Question:

I work in a small office with 6 others, including the owners of the company. Several of us participate in the Company’s 401(k) program. None of us has ever received information describing the 401(k) plan and how it works. What information can we get about our 401(k) plan?

Answer:

The Employee Retirement Income Security Act of 1974, or ERISA, is a federal law that sets minimum standards for retirement plans established by employers in private industry. For example, if your employer maintains a retirement plan, ERISA specifies when you must be allowed to become a participant, how long you have to work before you have a non-forfeitable interest in your employer-provided benefits, how long you can be away from your job before it might affect your participation in the plan, and whether your spouse has a right to part of your retirement benefits in the event of your death.

ERISA does not require any employer to establish a retirement plan. It only requires that those who establish plans must meet certain minimum standards. The law generally does not specify how much money a participant must be paid as a benefit.

ERISA does the following:

  • Requires plans to provide participants with information about the plan, including information about plan features and funding.
  • Sets minimum standards for participation, vesting, benefit accrual and funding. The law defines how long a person may be required to work before becoming eligible to participate in a plan, to accumulate benefits, and to have a non-forfeitable right to those benefits. The law also establishes detailed funding rules that require plan sponsors to provide adequate funding for your plan.
  • Requires accountability of plan fiduciaries. ERISA generally defines a fiduciary as anyone who exercises discretionary authority or control over a plan’s management or assets, which generally includes anyone who provides investment advice to the plan.
  • Gives participants the right to sue for benefits and breaches of fiduciary duty.
  • Guarantees payment of certain benefits if certain types of retirement plans are terminated, through a federally chartered corporation, known as the Pension Benefit Guaranty Corporation.

There are special rules governing the operation of a 401(k) plan. For example, for 2004 there is a $13,000 limit on the amount you may elect to defer to your 401(k) plan. Other limits may apply to the amount that may be contributed on your behalf. For example, highly compensated employees may be limited depending on the extent to which rank and file employees participate in the plan. Your employer must advise you of any limits that may apply to you.

The documents you are entitled to receive as a plan participant include a summary of the plan, called the Summary Plan Description or SPD. Your plan administrator is legally obligated to provide the SPD to you. The SPD explains when you begin to participate in the plan, how your service and benefits are calculated, when your benefit becomes vested (if your employer is making contributions to the plan on your behalf), when you will receive payment and in what form, and how to file a claim for benefits. If a plan is changed you must be informed, either through a revised SPD, or in a separate document, called a Summary of Material Modifications, which also must be given to you free of charge.

In addition to the SPD, the plan administrator must provide a copy of the plan’s summary annual report. This is a summary of the annual financial report that most retirement plans must file with the Department of Labor. These reports are filed on government forms called Form 5500 or 5500-C/R. The summary annual report is available to you at no cost. To learn more about your plan’s assets, you may ask the plan administrator for a copy of the annual report in its entirety.

If you are unable to get the SPD, the summary annual report, or the annual report from the plan administrator, you may be able to obtain a copy by writing to:

U.S. Department of Labor
EBSA Public Disclosure Room
200 Constitution Avenue, NW, Suite N-1513
Washington, DC 20210
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