New Regulations for 401K Money

To ensure that you're getting the most out of your 401k plan, you must stay informed of the regulations surrounding these accounts as we delve further into 2012.  Below, we've compiled some information to make your 401k retirement plan more beneficial and easy to understand.

Be Aware of the Contribution Limits

Every retirement account has a contribution limit, which is the amount of money you're allowed to put aside out of your annual income and into a given account.  For 401k accounts, this contribution limit has increased as a way to assist investors in saving more money for their retirement.  There are two separate regulations in relation to contribution limits for a 401k retirement plan:

• If your 401k is either a traditional or safe harbor plan, you are allowed to contribute up to $17,000 for 2012.  This is an increase of $500 over what it was in 2011.

• If you have a SIMPLE 401k plan, the annual contribution limit for 2012 is the same as it was in 2011, which is $11,500.

Be aware that both of these limits may be affected by cost of living increases after 2012.  Also be aware that other limitations may be in effect.  This means that although 401k regulations account for these contribution limits, you may not be able to defer that amount.  To determine if this may be the case, it is wise to check your specific plan's documentation and seek the help of a financial professional.

It May Be Time to Play Catch-Up

If you started saving for retirement a bit late in life, you may need to play a little catch-up.  Basically, regulations may allow you to contribute above the annual contribution limit if you are over the age of 50.  This can help you make up for lost time, which will provide you with a larger stream of money from your 401k retirement plan.  These additional funds are designed to make life even easier once you've retired.  These are also split between two categories:

• For a traditional or safe harbor 401k, the catch-up limit is the same in 2012 as it was for 2011, which translates to an additional $5500.

• The limit for a SIMPLE 401k plan remains the same as well, at $2500 for 2012.

The same cost of living impact that could possibly occur goes with these catch-up contribution limits as well.  You must also be advised that the rules of catch-up contributions for any 401k retirement plan can be complicated, and your specific contribution limit amounts may be different from what is set forth in the plan you're involved with.  Therefore, it is always a good idea to check with a financial advisor to make sure that your contributions are in line with what your plan allows.  This is especially true if you are contributing catch-up funds from more than one employer.

Full Disclosure

A recent change to the regulations governing disclosure of fees will make life much easier for a number of investors.  As of 2012, 401k plan sponsors must provide individuals with assistance concerning the fees involved in a 401k plan.  There are two parts to this regulation:

• As of July 1st, 2012, plan sponsors must evaluate any associated fees to ensure they are reasonable.  Also, service providers are required to present a service agreement to sponsors and fiduciaries.

As of August 30th, 2012, each individual must be sent a statement providing them with a breakdown of fees associate with their 401k accounts.  In addition, all fees and/or other expenses must appear on a quarterly statement.

Source: http://firstsecurityfinancialshow.com/blog/bid/113301/New-Regulations-for-401K-Money

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