Why your 401(k) deserves special attention in 2012

Your 401(k) plan deserves special attention this year.

The maximum contribution is $17,000 after being stuck at $16,500 since 2009. If you want to increase your contribution to the new limit, contact your human resources department or plan administrator.

People who will be 50 or older in 2012 can contribute an additional $5,500, the same amount since 2009. The same limits also apply to 403(b) plans for nonprofit employees and 457 plans for government workers.

Later this year, employees should finally be getting information about the fees they pay to participate in their 401(k) plans. How useful this long-awaited information will be -- and whether it will be delayed again -- remains to be seen.

For years, the Labor Department has been formulating a rule that will require companies that administer and provide other services to 401(k) plans to provide new information about fees and conflicts of interest to employers. In many cases, employers are not sure how much companies charge for these services. Many employers pass some or all of the costs on to employees, who know even less about how much they are paying to participate in their 401(k) plans. This lack of transparency has allowed some providers to charge high fees.

The department published an interim final rule in July 2010. Assuming that a final rule would be published by the end of 2011, it gave service providers until April 1 to comply with it.

But a final version still has not been published and some providers are now saying they cannot meet the April 1 deadline.

The Securities Industry and Financial Markets Association has asked the Labor Department for a 12- to 18-month delay in the compliance deadline.

Last week, Reuters published a story quoting unnamed sources saying the Labor Department might push back the April 1 deadline because the final rule still had not been published.

The department would not say why it has not published a final rule but says it expects to do so by Jan. 31.

"We have a high degree of confidence that the final rule mandating service provider-to-employer/plan sponsor fee disclosure will be published by the end of this month. The department is sympathetic to the concerns expressed by the industry regarding the applicability dates, but has not signaled that the applicability dates will be extended," Labor Department spokesman Jason Surbey said in an email.

The new disclosure rules will also apply to 403(b) plans but not 457 plans.

If the department caves to industry pressure and postpones the April 1 deadline, it presumably would have to push back the date when employers are supposed to provide disclosures to employees as well.

"It certainly would be difficult for a plan sponsor (employer) to answer questions from confused or angry employees if they don't even know how much their employees are paying," says Mike Alfred, chief executive of Brightscope.com , which rates 401(k) and 403(b) plans.

Alfred says the good news is that fees appear to be coming down in anticipation of the new rules. A delay in the implementation date would give providers and employers more time to reduce fees before employees see what they have been paying.

"A lot of employers have been negligent" in monitoring fees, Alfred says. "The fee disclosure will put that on display for everyone to see."

Even after the new rules take effect, many employees will still have a hard time finding their total costs all in one place because companies will have a fair amount of leeway in how they disclose them.

"I'm cynical" that most employees will be able to figure out what they are paying, says Rick Meigs, president of 401khelpcenter.com . "It depends on your vendor. If they are a good honest outfit, you may get a good feel for it," he says. But if they are trying to hide the true cost, they can scatter the information in various places.

The hope is that employees at high-cost plans will learn enough to pressure their employers for lower costs. The fear is that employees will become obsessed with cost alone and not what they are getting for their money. In some cases, it might be worth it to pay a little extra to have good customer service or a better selection of funds.

(E-mail Kathleen Pender at kpender@sfchronicle.com. For more stories visit scrippsnews.com)

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