ALOOKAT
KPLANFEES
This publication has been developed by the U.S. Department of Labor,
EmployeeBenetsSecurityAdministration(EBSA).
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ThisbookletconstitutesasmallentitycomplianceguideforpurposesoftheSmall
BusinessRegulatoryEnforcementFairnessActof1996.
A LOOK AT 401(K) PLAN FEES
1
Introduction
More and more employees are investing in their
futures through 401(k) plans. Employees who
participate in 401(k) plans assume responsibility
for their retirement income by contributing
part of their salary and, in many instances, by
directing their own investments
.
If you direct your investments, you will need to consider the investment
objectives, the risk and return characteristics, and the performance over time
of each investment option your plan offers in order to make sound investment decisions. Fees and
expenses are one of the factors that will affect your investment returns and impact your retirement
income.
This booklet answers some common questions about the fees and expenses that your 401(k) plan may
pay. It highlights the most common fees and encourages you, as a 401(k) plan participant, to:
n Make informed investment decisions;
n Consider fees as one of several factors in your decision making;
n Compare all services received with the total cost; and
n Realize that cheaper is not necessarily better.
2
Keep in mind, however, that this booklet is a simplied explanation of some common 401(k) fees.
It is not a legal interpretation of the nation’s major retirement benets protection law, the Employee
Retirement Income Security Act (ERISA), or other laws, nor is this information intended to be
investment advice.
Why consider fees?
In a 401(k) plan, your account balance will determine the amount of retirement income you will
receive from the plan. While contributions to your account and the earnings on your investments
will increase your retirement income, fees and expenses paid by your plan may substantially reduce
the growth in your account which will reduce your retirement income. The following example
demonstrates how fees and expenses can impact your account.
Assume that you are an employee with 35 years until retirement and a current 401(k) account balance
of $25,000. If returns on investments in your account over the next 35 years average 7 percent and
fees and expenses reduce your average returns by 0.5 percent, your account balance will grow to
$227,000 at retirement, even if there are no further contributions to your account. If fees and expenses
are 1.5 percent, however, your account balance will grow to only $163,000. The 1 percent difference
in fees and expenses would reduce your account balance at retirement by 28 percent.
In recent years, there has been a dramatic increase in the number of investment options typically
offered under 401(k) plans as well as the level and types of services provided to participants. These
changes give employees who direct their 401(k) investments greater opportunity than ever before to
affect their retirement savings. As a participant, you may welcome the variety of investment options
and the additional services, but you may not be aware of their cost. As shown above, the cumulative
effect of the fees and expenses on your retirement savings can be substantial.
You should know that your employer also must consider the fees and expenses paid by your plan.
ERISA requires employers to follow certain rules in managing 401(k) plans. Employers are held to
a high standard of care and diligence and must discharge their duties solely in the interest of the plan
participants and their beneciaries. Among other things, this means that employers must:
n Establish a prudent process for selecting investment options and service providers;
n Ensure that fees paid to service providers and other plan expenses are reasonable in light of the
level and quality of services provided;
n Select prudent and adequately diversied investment options;
n Disclose plan, investment, and fee information to participants to make informed decisions about
their investment options under the plan; and
n Monitor investment options and service providers once selected to make sure they continue to
be appropriate choices.
What are 401(k) plan fees and who pays for them?
If you want to know how fees affect your retirement savings, you need to know about the different
types of fees and expenses and the different ways in which they are charged.
A LOOK AT 401(K) PLAN FEES
3
401(k) plan fees and expenses generally fall into three categories:
Plan administration fees. The day-to-day operation of a 401(k) plan involves expenses for basic and
necessary administrative services, such as plan recordkeeping, accounting, legal, and trustee services.
A 401(k) plan also may offer a host of additional services, such as telephone voice-response systems,
access to customer service representatives, educational seminars, retirement planning software,
investment advice, electronic access to plan information, daily valuation, and online transactions.
