Woohoo! My 401k whining paid off!

[Olav23]

My company has a 401k program. Currently it is through (I believe) Bisys and Merrill Lynch. I have been very vocal in complaining about it within the company. [most funds have an average of 1.5% expense ratios, including "closet" index funds]

Well, apparently they are interviewing new recordkeepers and trying to get less expensive funds. My complaining paid off, combined with the fact that we have grown to 300 employees to give us more bargaining power.

Management has narrowed it down to 4 providers, and I will be sitting in the presentation of the 4 choices.

My main goal is to get as low cost funds as possible (hoping at least to get some index funds as well) and the most variety in the fund choices to cover as many asset classes as possible.

I'm coming at this as an employee investing in the funds, but I would like to be more diligent on how to make the best choice for the whole company.

Has anyone gone through this before? And if so, did you have any sort of "checklist" of questions that I could use to compare apples to apples?

If you made the choice for your company, what was the deciding factor? I have read past posts and many people have mentioned their happiness with Fidelity as a provider, so I am hoping that is one of the narrowed down choices.

Any help anyone can provide is most appreciated.

 

[REWahoo]

Congratulations. Check out this thread: http://www.early-retirement.org/forums/f28/opportunity-to-interview-401k-company-help-26579.html

 

[Olav23]

Ah, yes, I thought I remembered that post recently. NinjaPigeon, if you are still around, I'd love to hear your experiences and how you came to a decision.

 

[LOL!]

See also this thread on Diehards

 

[DangerMouse]

Congrats on making the change happen. The company I work for just went thru this process and commencing July we are moving to Fidelity. We were fortunate in that it did not take a lot of complaining to make the change happen, it was just a case of a new HR manager looking at our current carrier and realising how badly we were getting ripped off.

 

[Olav23]

I'm actually a bit nervous, since it is the CFO of our company, the head of HR, 2 other people, and ME, the peon software guy. But I'm also pretty excited since my decision will impact the entire company (hopefully for the better!) and with the people in attendance, good networking in a high visibility task.


But, still daunting nonetheless, when I micromanage buying a new gadget or book to the last nuance. How to deal with making or breaking people's retirements!

 

[runchman]

Seeing as how you are focusing on low cost funds, index funds, and a variety of asset classes, I don't think you should be nervous - you are attempting to get everyone in your company access to exactly what would be optimal for them, after all.

Congrats to you for having the b*lls to make a change happen.

Also remember that all these folks in your meeting fall on the intelligence bell curve just like we do, and they are probably just average dopes like the rest of us !

- John

 

[NinjaPigeon]

Funny you brought this up - we just made our first deferral this pay period. Your situation is slightly different, but I'll discuss some of the things we looked at. Keep in mind your company has 300 people. We had eight employees, zero dollars starting off, and needed safe harbor. Fidelity and Vanguard did not have programs for us.

I think there are two sides to picking your provider - looking out for the company and looking out for the employees.

In regards to the company, you wanna look at fees, many of which are actually incurred with the TPA and not the funds provider. Things like, how much it costs per employee, how much it costs for various IRS forms to be filled out, calculating if the plan is within the rules, etc. You also wanna look at how you interact with the provider. Do you send deferrals to them via ACH? Check? What kind of reporting tools do they have? Will they help you catch if an employee goes over their contribution limit?

Again, keep in mind these responsibilities are split between the provider, the TPA, and sometimes your payroll company. So it's a little different from one to the next. So figure out if your company is just changing the funds provider or if they are also interviewing for a new TPA as well. Most likely it's just the funds provider, so if one of the providers you interview offers a service already offered by your TPA for free, it's not as compelling as a service you currently don't receive.

As for the employees, you already know what you want out of funds. So look at other common concerns. What if an employee wants to invest in funds that aren't in the core basket? Fidelity offers BrokerageLink for this purpose. What if an employee wants a financial advisor to manage their 401k? What if your employees need general advice on anything from fund selection to how their 401k fits into their estate plans? Can the employee take loans against the plan? Is there a fee to roll out of the plan for employees who leave? What types of online tools are provided?

The questions really can go on and on. Especially if you start asking questions from an employer perspective. So, figure out if you are just looking out for the employees or if you're trying to look out for both. Above all, note all the features of the various providers and try to rank them on which provide the best features for the most employees in addition to having strong fund selections.

