401k fee shock and rant

[sunnysideup]

Sorry for the long story but I need to vent.

So I know that the fees are supposed to be more transparent now, but I honestly don't think they are that easy to decipher. I have been rolling over my 401ks over the past few years to consolidate, and never paid much attention until recently.

I had one 401k that I let sit for almost 10 years since it was in VG and I like it's performance. I finally rolled it over early in 2012. No problems with the rollover. The company underwent a merger that year, and apparently after the merger the new company "ABC" moved the 401ks to Fidelity.

Meanwhile I have 2 brokerage accounts for my rollovers, one is Fidelity. Something weird happened early in 2013, a new account showed up, it was $140 in a 401k from the new company ABC. I am not sure where the $140 it came from, (interest or a settlement) but that is a moot point. I recently noticed that in less than a year they already took 2 x 10 dollar fees out, and decided it was time to roll it over before my entire windfall of $140 disappeared....

It took me less than 5 minutes on Fidelity this week to do the rollover of the $122 that was the balance in the account. I got the paperwork on Friday and they showed a $102 balance transfer. Another $20 had disappeared.

I call the rep at FIdelity and could only say are you kidding me? 30% fees in 9 months? He could only tell me that $20 is the rollover fee. I commented that it isn't even noted on the transaction paperwork. Seems less than transparent to me.

And all I keep thinking is that since I typically don't have small balances, the fees probably are not a large percentage to me, but what about the lower income workers. This is incredible.

So the rep wouldn't give me a company employee's name but told me he would email my comments to the company. I asked him to tell the person I would appreciate a call back and gave him my cell number.

I don't expect diddly from this but I really want to complain to someone, I just don't know who? How can ridiculous fees like this be allowed?

PS Forgive my naivete...

[Rustward]

Uh, 2more, this probably won't make you feel any better, but there is some finite cost to the custodian to maintain your account. It is probably more like a fixed cost than a percentage, and it is probably less than you paid in fees, but it is real and it is there. Let's see, they have some big shiny computers and some shiny storage devices to keep track of you, some electricity to run their systems and their air conditioning, some offsite storage (which is usually something like synchronous remote copy for financial applications -- more electricity, air conditioning, shiny storage and lots of bandwidth), some people to keep all that technology running, customer service reps, phones (more people, offices, computers, electricity, air conditioning, and bandwidth), auditing and compulsory reporting, offsite disaster recovery tests . . .
All this stuff (and I probably left out a lot) does cost money and it has to be paid for somehow.

I rolled over a 401K from a previous employer to an IRA last year and the Fidelity rep told me there would be a $50 account closing fee whenever I closed the Fidelity account. They also told me to expect an account closing fee from the 401K custodian.

I have seen people get pissed when they go to use a credit card that they haven't touched for 2 years only to find out it was canceled for lack of use.

[meierlde]

My 401k with a megacorp charges $46 a year for a 401k. That shows up in the transaction record for the account.

[FinancialDave]

Wow, that is sad. I have never seen any transaction fees or rollover fees in my 401k account.

[FinancialDave]

However, I have seen 401k accounts that were offering Vanguard index funds, but then added almost 1% ER to the funds expenses.

Now that is something to cry about.

$20, not so much.

fd

[rbmrtn]

The megacorp I worked for paid the administrative fees, the investment management fees were very low ( TRP mutual funds and investment trust ). Nothing was/is deducted from my account for fees. It depends more on what your plan contracted for services and how much money was under management. I've seen small ones with outrageous fees ( full service broker etc )

[foxfirev5]

My 401k charges $70 per year for fees. However the 70% match of the first 10% , 5% annual contribution on top of that, and Vanguard Inst'l class funds make the $70 a real bargain.

[meierlde]

Quote:

Originally Posted by foxfirev5 My 401k charges $70 per year for fees. However the 70% match of the first 10% , 5% annual contribution on top of that, and Vanguard Inst'l class funds make the $70 a real bargain.

I suspect that because the inst'l class funds have such low fees, that while under the admiral and regular funds vanguard had the margin to pay the fees, one you go to the inst'l class funds there is insufficient margin.

[sunnysideup]

Quote:

Originally Posted by Rustward . All this stuff (and I probably left out a lot) does cost money and it has to be paid for somehow.

I agree that fees are a necessity. The way they were applied to such a small amount is what was shocking, and that this megacorp would not help with the fees (considering the percentage) was even a bigger shock. Like I said, my naivete. I have worked for other companies that have paid all the fees, and didn't pass them on to the employees, so seeing them like this was new to me.

[Rustward]

Quote:

Originally Posted by 2moreyears I agree that fees are a necessity. The way they were applied to such a small amount is what was shocking, and that this megacorp would not help with the fees (considering the percentage) was even a bigger shock. Like I said, my naivete. I have worked for other companies that have paid all the fees, and didn't pass them on to the employees, so seeing them like this was new to me.

I think I understand your position. I was there myself once, with the Executive Life settlement. My share of that (fortunately) was only about $100, but it came over a decade after I left the employment of the company where that 401K was before the settlement appeared. By then I had rolled the 401K to an IRA. As I recall, the money was put into a Fidelity Rollover IRA for me. After three months (or it might have been six months) I received a distribution (with a 1099-R) for the full amount with a letter saying that $100 was not enough to keep the account open. I just paid the taxes and early withdrawal penalty, and put what was left in my brokerage account. I don't know who paid the fees (if any) -- it was not enough to spend much time on.

The point I was trying to make is that the fees you paid were probably *per account* types of fees with no regard for the account balance. When you convert that to a percentage of account value, it looks like a whale of a percentage for a small account balance.

[FinancialDave]

Quote:

Originally Posted by foxfirev5 My 401k charges $70 per year for fees. However the 70% match of the first 10% , 5% annual contribution on top of that, and Vanguard Inst'l class funds make the $70 a real bargain.

Would be interested to know the quoted ER fees for the Vanguard funds, and which funds they use?

fd

[rodi]

Don't get me started on this. My division was recently sold off to company xyz - who has higher expense ratios than we used to.

My husband's company has high expense ratio funds with front loads ranging from 3-5%!!!! I complained to his boss (a partner) about it and he seemed surprised. He thought the plan was fabulous. I pointed out that in the 25 years the boss ha'd worked there he'd have gained a whole lot more if the funds were better and not loaded. (My husband was kicking me under the table to shut up. LOL.) My husband retires next year - but maybe my complaint will help future employees.

[MRG]

Fee's in 401k, such as previously mentioned are real, per account. They vary by the custodian and 401k.

Also some employers are passing down more costs they used to pick up.

OP, have you reviewed your 401k SPD, it should have descriptions, and who to contact for issues. Least all I've seen do.

Good luck,

MRG