ABC, INC.
401(K) PLAN AND TRUST
NOTICE OF DEFAULT INVESTMENT OPTION AND PROCEDURES
__________ __, 20__
Why You Are Receiving This Notice
You are receiving this Notice because you are either currently a Participant in the ABC,
Inc. 401(K) Plan and Trust (the “Plan”) who has not made an election as to how you want
your entire account to be invested or you will shortly become a new Participant in the
Plan.
The purpose of this Notice is to advise you of your right to direct the investment of your
entire account under the Plan and how your account will be invested by the Trustee in the
absence of your timely instructions.
The Trustee has adopted a Default Investment in which any account or portion of an
account for which the Trustee does not receive timely instructions will be invested.
Please note that this Notice is provided for your information and is important. While the
Trustee will seek to invest any assets for which a Participant fails to give timely
instructions in a prudent manner, you are encouraged to carefully review the investment
options under the Plan and make your own investment election. Only you will know
your retirement goals, risk tolerance, retirement needs and availability of other
assets. The Trustee can in no way guarantee that any default investment ***he/she/it***
selects will be the most appropriate for you from among those made available under the
Plan given your age, other assets, retirement horizon and other factors nor can the Trustee
assure you that such a default investment will produce the best investment results for you.
Your Right To Direct Your Account
As a Participant, you have the right to invest the full amount allocated to your account
and to be allocated to your account in any of the investment options made available under
the Plan. Should you fail to timely provide instructions to the Trustee in writing on forms
provided by the Trustee for this purpose (or by use of other methods that the Trustee may
approve in writing), your entire account, or any portion for which you failed to make a
timely election, will be invested in the Plan’s Default Investment rather than invested as
you might elect.
What is the Plan’s Default Investment
The Plan’s Default Investment is the XYZ Balanced Fund.
1
The Trustee may in the future replace this Default Investment. If this happens, you will
be notified and given information regarding the Plan’s new Default Investment.
A Description of the Plan’s Default Investment
The XYZ Balanced Fund seeks to achieve a balanced investment program between
growth and income. ***The Fund invest in a combination of common stocks, preferred
stocks and bonds, including short-term bonds with a goal of providing both income and
capital preservation. *** ***The XYZ Balanced Fund is actually a fund of funds
meaning that to achieve its desired investment mix, the fund normally invests
approximately ___% of its assets in underlying funds that invest primarily in equity
securities and approximately___% in underlying funds that invest primarily in fixedincome securities.*** By so doing, the fund strives to achieve a level of risk below that
of equity markets.
As is the case with all investments, the XYZ Balanced Fund is subject to various risks
including ***the risk that equities may decline in value, bonds may decrease in value due
to rising interest rates or due to problems of the creditworthiness of the borrower
including the risk that the borrower may be unable to make principle and/or interest
payments when due and default as well as the risk associated with investing in non-US
assets. *** ***In addition, the risk exist that the fund may drift from its stated
strategy.*** *** ***The Default Investment will likely experience fluctuations in
value.***
***In addition to these general risks, as a fund that itself invest in a number of other
investment funds, the Default Investment’s ability to achieve its investment objective will
depend largely on the ability of its investment manager to select the appropriate mix of
underlying funds and on the underlying funds ability to meet their various investment
objectives.***
There is no guarantee that a Participant’s account invested in the Default Investment will
not lose money. The likelihood of loss is generally greater if you invest for shorter
periods of time.
With respect to the fees, the Plan will purchase ____ Class shares. ***This means that
there will be no front or back end sales charge.*** However, there are other annual fees
and expenses which will be paid from accounts invested in the Default Investment
including an administrative maintenance charge of ___as well as other charges and
expenses of _________. The total annual operating expense which will be deducted
from the invested funds is ___%.
This Notice contains only a brief description of the Plan’s Default Investment and its fees
and expenses. For more information on the Default Investment, please consult the
attached XYZ Balanced Fund. For more detailed information on the fees and expenses
charged, see page __ of the attached Prospectus.
2
Your Right to Select Another Investment Option under the Plan
If all or any part of your account is invested by the Trustee by default in the Plan’s
Default Investment, you still have the right to choose the manner in which your account
will be invested prospectively by completing and returning to the Trustee, or to the
Trustee’s designee, the attached ***Investment Election Form.*** By so doing, you can
elect to invest in some or all of the other investment options available under the Plan
including in the XYZ Balanced Fund described in this Notice.
Caution should be taken, however, when you invest in the Default Investment for short
periods of time as the likelihood of investment loss may be greater if you invest for a
shorter period of time. As such, if you do not intend to remain invested in the Default
Investment for an extended period of time, it is likely preferable that you avoid having
your account defaulted into the fund.
Attached is an ***Investment Election Form*** which you can use for this purpose.
To avoid having your account invested in the Default Investment, you must
complete and return the Form to the Trustee, or to its designee, not later than
___________________________ (in no event should the participant be given fewer
than 30 days from this Notice to make an election).
***You can change your investment elections at any time without restriction.***
OR
***While in general, you can change your investment elections at any time without
restriction, all investment elections, as well as changes in existing accounts or future
contributions, must be elected in whole percentages only.***
Where Can You Obtain Additional Information about the Plan’s Other Investment
Alternatives and Where Do you Return Your Completed ***Investment Election
Form***
To get information about the Plan’s other investment options, including a copy of the
most recent Prospectus, if applicable, and to return your completed ***Investment
Election Form*** contact and/or return the completed Form to:
Jane Doe
ABC, Inc.
2013 Nowhere Lane
Anytown, USA 66666
(555) 555-1111
3
Defined terms used are as defined in the Plan document and as summarized in the
Summary Plan Description. For more information about the Plan, or for a definition of
Participant, please see the most recent Summary Plan Description for the Plan.
Attached
Investment Election Form
XYZ Balanced Fund Prospectus
4