 

[CyclingInvestor]

I'm actually a bit nervous, since it is the CFO of our company, the head of HR, 2 other people, and ME, the peon software guy. But I'm also pretty excited since my decision will impact the entire company (hopefully for the better!) and with the people in attendance, good networking in a high visibility task.

I remember when I, a peon programmer to the end, had meetings like that, with the
CFO, HR, various managers and VPs. Just remember to talk slowly, don't use big
words, be ready to explain any complex topics in very simple terms, and try not to
be too condescending.

 

[REWahoo]

I remember when I, a peon programmer to the end, had meetings like that, with the
CFO, HR, various managers and VPs. Just remember to talk slowly, don't use big
words, be ready to explain any complex topics in very simple terms, and try not to
be too condescending.

And don't make any sudden moves.

 

[NinjaPigeon]

I remember when I, a peon programmer to the end, had meetings like that, with the
CFO, HR, various managers and VPs. Just remember to talk slowly, don't use big
words, be ready to explain any complex topics in very simple terms, and try not to
be too condescending.

Awesome

 

[Nords]

And don't make any sudden moves.

And wear somebody else's ID badge...

 

[cute fuzzy bunny]

Anyone want to guess how long before someone in the company complains that there arent any high expense, thrash actively managed funds with a really, really great 1 and 3 year record?

Managements easy. Cyclinginvestors tongue in cheek comments arent that far removed from the truth. Bottom line, big picture, not too heavy on the details, give them the 3 line summary and let them ask you for drill downs.

 

[Buckeye]

We just went through this at work and we will be starting with our new provider next month. What we found is that you need to drag the costs (fees, share class) out of them in order to compare apples to apples. They like to present it as "free." In addition, question them carefully about how they will interact with the employees. Given we have no pension plan, it's critical that our associates participate in the 401(k) plan and make appropriate choices (i.e. not put everything in fixed income if they are 25).

The company we went with has a very robust communications program. Initially, they will be sitting down with every one of our employees individually (and their spouse/partner if they desire) to review their situation and choices. There will then be continuing personalized communications to cajole them into increasing their contribution percentage each year and teach them about how to financially prepare for retirement starting NOW!

 

[Olav23]

I was reading a diehard thread that someone posted earlier, and one of the guys was bragging that he is in charge of selecting the funds for the plan. Basically, he goes to morningstar, and finds the past 5 years of historical returns. He then chooses these funds with the highest % return for the next year and does this again the each year. (as if 5 years is really a statistically significant datapoint for anything except being the worst returning fund for the next 5 years!)

I am a bit horrified that someone that doesn't even understand "performance chasing" can be in charge of your financial well-being...

 

[LOL!]

I remember when I, a peon programmer to the end, had meetings like that, with the
CFO, HR, various managers and VPs. Just remember to talk slowly, don't use big
words, be ready to explain any complex topics in very simple terms, and try not to
be too condescending.

I have been insulted, I think. I sit on the 401k committee with CFO, controller and HR folks, but I wrote a C++ program today, built it, tested it, wrote the documentation. I also am a VP. You don't have to talk slowly to any of our folks nor be condescending to them. It's their 401k plan, too.

 

[LOL!]

I was reading a diehard thread that someone posted earlier, and one of the guys was bragging that he is in charge of selecting the funds for the plan. Basically, he goes to morningstar, and finds the past 5 years of historical returns. He then chooses these funds with the highest % return for the next year and does this again the each year. (as if 5 years is really a statistically significant datapoint for anything except being the worst returning fund for the next 5 years!)

I am a bit horrified that someone that doesn't even understand "performance chasing" can be in charge of your financial well-being...

I read the M* thread differently. He wrote that he didn't change funds. He wrote that the funds that they had had for the last umpteen years were in the top 15% on a 5-year average.

 

[Olav23]

Well, my meeting is tomorrow. I finally got some more info on the providers that they have pared the choices down to. I am a bit upset as I don't see Vanguard or Fidelity on the list.