In some instances, administrative service costs are covered by investment fees that are deducted
directly from investment returns. Otherwise, if administrative costs are separately charged, they
will be borne either by your employer or charged directly against the assets of the plan. When paid
directly by the plan, administrative fees are either allocated among participants’ individual accounts
in proportion to each account balance (i.e., participants with larger account balances pay more of
the allocated expenses) or passed through as a at fee against each participant’s account. Either way
,
generally the more services provided, the higher the fees.
Investment fees. By far the largest component of 401(k) plan fees and expenses is associated with
managing plan investments. Fees for investment management and other investment-related services
generally are assessed as a percentage of assets invested. You should pay attention to these fees. You
pay for them in the form of an indirect charge against your account because they are deducted directly
from your investment returns. Your net total return is your return after these fees have been deducted.
(See pages 4-6 for more information on investment-related fees.)
Individual service fees. In addition to overall administrative expenses, there may be individual
service fees associated with optional features offered under a 401(k) plan. Individual service fees are
charged separately to the accounts of participants who choose to take advantage of a particular plan
feature. For example, individual service fees may be charged to a participant for taking a loan from
the plan or for executing participant investment directions.
401(k) plan investments and services may be provided through a variety of
arrangements:
Employers may directly provide, or separately negotiate with and hire different providers for
, some
or all of the various services and investment alternatives offered under their 401(k) plans (sometimes
referred to as an unbundled arrangement). The expenses of each provider (such as an investment
manager, trustee, recordkeeper, or communications rm) are charged separately.
In many plans, one provider may offer some or all of the services and investment options for a fee
paid to that provider (sometimes referred to as a bundled arrangement). The provider will then pay
out of that fee any other service providers that it contracts with to provide the services.
Some plans may use an arrangement that combines a single provider for certain services, such as
administrative services, with a number of providers for investment options.
Regardless of the arrangement used, fees need to be evaluated, keeping in mind the cost of all
covered services.
4
What fees are associated with my investment choices in a 401(k)
plan?
Apart from plan administration fees, there are three basic types of fees that may be charged in
connection with 401(k) plan investment options. These fees, which can be referred to by different
terms, include:
n Sales charges (also known as loads or commissions). These are transaction costs for buying
and selling of shares. They may be computed in different ways, depending upon the investment
product.
n Management fees (also known as investment advisory fees or account maintenance fees).
These are ongoing charges for managing the assets of the investment fund. They are generally
stated as a percentage of the amount of assets invested in the fund. Sometimes management
fees may be used to cover administrative expenses. The level of management fees can vary
widely, depending on the investment manager and the nature of the investment product.
Investment products that require signicant management, research, and monitoring services
generally will have higher fees. (See page 7.)
n Other fees. This category covers services, such as recordkeeping, furnishing statements, toll-
free telephone numbers, and investment advice, involved in the day-to-day management of
investment products. They may be stated either as a at fee or as a percentage of the amount of
assets invested in the fund.
There also are some fees that are unique to specic types of investments. Following are brief
descriptions of some of the more common investments offered under 401(k) plans and explanations of
the different terminology or unique fees associated with them.
Some Common Investments and Related Fees
Most 401(k) plan investment options pool the money of many individual investors. Pooling money
makes it possible for individual participants to diversify investments, to benet from economies of
scale and to lower transaction costs. These funds may invest in stocks, bonds, real estate, and other
investments. Larger plans, by virtue of their size, are more likely to pool investments on their own
– for example, by using a separate account held with a nancial institution. Smaller plans generally
invest in commingled pooled investment vehicles offered by nancial institutions. Generally, the
participant pays investment-related fees, usually charged as a percentage of assets invested.
Mutual funds. Mutual funds pool and invest the money of many people. Each investor owns shares in
the mutual fund that represent a part of the mutual fund’s holdings. The portfolio of securities held by
a mutual fund is managed by a professional investment adviser following a specic investment policy.
