Your plan statement provides an in-depth look at where your 401(k) stands.
Your employer is legally required to report the status of your 401(k) account just once a year — and that’s only if you request a copy of your statement. Fortunately, however, most plan sponsors automatically provide reports on at least a quarterly basis. Others issue statements monthly. And to keep up with the demand for immediate, up-to-date information, more and more firms are reporting account information online or using automated voice response units (VRUs).
Regardless of how you get your 401(k) report, it’s an important tool for monitoring performance and confirming that deposits are being made.
Doing the math
The timing of the reports you receive depends on how often your plan is valued. Valuation occurs when the plan’s record-keeper reconciles all the activity in your account — such as contributions or matching funds being deposited, the gain or loss from moving assets from one investment option to another, increases or decreases in the value of your investments, and loan repayments you’ve made — within a particular period.
Armed with increasingly sophisticated electronic tools, recordkeepers have no trouble valuing your account daily and making this important information available to you.
As plans are valued more frequently, you have more flexibility in changing your investment selections — whether your assets are held in plan investments or in brokerage accounts. In most cases, if your plan is valued daily, you can usually switch your current investments and redirect your future plan contributions every day. Similarly, if your plan is valued quarterly, you can usually make changes in your portfolio quarterly as well.
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A friendly voice
If you have a touch-tone phone, you can often get 401(k) information using a voice response unit, which is usually accessible through a toll-free telephone number. These systems allow you to access your account balances, investment selections, and personal data, as well as request statements, 24 hours a day, 7 days a week. You usually have to enter an ID number, often all or part of your Social Security number, and a personal identification number (PIN).
Voice response units offer the same information that’s available in printed form on a statement. The difference is that the systems make it easy for you to reallocate your account — that is, switch your current investments, or change the way your future contributions will be invested — and update personal data. Remember, though, that the timeliness of your account balance depends on how frequently it’s valued. If the recordkeeper performs daily valuations, your account balance will reflect the previous day’s closing prices. But if your plan uses monthly or quarterly valuations, your investments will be priced as of the close of that period.
Your statement won’t look exactly like this one, but it will have this information.
Reading the statement
Loan information
If you’re repaying a loan from your 401(k), the investment from which you took the loan and the amount that you borrowed will be shown as a debit.
Transfers
If you’ve moved money out of or into your account, those amounts will be reported. For example, you might have added money from a former employer’s plan.
Making changes
The rules for changing your investments differ from plan to plan. Your plan description will tell you how often you can make changes, and when they will take effect. For example, if your plan allows you to switch investments daily, you may have to call or log in by a certain time in order for the change to be implemented the same day. When you make a change, your plan administrator will mail you a confirmation statement.
Personal data
You’ll find your name, address, date of birth, the date you joined the plan, beneficiaries, and annual salary. If this information is incorrect, check further, as there may also be errors in how your account is valued.
Investment selections
This section shows your current allocation among the investment options you’ve chosen. Most plans let you shift your investment mix, though the frequency and timing for making these changes vary from plan to plan, often based on the valuation dates.
Future account value
Some plans may provide a projection of your account’s value at retirement based on different hypothetical rates of return, assuming you continue contributing at your current rate.
Vesting status
There may be a statement describing whether or not you are vested in, or own, your employer’s contributions to your account, and if not, the date you will become vested.
Account balance
The report provides your balance at the beginning and end of the period, plus a breakdown showing your pretax and after tax contributions (if any), employer contributions (if any), and rollovers from a prior employer’s 401(k) plan (if any). If you subtract the total you’ve added to an investment for the period from its overall increase or decrease in value, you can figure out its rate of return.
Transfers
If you’ve moved money out of or into your account, those amounts will be reported. For example, you might have added money from a former employer’s plan.
Loan information
If you’re repaying a loan from your 401(k), the investment from which you took the loan and the amount that you borrowed will be shown as a debit.
Place your order
In plans that offer electronic access to account information, you may not receive printed account statements, but you can request them if you wish.
In conclusion
Online access to 401(k) account information is becoming an increasingly popular feature of many plans. If your plan isn’t online yet, it probably will be soon. Plan websites provide the same account information as printed statements and voice response units in a format that you can view and print at any time.
Plan administrators use special software to ensure secure transmission of confidential account information, and require you to identify yourself with a user ID and a password to get access to your account.
Understanding Your 401k Statement And Account Report Cards by Inna Rosputnia
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