I'd love to hear anyone's thoughts if you have any previous experience on any of these:

Hartford
Prudential
Diversified
Merrill Lynch

We currently use Merrill (through Bisys) so I am not sure why they are presenting again. We already know they rape us with fees and give lousy expensive fund choices. Maybe competition has forced them to give us a second try

Here are more stats that they sent me:

Participants Eligible and contributing – 182
Participants Eligible and not contributing – 15
Terminated Participants with Balances – 18

Projected Plan Value at 12.31.2007
Current Plan Assets as of 06.11.2007 $8,311,218.93
Projected EE Contribs from 6.15.07 - 12.31.07 $1,359,559.76
Projected Safe Harbor Match from 6.15.07 - 12.31.07 $867,637.53
Projected Plan Assets as of 12.31.2007 $10,538,416.22

Critical Topics for Consideration
- Personal attention / dedicated service representative
- Proactive approach to employee communication and education (i.e., how they plan to use the meeting days they have offered)
- Overall proactive approach to client service; frequency of plan sponsor meetings
- Technical resources (client and employee websites which are userfriendly and intuitive)
- Roth 401(k) feature
- Open investment architecture to public of mutual funds; minimal or no restrictions regarding any proprietary funds
-Ability to redirect excess revenue sharing income back to plan services

 

[LOL!]

My spouse's 401k plan is with Hartford. The bad things about it:
1. They have about 50 funds in her plan with lots of similar funds. It's very confusing and intimidating.
2. Front-end loads are waived.
3. Fund expense ratios are between 1% and 2%.
4. The funds are wrapped in annuities which add an additional 1% fee. Apparently the additional fee can change from year to year. When they started the extra fee was 0.75% and it may go up past 1.25%.
5. The Hartford reps use their interaction with you to sell you Hartford products for your non-401k money and IRAs.

The good things about it:
1. ?

 

[igsoy]

Well, my meeting is tomorrow. I finally got some more info on the providers that they have pared the choices down to. I am a bit upset as I don't see Vanguard or Fidelity on the list.

I'd love to hear anyone's thoughts if you have any previous experience on any of these:

Hartford
Prudential
Diversified
Merrill Lynch

We currently use Merrill (through Bisys) so I am not sure why they are presenting again. We already know they rape us with fees and give lousy expensive fund choices. Maybe competition has forced them to give us a second try

Olav, it's possible that the reason your company went with Merrill Lynch in the first place was because a person of influence in your corp had a connection with the Merrill Lynch guy. Aren't these networking connections what make the corporate world go round? Maybe they have stacked the deck with other firms that look even worse than ML, so that in the end, ML looks like the reasonable choice...

 

[LOL!]

2. Front-end loads are waived.
...
The good things about it:
1. ?

Ooops, a good thing is that front-end loads are waived. That's not a bad thing.

 

[Olav23]

Olav, it's possible that the reason your company went with Merrill Lynch in the first place was because a person of influence in your corp had a connection with the Merrill Lynch guy. Aren't these networking connections what make the corporate world go round? Maybe they have stacked the deck with other firms that look even worse than ML, so that in the end, ML looks like the reasonable choice...

Damn! Now you've got me all paranoid!

 

[LOL!]

Yep, generally any new plan has to be significantly better than the current plan to make a switch. From the list you provided, I don't see that happening. I'm looking forward to reading about your meeting.

 

[LOL!]

Here's something to ask: Our 401k plan uses mutual funds not wrapped in annuities, so that we can keep track of our balances with Quicken of MSMoney because we can get a quote for the ticker symbols. We can thus figure out our own return on investment easily.

In contrast, my spouse's Hartford plan has annuity wrappers on all the funds. One cannot get ticker symbols and cannot get quotes. The Hartford quarterly reports are abysmal in order to hide all the fees. They show only how much money you have and not much when you contributed nor when you contributed. You can get this info through the web site with difficulty. But there is no easy way to track things with Quicken or MSMoney.

 

[cute fuzzy bunny]

Maybe they have stacked the deck with other firms that look even worse than ML, so that in the end, ML looks like the reasonable choice...

Ding Ding Ding!

Someone felt it was a good idea to go through "the process" just to make sure everyone feels like their complaints were heard and something was done about it.

Then stack the deck and call the incumbent back in for a diving catch save of the business.

Because those choices stink....