In addition to investment management and administration fees, you may nd these fees:
n Some mutual funds assess sales charges (see above for a discussion of sales charges). These
charges may be paid when you invest in a fund (known as a front-end load) or when you sell
shares (known as a back-end load, deferred sales charge or redemption fee). A front-end load
is deducted up front and, therefore, reduces the amount of your initial investment. A back-end
load is determined by how long you keep your investment. There are various types of back-end
A LOOK AT 401(K) PLAN FEES
5
loads, including some which decrease and eventually disappear over time. A back-end load is
paid when the shares are sold, so if you decide to sell a fund share when a back-end load is in
effect, you will be charged the load.
n Mutual funds also may charge what are known as Rule 12b-1 fees, which are ongoing fees
paid out of fund assets. Rule 12b-1 fees may be used to pay commissions to brokers and other
salespersons, to pay for advertising and other costs of promoting the fund to investors, and to
pay plan service providers as part of a bundled services arrangement. Some mutual funds may be
advertised as “no-load” funds. This can mean there is no front- or back-end load. However, there
may be a 12b-1 fee.
n Target date retirement funds, which are often mutual funds, hold stocks, bonds, and cash
investments. These funds are designed to make investing for retirement more convenient by
automatically changing your investment mix or asset allocation over time. Target date funds may
charge different fees even with the same target date. If a target date fund invests in other mutual
funds (often called a “fund-of-funds”), fees may be charged by both the target date fund and the
other funds.
Collective investment funds. A collective investment fund is a trust fund managed by a bank or
trust company that pools investments of 401(k) plans and other similar investors. Each investor has a
proportionate interest in the trust fund assets. For example, if a collective investment fund holds $10
million in assets and your investment in the fund is $10,000, you have a 0.1 percent interest in the
fund. Like mutual funds, collective investment funds may have different investment objectives. There
are investment management and administrative fees associated with a collective investment fund.
Variable annuities. Insurance companies frequently offer a range of investment options for 401(k)
plans through a group variable annuity contract between an insurance company and an employer on
behalf of a plan. The variable annuity contract “wraps” around investment options, often a number
of mutual funds. Participants select from the investment options offered, and the returns to their
individual accounts vary with their choice of investments. Variable annuities also include insurance
6
elements, which are not in other investment options. Generally, these elements include an annuity
feature, interest and expense guarantees, and any death benet provided during the term of the
contract. In addition to investment management and administration fees, you may nd these fees:
n Insurance-related charges are associated with investment options that include an insurance
component. They include items such as sales expenses, mortality risk charges and the cost of
issuing and administering contracts.
n Surrender and transfer charges are fees an insurance company may charge when an employer
terminates a contract (in other words, withdraws the plan’s investment) before the contract
expires or if you withdraw an amount from the contract. These charges may be imposed if these
events occur before the expiration of a stated period, and commonly decrease and disappear
over time. They are similar to an early withdrawal penalty on a bank certicate of deposit or to a
back-end load or redemption fee charged by some mutual funds.
Stable value funds. A common investment option that generally includes xed income securities and
one or more contracts issued by banks or insurance companies that provide protection of invested
contributions (the principal) and accumulated interest, as well as a rate of return that may be xed,
linked to an index, or reset periodically based on the performance of the fund’s investments. These
funds may have investment management and other administrative fees associated with their operation.
While the investments described above are common, 401(k) plans also may offer other investments
which are not described here (such as employer securities).
Where can I get information about the fees and expenses
charged to my 401(k) plan account?
If you have questions about the fees and expenses charged to your 401(k) plan, review the documents
noted below or contact your plan administrator.
The following information is available from your plan:
n If you direct the investments in your account, your plan will provide information about your
rights and responsibilities under the plan to direct your investments. This includes plan and
investment-related information, including information about fees and expenses, that you need
to make informed decisions about the management of your account. The investment-related
information is provided in a format, such as a chart, that allows you to compare the plan’s
investment options. The plan should give you this information before you can direct investments
for the rst time and annually thereafter. You also will receive a quarterly statement with
information on fees and expenses for administrative or individual services actually paid from
your individual account. This statement does not include charges paid indirectly from your
investments.
A model chart similar to what you may receive is included in the back of this publication.
