Roadmap to Retirement: While You are Working

It is important to understand how you earn retirement benefits while you are working. Each type of plan has different rules, and the publications linked below will help you understand yours. They will also tell you about the documents your plan must give you and the responsibilities plan officials have to act in your interest.

Earning a retirement benefit

It is important to understand how you earn benefits in a private-sector retirement plan. Earned benefits are typically not payable until some future date. The rules for traditional pensions differ from those for hybrid plans (such as cash balance plans) and from those governing defined contribution plans (such as 401(k)s and profit sharing plans). The rules can also differ depending on when you leave work covered by the plan.

You will need to know your type of plan to determine which rules apply to you.

401(k)-type retirement savings plans

Most 401(k)-type plans require a monthly contribution from salary to participate in the plan and to benefit from any employer matching contributions. You have the right once a year to change how much you contribute.

Contributions. The federal government sets limits on the amount of money that can be put into tax-favored retirement plans each year.

Investments in 401(k)-type plans. Most, but not all, 401(k)-type plans let you choose investments from a selection of alternatives. These plans are called self-directed individual account plans. Employers have the responsibility to provide a diversified selection of investments and to give you clear information about your investment choices.

Fees in 401(k)-type plans

Fees are part of every 401(k)-type plan. Some fees may be directly paid by the employer, but most fees are charged to participants as part of their investment choices. Different investments can have different fees. Fees may be one consideration when choosing an investment.

Loans and hardship withdrawals

Loans and hardship withdrawals can be features of defined contribution plans, such as 401(k)s and profit sharing plans. These plans may, but are not required, to have provisions for loans and hardship withdrawals. Traditional pension plans, called defined benefit plans, do not include loans and hardship withdrawals. Check the rules of your plan or contact your plan administrator to learn if your plan includes loans or hardship withdrawals.

Documents your retirement plan must give you

Retirement plans must disclose certain information in order to inform participants and beneficiaries about how a plan works, how benefits are earned, and when benefits may be paid. Some disclosures describe the rights and obligations of all participants and beneficiaries under the plan. Other disclosures are designed to inform individuals about their own benefits.

All plan information given to you must be written in a manner easily understood by an average participant. Disclosures usually must be made within a given time period, but the timing differs for each type of disclosure and also may vary by the type of plan.

Disclosures may be given automatically at a certain time, in response to a “triggering event,” or upon request of a participant or beneficiary. The most important disclosures for participants — the summary plan description and the individual benefit statement — are provided automatically.

If information is given to you in electronic form, you have the right to request a paper copy.

You should save all of the information given to you about your plan and benefits for future reference.

Most retirement plans must file an annual report, known as a Form 5500, with the Department of Labor. (Certain small plans are exempt from this requirement.) You may view a copy of your plan’s Form 5500 on the Department of Labor’s website.

You also may request a copy of the latest annual report from your plan administrator.

  • Funding notices
  • Disclosures of 401(k) fee and investment information. These disclosures apply only to 401(k) plans in which participants choose investments from a selection provided by the employer. Some fee and investment disclosures must be given to you before you choose your investments and once a year thereafter. Some required fee disclosures can be given to you along with the individual benefit statement. (See summary below.)

Responsibilities of plan officials

Employers sponsoring retirement plans and plan officials must act prudently and solely in the interests of the plan participants. The following publications summarize employers’ responsibilities.

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