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Employer 401k fee disclosure
Old 12-03-2011, 09:02 AM   #1
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Employer 401k fee disclosure

I've switched to a different overlord, an overlord with what seems to offer piss poor 401k options.

Former overlord ran their 401k through Vanguard and everything was peachy keen, but now I have some Wilmington Trust with funds I can't find on Morningstar? Even more squirrelly is how they report fees. e.g. Their Balanced portfolio fund has the last 10 years of gross returns and "Net of trust and investment mgmt fees". 2003 gross was 20.57% and "net" 19.08%. So, the fees are roughly 1.49% for that year? Fees seem to change year to year, but fluctuate within 0.3%, with some bigger swings where I assume the fund manager divorced his current 20 something wife.

I'm used to seeing a constant fee with Vanguard like 0.3%, can they report the fund's fees either way? I have no ticker symbols or anything...

Current overlord has even offered to allow me to roll previous overlord's 401k funds into their's, but I think I will keep my ~$200k with Vanguard. I've been wanting to get a taxable portfolio going, I guess now is my chance! The writing on the wall is I will put minimum in to get the 6% match with the fund with lowest fees, invest difference elsewhere and adjust portfolio allocations accordingly across 5 accounts? Talking with HR is like talking to a coconut.
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Old 12-03-2011, 09:37 AM   #2
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good call.
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Old 12-03-2011, 09:44 AM   #3
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coconut, hah!

Unless the old 401k has something really compelling about it, rolling to a Vanguard IRA could make sense. At the very least it opens up roth conversions and 72(t) distributions to you. It also ensures you are fully in control of the account.

New 401k sounds crummy, but depending on your tax bracket, maxing it could still make sense. I don't think you can invest in an IRA at the same time as a 401k, and the benefits of tax deferral might more than offset the higher fees.
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Old 12-03-2011, 03:59 PM   #4
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Overlord, coconut...where do you work?
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Old 12-04-2011, 10:35 AM   #5
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Overlord, coconut...where do you work?
for a private company. don't even get me started.
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Old 12-04-2011, 10:46 AM   #6
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Sounds like you are doing the right thing (or, at least what I would have done under similar circumstances). Maybe after contributing enough for the match, you can arrange an automatic transfer of additional money to an account at Vanguard.

You can roll your present 401K over to Vanguard once you are done working there, but I think it doesn't make much sense to do it now if you just started this job.
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Old 12-04-2011, 10:53 AM   #7
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I had a similar problem with my 403-B. Because of fear of liability issues if the investments went bad, most school districts want the employee and mutual fund company to agree to hold the district harmless. Only the load fund/hi-expense companies would agree to the district's requirements. So, I decided to do the next best thing. Invest my $$'s in the most tax efficient no-load index fund I could find.
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Old 12-04-2011, 10:54 AM   #8
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Originally Posted by ronocnikral View Post

Current overlord has even offered to allow me to roll previous overlord's 401k funds into their's, but I think I will keep my ~$200k with Vanguard. I've been wanting to get a taxable portfolio going, I guess now is my chance! The writing on the wall is I will put minimum in to get the 6% match with the fund with lowest fees, invest difference elsewhere and adjust portfolio allocations accordingly across 5 accounts? Talking with HR is like talking to a coconut.
Vanguard, max the employer contribution, look for the least stinky 401(k) fund, rearrange allocations elsewhere to compensate and increase taxable savings all sound like good options that make the best of a lousy option. Can't help with the coconut - never talked with one.
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Old 12-04-2011, 11:56 AM   #9
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It might matter whether you expect to be employed here for years or decades. In a similar situation, where I didn't expect to stay longer than 5 years, what I did was:

1. look for the least bad of the fund options in the new 401k
2. adjust the other previous 401k so my overall asset allocation stays sane
3. fully contribute to new 401k (not just up to match amount)
4. be more likely to consider other offers of employment that will let me end service and roll this new 401k to an IRA I control or a new employer's plan

This worked out well for me. I didn't sacrifice any tax advantaged space, although it cost me higher fees for a few years on just that portion of the portfolio. I think the tax advantaged space was worth it. I might have been more likely to contribute only up to the match and explore taxable investing if I thought I would be stuck with this plan for a very long time. In my industry that's rare. A short term expensive fee costs a little, but the long term expensive fees would be much more painful.
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Old 12-05-2011, 02:16 PM   #10
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I thought by law a company had to give you a prospectus before you could invest...and the prospectus should have this info, no?

It's wise of you to be suspect....keep poking.
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Old 12-05-2011, 03:34 PM   #11
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Originally Posted by ronocnikral View Post
e.g. Their Balanced portfolio fund has the last 10 years of gross returns and "Net of trust and investment mgmt fees". 2003 gross was 20.57% and "net" 19.08%. So, the fees are roughly 1.49% for that year? Fees seem to change year to year, but fluctuate within 0.3%, with some bigger swings where I assume the fund manager divorced his current 20 something wife.
Do a little research, but my guess is that the "Balanced Portfolio" is a group of mutual funds that they manage and weight as they see fit.

I would also bet the you are paying 1.5% Management Fee, but it is calculated and withdrawn every quarter. For example, you have 100k in the fund; on 1/1 you pay (1.5%/4)*100k = $375; Up 20% in Q1, pay $450 (120k*(1.5%/4)) on 4/1; Flat for Q2, Q3 and Q4, paying $450 on 7/1 and 10/1; you are up 20% gross, and you paid 1.43% Management Fee ((450*3)+375=1725; 1,725/120,000=1.43%)
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Old 12-06-2011, 06:51 AM   #12
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Quote:
Originally Posted by ronocnikral View Post
I've switched to a different overlord, an overlord with what seems to offer piss poor 401k options.