It includes performance data for each investment option over 1, 5 and 10 years; returns of an
appropriate broad-based securities market index (referred to as a benchmark) over these same
time periods for comparison; and fee and expense information on the costs of running each
investment option (expense ratio) and service and shareholder-type fees (such as sales charges).
The chart also includes a glossary to help you understand your plan’s investment options.
A LOOK AT 401(K) PLAN FEES
7
To help you use this information, see EBSA’s publication Maximize Your Retirement Savings –
Tips on Using the Fee and Investment Information From Your Retirement Plan. These tips also
will help you use the periodic fee and investment information from your plan to see if you want
to make any changes.
n Your 401(k) plan’s summary plan description (SPD) will tell you what the plan provides and
how it operates. It may tell you about the investments your plan offers, the fees and expenses
your plan pays, and how those expenses are allocated among plan participants. A copy of the
SPD is furnished to participants when they join a plan and then every 5 years if there are material
modications or every 10 years if there are no modications.
n The plan’s annual report (Form 5500 series) contains information about the plan’s assets,
liabilities, income, and expenses, and shows the aggregate administrative fees and other expenses
paid by the plan. However, it will not show expenses deducted from investment results or
fees and expenses paid by your individual account. You may examine the annual report for
free online. In general, the summary annual report, which summarizes the annual report
information, is distributed yearly.
You also may request copies of prospectuses or similar documents from your plan as well as nancial
statements provided to your plan, and share values for your plan’s investment options (with the
valuation date). In addition, you may want to consult the business section of major daily newspapers,
business and nancial Websites and publications, rating services, or the business librarian at the public
library. These sources will provide information and help you compare the performance and expenses
of your 401(k) plan investment options with investments outside your 401(k) plan.
If, after doing your own analysis, you have questions about the rates of return or fees of your plan’s
investment options, ask your plan administrator for an explanation.
What other factors might impact the fees and expenses of my
401(k) plan?
n Funds that are “actively managed” (i.e., funds with an investment adviser who continually
researches, monitors, and actively trades the holdings of the fund to seek a higher return than
the market) generally have higher fees. The higher fees are associated with the more active
management provided and sales charges from the higher level of trading activity. While actively
managed funds seek to provide higher returns than the market, neither active management nor
higher fees necessarily guarantee higher returns.
n Funds that are “passively managed” generally have lower management fees. Passively managed
funds seek to obtain the investment results of an established market index, such as the Standard
and Poor’s 500, by duplicating the holdings included in the index. Thus, passively managed
funds require little research or trading activity.
n If the services and investment alternatives under your plan are offered through a bundled
program, then some or all of the plan service costs may not be separately charged to the plan or
to your employer. For example, the asset-based fees charged on investments may subsidize these
costs. Compare the services received in light of the total fees paid.
U.S. DEPARTMENT OF LABOR
8
n Plans with more total assets may be able to lower fees by using special funds or classes of
stock in funds, which generally are sold to larger group investors. “Retail” or “brand name”
funds, which are also marketed to individual and small group investors, tend to be listed in the
newspaper daily and typically charge higher fees. Let your employer know your preference.
n Optional features, such as participant loan programs and insurance benets offered under variable
annuity contracts, involve additional costs. Consider whether they have value to you. If not, let
your employer know.
n Retirement plans, such as 401(k) plans, are group plans. Therefore, your employer may not be
able to accommodate each employee’s preferences for investment options or additional services.
Is there a checklist I can use to review my 401(k) plan’s fees?
There is an array of investment options and services offered under today’s 401(k) plans. Answers to
the following 10 questions will help you gather information about the fees and expenses paid by your
plan. If you cannot nd answers, ask your plan administrator.
401(k) Fees Checklist
1. What investment options does your 401(k) plan offer?
2. Do you have all available documentation about your plan’s investment options and the fees
charged to your plan?
3. What types of investment education are available under your plan?
4. What arrangement does your plan use to provide services (i.e., are any or all of the services or
investment options provided by a single provider)?
5. Do you and other participants use most or all of the optional services offered under your 401(k)
plan, such as a participant loan program and insurance coverage?
