Brightbridge Wealth Management Online Magazine

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Even though lawmakers may shy away from passing major laws in an election year, 2012 brings changes to 401(k) s and otherretirement plans.

From charge disclosure to lifetime-income options and more, your 401(k) or other workplace plan likely will look different by this time next year.

Still, experts say that there won’t be many legal or regulatory changes in 2012 considering the fact that it’s an election year. “Given the monetary situation, there is certain to be a quite long political debate over the question of entitlement reform, which includes Social Security and Medicare,” said Stephen Utkus, a principal with the Vanguard Center for Retirement Research.

Moreover, “No one really envisions major changes in 2012, given that it is an election year,” she added.

Charge Disclosure

The executive director of the Defined Contribution Institutional InvestmentAssociation, Lew Minsky said that the year 2012 should generally be about the advanced disclosure. For instance, retirement-plan sponsors will have to discloseto 401(k) participants the fees and expenses affiliated with the funds in theirretirement plan. These include new annual notices, quarterlystatements,enrollment workbooks and education about fees. “The materials are being ordered under the new regulations which are intended to make it easier forparticipants to understand their retirement-plan investment choices by giving an information about such things as past performance, benchmarks and fees in acomparative chart,” said Larry Goldbrum, general counsel at the SPARK Institute.

Intentionally, such disclosure may not change the participant’s behavior, said Michael Falcon, the managing director and head of the retirement in the U.S and Canada for J.P Morgan Asset Management as well. Finding out that a fund costs 4 basis point is interesting math, the most important way to change outcomes is to change how much you save in which is also the most important element of a retirement plan, and not the fees.

Lifetime income options and illustrations

There are those who hope, or expect, that regulators and lawmakers will make an improvement on other initiatives.

The Manager of legislative and regulatory strategy for T. Rowe Price Retirement Plan Services Howard Heller expects the U. S Labor Department to issue guidance in 2012 on providing lifetime income illustrations on participant benefit statements. Theillustrations would show the expected monthly benefit at retirement age given their current account balance and, perhaps; givecertain assumptions regarding future contributions and earnings of their participants.

Schaus also hopes to see the Lifetime Income Disclosure Act or LIDA, which was proposed in 2010, and become law. In addition, she also hopes the U.S Treasury Department to issue guidance on deferred annuities within the defined-contribution plans, specifically, pertaining to the required minimum distributions.