference. As with the plan document, if you are leaving employment or retiring, make sure you keep a copy of the SPD and any SMM in your records. The SMM will eventually be incorporated into an updated SPD, but if you leave the Plan shortly after receiving an SMM, you should retain the SMM for your records because you will not automatically receive an updated SPD. The SPD often is the plan document most participants receive and use to understand their benefit rights.
The plan will provide an individual benefit statement containing important information about your retirement benefit. It describes the benefits you have earned, whether you have a legal right to receive all or a portion of those benefits at the time of the statement, and when you will become partly or fully entitled to (or vested in) your benefits. Plans send benefit statements at different times, depending on the type of plan you are participating in.
In addition to the information described above, if you are a participant in a defined benefit plan, the benefit statement tells you how much monthly income you could receive if you retire at normal retirement age, assuming that you continue employment at your current salary. The benefit statement also tells you if Social Security or other benefits will be subtracted from your final benefit amount and/or how much your benefit amount will be reduced for early retirement.
Benefit statements also contain your date of birth, date of hire, Social Security number, address, and may also include marital status and beneficiary information. Always review the information in the statement for accuracy and correct or update the information if necessary. Contact the plan if any of your personal information is incorrect.
Benefit statements from defined benefit pension plans must be sent at least every three years to participants as long as they are employed by the employer. Participants and beneficiaries may request one benefit statement per year.
If your marital status changes, be sure to tell the plan and review your beneficiary designation for any changes that need to be made. In general, company-sponsored retirement plans (and federal law) require the current spouse to be the beneficiary unless the current spouse waives their interest. This means that even if you designate in writing a child or someone other than your current spouse as your beneficiary, that beneficiary designation will not be valid without the current spouse’s notarized waiver (see below).
If you leave employment, be sure to ask the plan each year for your benefit statement and keep them with your important papers. When you retire, compare the benefit amounts stated in the statements with the retirement benefit you receive. Always make sure the plan has your up-to-date contact information.
Typically, the plan provides an array of investment options that you may choose from to invest your retirement account, along with information about each investment option (see below). You are responsible for choosing how your retirement account is invested and the plan will follow your investment direction. The value of your retirement account and how much you will have for retirement depends on how much is contributed and how the investments perform. At retirement, you receive the balance in your account, reflecting the contributions, investment gains or losses, and any fees charged against your account. The information in the statement will include the balance in your retirement account, the value of each investment, an explanation of any restrictions on the right to direct investments, any individual fees charged to the account, and a statement of the importance of diversifying investments.
Benefit statements from plans in which participants choose among investment alternatives must be sent to participants quarterly. Beneficiaries may request a benefit statement once a year.
Other types of defined contribution plans provide benefit statements annually to participants and beneficiaries may request a benefit statement annually.
Always review the statement promptly to check that your contributions are properly accounted for. If there is a discrepancy, notify the plan immediately. The discrepancy could be an error, or it could be an indication of a third party improperly gaining access to your retirement account. You should also review the statement promptly to ensure that your information is correct – including address, Social Security number, beneficiary designation, marital status – and notify the Plan with any corrections or changes. Carefully check the benefit statement for accuracy on a regular basis, whether you are still employed or if you leave employment. Retain the benefit statements and keep them with your important papers.
If you receive the information electronically, do not assume electronic documents will remain available indefinitely. Print or make paper copies and save electronic copies on personal files for important documents.
Plans are required by law to provide fee and investment disclosures to participants in employer-sponsored 401(k) and certain 403(b) defined contribution plans that allow participants to select among investment options in which to invest their contributions. These disclosures include information about the plan’s investment options, including investment returns, performance and benchmark data; investment fees; expenses charged for plan administration; and charges assessed to individual participants for utilizing certain plan features, such as fees for processing plan loans or Qualified Domestic Relations Orders or accessing investment advice. You will receive this information before you can direct investments for the first time. After that, the plan will send you the disclosures each year. In addition, each quarter, the plan will send you information about the fees and expenses actually paid from your individual account. Some of this information may be included in the SPD and your individual benefit statement. The two most significant fees are investment fees and administrative fees. Investment fees are disclosed as a percentage on the annual investment disclosure. Administrative fees usually are disclosed as a dollar amount on the benefit statement.
Always review this information promptly to make sure that the fees being charged to you individually are correct. Periodically review your investment options and make sure you understand and are comfortable with the rate of return on the investments you selected and the level of risk they represent. Make sure your contributions are invested in investment options that are diversified.
A triggering event – such as leaving employment, retirement, divorce, or marriage –can be an important decision point for participants and beneficiaries. Some disclosures relating to triggering events include notices about the status of the plan and others are directly related to participant decisions or life changes. A few of the key disclosures are outlined below:
Participants in defined benefit plans and in certain defined contribution plans will receive a statement within 30 to 180 days before their annuity start dates informing them of the right to receive a qualified joint and survivor annuity (QJSA) or other optional forms of benefits; the option of selecting a non-spouse beneficiary and the spousal consent requirements; a written explanation specifying the terms and conditions of the QJSA; the participant’s right to make, and the effect of, an election to waive the QJSA; the participant’s spouse’s rights; and the right of the participant to make, and the effect of, a change in benefit election (with spousal consent).
Participants in defined benefit pension plans will receive a Statement of Accrued and Nonforfeitable Benefits, which informs the participant what pension benefits they have accrued. The plan provides the statement to the participant when employment ends. Thereafter, the participant may request a statement once each year from the Plan.
In a divorce proceeding, a state court can issue a domestic relations order (DRO) that awards part or all of a participant’s retirement benefit to the alternate payee, who can be the participant’s current spouse, former spouse, child, or other dependent. To obtain an interest in the participant’s retirement benefit, the alternate payee must submit the DRO to the Plan for a determination of whether the order is a qualified domestic relations order (QDRO) under the plan. When the plan receives the DRO, it notifies the participant and the alternate payee and acknowledges receipt. After a reasonable time for processing, the Plan then notifies electronically or by mail the participant and the alternate payee whether the DRO qualifies and is approved as a QDRO. If you are involved in a divorce, you should discuss these issues with the plan and your attorney.
When you apply for social security benefits, the Social Security Administration may send you a Notice of Potential Private Pension Benefits if your former employer reported that you left employment with deferred vested benefits. The information in the notice may have been provided a long time ago and maybe out of date. In some cases, you may have already begun receiving these retirement benefits. You should read the information in the statement and contact the Plan about the retirement benefits that may be owed to you.
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