6. If administrative services are paid separately from investment management fees, are they paid
for by the plan, your employer, or are they shared?
7. Do the investment options track an established market index or is there a higher level of
investment management services provided?
8. Do any of your plan’s investment options include sales charges (such as loads or commissions)?
9. Do any of your plan’s investment options include fees related to specic investments, such as
12b-1 fees, insurance charges, or surrender fees, and what do they cover?
10. Does your plan offer any special funds or special classes of stock (generally sold to larger
group investors)?
This booklet is only the beginning of your educational process. You should ask questions and educate
yourself about investments. Monitoring your current investment selections and reviewing your plan’s
investment options are part of a process that you, as an informed participant, need to do continually.
A LOOK AT 401(K) PLAN FEES
9
Keep in mind that the law requires the fees charged to a 401(k) plan be “reasonable” rather than
setting a specic level of fees that are permissible. Therefore, the reasonableness of fees must be
determined in each case.
In Conclusion...
When you consider the fees in your 401(k) plan and their impact on your retirement income,
remember that all services have costs. If your employer has selected a bundled program of services
and investments, compare all services received with the total cost.
Remember, too, that higher investment management fees do not necessarily mean better performance.
Nor is cheaper necessarily better. Compare the net returns relative to the risks among available
investment options.
And, nally, don’t consider fees in a vacuum. They are only one part of the bigger picture, including
investment risks and returns and the extent and quality of services provided. Keep in mind the
importance of diversifying your investments.
What other sources of information are available?
Listed below are some organizations and their Websites, phone numbers and publications that can help
in your research.
From the Employee Benets Security Administration:
• Maximize Your Retirement Savings – Tips on Using the Fee and Investment Information
From Your Retirement Plan
• Target Date Retirement Funds Investor Bulletin
• A Look at 401(k) Plan Fees (video)
• What You Should Know About Your Retirement Plan
• Savings Fitness: A Guide to Your Money and Your Financial Future
• Taking the Mystery Out of Retirement Planning
Website
Toll-free publication hotline: 1-866-444-3272
From the Securities and Exchange Commission:
• Savings and Investing: A Roadmap to Your Financial Security Through Saving and Investing
• Mutual Funds and ETFs – A Guide for Investors
• Ask Questions – Questions You Should Ask About Your Investments
Website
Toll-free phone information service: 1-800-732-0330
10
From the Board of Governors of the Federal Reserve System:
Website
Phone: (202) 452-3000
From the Comptroller of the Currency:
Website
Toll-free Hotline: 1-800-613-6743
From the American Savings Education Council (ASEC):
Website
Phone: (202) 659-0670
From the Certied Financial Planner Board of Standards:
Website
Toll-free Hotline: 1-800-487-1497
From the Financial Industry Regulatory Authority:
Website
Phone: (301) 590-6500
U.S. DEPARTMENT OF LABOR
10
A LOOK AT 401(K) PLAN FEES
11
Model Comparative Chart
ABC Corporation 401k Retirement Plan
Investment Options – January 1, 20XX
This document includes important information to help you compare the investment options under your
retirement plan. If you want additional information about your investment options, you can go to the specific
Internet Web site address shown below or you can contact [insert name of plan administrator or designee] at
[insert telephone number and address]. A free paper copy of the information available on the Web site[s] can
be obtained by contacting [insert name of plan administrator or designee] at [insert telephone number].
Document Summary
This document has 3 parts. Part I consists of performance information for plan investment options. This part
shows you how well the investments have performed in the past. Part II shows you the fees and expenses
you will pay if you invest in an option. Part III contains information about the annuity options under your
retirement plan.
Part I. Performance Information
Table 1 focuses on the performance of investment options that do not have a fixed or stated rate of return.
Table 1 shows how these options have performed over time and allows you to compare them with an
appropriate benchmark for the same time periods. Past performance does not guarantee how the investment
option will perform in the future. Your investment in these options could lose money. Information about an
option’s principal risks is available on the Web site[s].
