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New regulations to make 401(k) quarterly statements even longer
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New federal regulations that give workers with 401(k) plans more information about how much the retirement accounts are costing them will add to the length of quarterly statements that many already pay scant attention to.
"Will people read it? I don't know, because they're already getting a lot of information now," said certified financial planner James Zalenka, with Baran James in Scott.
"I get comments that people just can't read them."
Employers and record keepers -- the firms employers hire to administer 401(k) plans and generate quarterly statements -- have always struggled with how much information to put in the quarterly plans.
The general rule of thumb is that a retirement saver is less likely to look at a 10-page statement than a two-page one, said Fidelity Investments vice president Krista D'Aloia. She said how busy the retirement saver is on the day the statement arrives in the mail also determines how long and hard they look at it.
There is basic information on most statements: how much money the investor started and ended the quarter with; a cumulative total of how much the employee and company (if the employer makes matching contributions) invested in each fund during the quarter; and, increasingly, more information about fees that account holders pay.
"Our statements always include a fee line," said Ms. D'Aloia, who says Fidelity has been complying with the new fee disclosure regulations since January.
Robert Nusbaum, of Middle America Planning in Mt. Lebanon, likes statements that provide pie charts detailing on a fund-by-fund basis how investors are dividing their money up among stocks, bonds and other investments. He sees a lot of variety in the quarterly statements of investors he advises.
"Some are pretty good. Others are awful," Mr. Nusbaum said.
Sponsors of 401(k) plans are increasingly viewing the quarterly statements as a way to motivate employees to become better savers, according to T. Rowe Price vice president Rachel Weker.
One of the ways the Baltimore investment firm tries to do that is by including an estimate of how much income a person's account will generate on quarterly statements.
"We think retirement projection information is important. That's why we include it front and center," she said, adding that investors say, " 'That is the one piece of information that is going to get me to save more.' "
Investors who want more information about their 401(k) accounts can go to the website of their plan's record keeper. Online data provide up-to-date details about each paycheck deduction: how much was invested in each fund in the account holder's portfolio; what price they paid per share; and how many shares they purchased.
Paul Brahim, of BPU Investment Management, said the record keeper who takes care of the 401(k) plans that the Downtown investment firm manages provides a wealth of information about the online activity of investors in those plans, including by age level.
BPU uses that information, as well as information that record keepers provide on how much participants are saving and their asset allocation strategies, to improve savings habits, Mr. Brahim said.
"You can learn a lot from that information, and that should really drive your education and training program," he said.
While Mr. Brahim thinks the new fee disclosure rules are good, he said 401(k) statements -- whether delivered electronically or on paper -- are no substitute for getting savers to come in for personal education and guidance.
First Published August 30, 2012 12:00 am