Former overlord ran their 401k through Vanguard and everything was peachy keen, but now I have some Wilmington Trust with funds I can't find on Morningstar? Even more squirrelly is how they report fees. e.g. Their Balanced portfolio fund has the last 10 years of gross returns and "Net of trust and investment mgmt fees". 2003 gross was 20.57% and "net" 19.08%. So, the fees are roughly 1.49% for that year? Fees seem to change year to year, but fluctuate within 0.3%, with some bigger swings where I assume the fund manager divorced his current 20 something wife.

I'm used to seeing a constant fee with Vanguard like 0.3%, can they report the fund's fees either way? I have no ticker symbols or anything...

Current overlord has even offered to allow me to roll previous overlord's 401k funds into their's, but I think I will keep my ~$200k with Vanguard. I've been wanting to get a taxable portfolio going, I guess now is my chance! The writing on the wall is I will put minimum in to get the 6% match with the fund with lowest fees, invest difference elsewhere and adjust portfolio allocations accordingly across 5 accounts? Talking with HR is like talking to a coconut.
It has become a way for compaines to make money.
we changed ours a few years ago with new higher fees and funds that are not listed anywere!!!!!!
I too decided to stop it and invest in Vanguard funds
And yes talking to HR was a waste
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Old 12-06-2011, 09:31 AM   #13
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Just wait a bit.... the new law that requires plans to tell about fees is about to start... plans will be required to tell the total fees that you pay...

I think Fido is ramping up to do it soon... I keep getting emails saying that....
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Old 12-08-2011, 07:09 PM   #14
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Just wait a bit.... the new law that requires plans to tell about fees is about to start... plans will be required to tell the total fees that you pay...

I think Fido is ramping up to do it soon... I keep getting emails saying that....
I think this is going to open a lot of peoples eyes.
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Old 12-08-2011, 08:59 PM   #15
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I have worked for four employers, including one of the 4 largest employers in world (200k+ employees), and two of those did not have mutual funds in them with tickers. All 4 401k plans were good.

Some companies get institutional funds, in my case I think they were managed by companies like "state street" or "wellington asset management". There were management fees, and the prospectus suggested what indexes they were following (S&P 500, Russell 2000...).

Is your 401k provider Hewitt, or is the company going directly to a fund company? I have seen both.

Employers have a fiduciary responsibility to employees with 401k plan choices. If you don't know what this means, look it up, or contact someone which sells 401k plans and see if they can sell your company a new one.
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Old 12-09-2011, 06:08 AM   #16
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Just wait a bit.... the new law that requires plans to tell about fees is about to start... plans will be required to tell the total fees that you pay...

I think Fido is ramping up to do it soon... I keep getting emails saying that....
Here's a link to the form letter DOL will require plan sponsors to use. At first glance, I'm a little disappointed. While it is comprehensive enough as a disclosure document, it appears to lack "compared to" components relative to expense ratio benchmarks, similar plans' expenses, etc.

More study required...

http://www.dol.gov/ebsa/pdf/401kfefm.pdf
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Old 12-09-2011, 09:45 AM   #17
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Here's a link to the form letter DOL will require plan sponsors to use. At first glance, I'm a little disappointed. While it is comprehensive enough as a disclosure document, it appears to lack "compared to" components relative to expense ratio benchmarks, similar plans' expenses, etc.

More study required...

http://www.dol.gov/ebsa/pdf/401kfefm.pdf
To tell the truth, I would have hoped that they could estimate the actual cost that 'I' paid....

IOW, if I have $100,000 in 4 funds, they would say:


You paid $15 per quarter = $60
You paid for Fund 1 = $200
You paid for Fund 2 = $250
You paid for Fund 3 = $180
You paid for Fund 4 = $200
Record keeping was $80

Total cost was $970.
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Old 12-11-2011, 06:29 AM   #18
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CEO to HR guy : "I want you to fire Smith. He's ugly and he doesn't ever smile"

HR guy to CEO : "We can't fire Smith. We're making too much money on his 401K "
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Old 12-11-2011, 07:49 AM   #19
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Originally Posted by ronocnikral View Post
I've switched to a different overlord, an overlord with what seems to offer piss poor 401k options.

Former overlord ran their 401k through Vanguard and everything was peachy keen, but now I have some Wilmington Trust with funds I can't find on Morningstar? Even more squirrelly is how they report fees. e.g. Their Balanced portfolio fund has the last 10 years of gross returns and "Net of trust and investment mgmt fees". 2003 gross was 20.57% and "net" 19.08%. So, the fees are roughly 1.49% for that year? Fees seem to change year to year, but fluctuate within 0.3%, with some bigger swings where I assume the fund manager divorced his current 20 something wife.

I'm used to seeing a constant fee with Vanguard like 0.3%, can they report the fund's fees either way? I have no ticker symbols or anything...

Current overlord has even offered to allow me to roll previous overlord's 401k funds into their's, but I think I will keep my ~$200k with Vanguard. I've been wanting to get a taxable portfolio going, I guess now is my chance! The writing on the wall is I will put minimum in to get the 6% match with the fund with lowest fees, invest difference elsewhere and adjust portfolio allocations accordingly across 5 accounts? Talking with HR is like talking to a coconut.
Perhaps you could provide some info on recent 401k class action suits to HR to motivate them to be more forthcoming and more responsible.

See: Schlichter, Bogard and Denton: A personal injury law firm practicing in Missouri, California, Illinois and Wisconsin: Practice Areas - Pension Plan & ERISA Litigation - General Dynamics Or, go to the Schlichter, Bogard & Denton webpage.
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