Table 1—Variable Return Investments
Name/
Type of Option
Average Annual Total Return
as of 12/31/XX
Benchmark
1yr. 5yr. 10yr.
Since
Inception
1yr. 5yr. 10yr.
Since
Inception
Equity Funds
A Index Fund/
S&P 500
www. website
address
26.5% .34% -1.03% 9.25% 26.46% .42% -.95% 9.30%
S&P 500
B Fund/ Large Cap
www.
website
address
27.6% .99% N/A 2.26% 27.80% 1.02% N/A 2.77%
US Prime Market 750 Index
C Fund/ Int’l Stock
www.
website
address
36.73% 5.26% 2.29% 9.37% 40.40% 5.40% 2.40% 12.09%
MSCI EAFE
D Fund/ Mid Cap
www. website
address
40.22% 2.28% 6.13% 3.29% 46.29% 2.40% -.52% 4.16%
Russell Midcap
Bond Funds
E Fund/ Bond Index
www. website
address
6.45% 4.43% 6.08% 7.08% 5.93% 4.97% 6.33% 7.01%
Barclays Cap. Aggr. Bd.
U.S. DEPARTMENT OF LABOR
12
Other
F Fund/ GICs
www. website
address
.72% 3.36% 3.11% 5.56% 1.8% 3.1% 3.3% 5.75%
3-month US T-Bill Index
G Fund/ Stable
Value
www. website
address
4.36% 4.64% 5.07% 3.75% 1.8% 3.1% 3.3% 4.99%
3-month US T-Bill Index
Generations 2020/
Lifecycle Fund
www. website
address
27.94% N/A N/A 2.45% 26.46% N/A N/A 3.09%
S&P 500
23.95% N/A N/A 3.74%
Generations 2020 Composite Index*
*Generations 2020 composite index is a combination of a total market index and a US aggregate bond index
proportional to the equity/bond allocation in the Generations 2020 Fund.
Table 2 focuses on the performance of investment options that have a fixed or stated rate of return. Table 2
shows the annual rate of return of each such option, the term or length of time that you will earn this rate of
return, and other information relevant to performance.
Table 2—Fixed Return Investments
Name/
Type of Option
Return Term Other
H 200X/ GIC
www.
website
address
4% 2 Yr. The rate of return does not change during the stated term.
I LIBOR Plus/ Fixed-
Type Investment
Account
www.
website
address
LIBOR
+2%
Quarterly The rate of return on 12/31/xx was 2.45%. This rate is fixed
quarterly, but will never fall below a guaranteed minimum
rate of 2%. Current rate of return information is available
on the option’s Web site or at 1-800-yyy-zzzz.
J Financial Services
Co./ Fixed Account
Investment
www.
website
address
3.75% 6 Mos. The rate of return on 12/31/xx was 3.75%. This rate of
return is fixed for six months. Current rate of return
information is available on the option’s Web site or at
1-800-yyy-zzzz.
Part II. Fee and Expense Information
Table 3 shows fee and expense information for the investment options listed in Table 1 and Table 2. Table 3
shows the Total Annual Operating Expenses of the options in Table 1. Total Annual Operating Expenses are
expenses that reduce the rate of return of the investment option. Table 3 also shows Shareholder-type Fees.
These fees are in addition to Total Annual Operating Expenses.
A LOOK AT 401(K) PLAN FEES
13
Table 3—Fees and Expenses
Name /
Type of Option
Total Annual
Operating
Expenses
Shareholder-Type Fees
As a %
Per
$1000
Equity Funds
A Index Fund/
S&P 500
0.18% $1.80
$20 annual service charge subtracted from investments
held in this option if valued at less than $10,000.
B Fund/
Large Cap
2.45% $24.50
2.25% deferred sales charge subtracted from amounts
withdrawn within 12 months of purchase.
C Fund/ International
Stock
0.79% $7.90 5.75% sales charge subtracted from amounts invested.
D Fund/
Mid Cap ETF
0.20% $2.00 4.25% sales charge subtracted from amounts withdrawn.
Bond Funds
E Fund/
Bond Index
0.50% $5.00 N/A
Other
F Fund/
GICs
0.46% $4.60
10% charge subtracted from amounts withdrawn within
18 months of initial investment.
G Fund/
Stable Value
0.65% $6.50
Amounts withdrawn may not be transferred to a
competing option for 90 days after withdrawal.
Generations 2020/
Lifecycle Fund
1.50% $15.00
Excessive trading restricts additional purchases (other
than contributions and loan repayments) for 85 days.
Fixed Return Investments
H 200X / GIC N/A
12% charge subtracted from amounts withdrawn before
maturity.
I LIBOR Plus/ Fixed-
Type Invest Account
N/A
5% contingent deferred sales charge subtracted from
amounts withdrawn; charge reduced by 1% on 12-month
anniversary of each investment.
J Financial Serv Co.
/ Fixed Account
Investment
N/A
90 days of interest subtracted from amounts withdrawn
before maturity.
The cumulative effect of fees and expenses can substantially reduce the growth of your retirement savings.
Visit the Department of Labor’s Web site for an example showing the long-term effect of fees and expenses
at http://www
.dol.gov/ebsa/publications/401k employee.html. Fees and expenses are only one of many
factors to consider when you decide to invest in an option. You may also want to think about whether an
investment in a particular option, along with your other investments, will help you achieve your financial goals.
Part III. Annuity Information
Table 4 focuses on the annuity options under the plan. Annuities are insurance contracts that allow you to
receive a guaranteed stream of payments at regular intervals, usually beginning when you retire and lasting
for your entire life. Annuities are issued by insurance companies. Guarantees of an insurance company are
subject to its long-term financial strength and claims-paying ability.
U.S. DEPARTMENT OF LABOR
14
Table 4—Annuity Options
Name Objectives / Goals Pricing Factors Restrictions / Fees
Lifetime
Income Option
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To provide a guaranteed
stream of income for
your life, based on
shares you acquire while
you work. At age 65,
you will receive monthly
payments of $10 for each
share you own, for your
life. For example, if you
own 30 shares at age 65,
you will receive $300 per
month over your life.
The cost of each share
depends on your age and
interest rates when you buy
it. Ordinarily the closer you
are to retirement, the more
it will cost you to buy a
share.
The cost includes a
guaranteed death benefit
payable to a spouse or
beneficiary if you die before
payments begin. The death
benefit is the total amount
of your contributions, less
any withdrawals.
Payment amounts are based
on your life expectancy only
and would be reduced if you
choose a spousal joint and
survivor benefit.
You will pay a 25% surrender
charge for any amount you
withdraw before annuity
payments begin.
If your income payments are
less than $50 per month, the
option’s issuer may combine
payments and pay you less
frequently, or return to
you the larger of your net
contributions or the cash-
out value of your income
shares.
Generations
2020 Variable
Annuity Option
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To provide a guaranteed
stream of income for
your life, or some other
period of time, based on
your account balance in
the Generations 2020
Lifecycle Fund.
This option is available
through a variable
annuity contract that
your plan has with ABC
Insurance Company.
You have the right to elect
fixed annuity payments in
the form of a life annuity, a
joint and survivor annuity,
or a life annuity with a term
certain, but the payment
amounts will vary based
on the benefit you choose.
The cost of this right is
included in the Total Annual
Operating Expenses of the
Generations 2020 Lifecycle
Fund, listed in Table 3
above.
The cost also includes a
guaranteed death benefit
payable to a spouse or
beneficiary if you die before
payments begin. The death
benefit is the greater of
your account balance or
contributions, less any
withdrawals.
Maximum surrender charge
of 8% of account balance.
Maximum transfer fee of $30
for each transfer over 12 in
a year.
Annual service charge of $50
for account balances below
$100,000.
Please visit www.ABCPlanglossary.com for a glossary of investment terms relevant to the investment
options under this plan. This glossary is intended to help you better understand your options.
EMPLOYEE BENEFITS SECURITY ADMINISTRATION
UNITEDSTATESDEPARTMENTOFLABOR
September2019