401k Expenses

[devo]

I can't locate the exact spot, but Brewer mentioned something about Insurance companies running 401k programs as opposed to fund companies or brokerages. It got me thinking more about how our plan is managed and how good/bad it is when it comes to expenses. I guess I can accept that there must be some cost to running a plan. ERs may have to be slightly more than for the underlying funds.


I have several questions for you:

1) Who is your plan provider?

2) What are you paying in Expenses for your S&P500 index (just so we're comparing same/same) within your 401k?

3) In your opinion, what is a reasonable ER for an index within a plan?

4) Has anyone had any luck getting an employer to switch providers? How would you go about that? I'd guess you'd have to mobilize a sizeable fraction of your coworkers.



Disclosure:
1) Securian Don't know much about this business. Certainly don't know much about this company. Appears to be held/run/part of Minnesota Life...whoever that is.

2) 0.90% - Advantus S&P500 Index - and that's the cheapest of any fund by a long shot!

3) No idea...that's why I'm askin'

4) Haven't yet tried. Like to hear your story though.

Thanks,

devo

[yakers]

1) Federal Thrift Savings Plan

2) .005, yes .5 percent

3) As little as possible, see Vanguard and Fidelity

4) No change in providers

More about TSP:
http://tinyurl.com/sguux


The TSP is for Federal employees and the armed services but was a proposed model for general use to enhance social security. I don't see why it could not be available to everyone. It would not hurt current participants and is "safe" enough for general use.

[Linney]

) Who is your plan provider?
Fidelity

2) What are you paying in Expenses for your S&P500 index (just so we're comparing same/same) within your 401k?
0.04% for our S&P500 "Large Cap Stock Index Fund". I'm reasonably sure it is VIIIX / VINIX under the covers since it has the same Vanguard management team.

3) In your opinion, what is a reasonable ER for an index within a plan?
0.04% Schwab's S&P500 Index has an expense ratio of 0.37% -- I can't imagine paying more than that.

4) Has anyone had any luck getting an employer to switch providers?
We have several index funds, Pimco bond funds, and Dodge & Cox International. I don't want to switch.

[FinanceDude]

Provider: ING.............. :P

Fund Choices: Artisan, Oppenheimer, Janus

ER: HIGH........I mean .75 - 1.25, plus the dreaded "wrap fee"

No match............. :P

And I'm an FA...............

We are fighting hard to change the plan.............so far, no luck......

I think almost every American would LOVE to be in the TSP. As I recall, Bush said he would like "Every American to have as good a retirement plan (TSP) as he has..........fat chance that happened............... :P :P

[jazz4cash]

1) Who is your plan provider?
..........Fidelity, with combination of Fido, Other No-Load, and legacy funds
2) What are you paying in Expenses for your S&P500 index (just so we're comparing same/same) within your 401k?
.............approx .12 (our legacy S&P "clone" Fund beats Vanguard by approx .04)
3) In your opinion, what is a reasonable ER for an index within a plan?
..............not more than .25 (50% more than Vanguard)4) Has anyone had any luck getting an employer to switch providers? How would you go about that? I'd guess you'd have to mobilize a sizeable fraction of your coworkers.
...............Overall, we have an outstanding plan, so no need to request changes

[justin]

1) Who is your plan provider?

Fidelity (for me and DW)

2) What are you paying in Expenses for your S&P500 index (just so we're comparing same/same) within your 401k?
0.1 for spartan total mkt index. .05 for Vanguard value index institutional. Limited selection in my 401k and DW's 401k

3) In your opinion, what is a reasonable ER for an index within a plan?
0.5 max.


4) Has anyone had any luck getting an employer to switch providers? How would you go about that? I'd guess you'd have to mobilize a sizeable fraction of your coworkers.
Haven't tried - pretty happy w/ what we have. I keep trying to get HR to expand the offering of index funds from two to some quantity greater than two but "that is impossible" :

Overall, we are very happy. My small company (<40 employees) has a pretty good plan w/ low costs, $20 in fees each year, and 2 slightly redundant domestic stock index options. 6% match immediately vested. The only thing I'd like is a nice bond index fund and an international index fund.

[FinanceDude]

Quote:

Originally Posted by justin Overall, we are very happy. My small company (<40 employees) has a pretty good plan w/ low costs, $20 in fees each year, and 2 slightly redundant domestic stock index options. 6% match immediately vested. The only thing I'd like is a nice bond index fund and an international index fund.

They can add funds with very little effort. I would think a bond fund and an international would be no-brainers............

[justin]

Quote:

Originally Posted by FinanceDude They can add funds with very little effort. I would think a bond fund and an international would be no-brainers............

I know. Our 401k person just doesn't care because it isn't important to her. The line I was told was that fidelity gives us a slate of funds and we don't get to choose. They occasionally change (the underperformers are removed and the hot-funds-of-last-year is added : ). I'm hoping this is the year the spartan int'l index is "hot" enough to add to our fund selection.

Right now I just use DW's 401k and other accounts for all international exposure. Complicates the allocations and forces me to be underweight international versus my target allocations.

[ats5g]

I have several questions for you:

1) Who is your plan provider?

Vanguard

2) What are you paying in Expenses for your S&P500 index (just so we're comparing same/same) within your 401k?

VFINX [0.18%]

3) In your opinion, what is a reasonable ER for an index within a plan?

since a good 401(k) plans should be able to pool assets and get institutional funds, anything lower than VFINX, or the appropriate retail investor index fund.

4) Has anyone had any luck getting an employer to switch providers? How would you go about that? I'd guess you'd have to mobilize a sizeable fraction of your coworkers.

No.

[ats5g]

Justin,

Are you saying you don't have a bond fund at all?

- Alec

[spideyrdpd]

my 401k is with fidelity and my new 403b is with fidelity

I think the issues is with 403b's cause there are less federal regulations

MY new company actually has 4 choices
ing/metlife/valic and fidelity
Thanks to Brewer I have pushed recommended to most people to stick with fidelity. Which seems to be the best choice based on what I see. Rob

[gindie]

I have several questions for you:

1) Who is your plan provider?
Vanguard

2) What are you paying in Expenses for your S&P500 index (just so we're comparing same/same) within your 401k?
0.18 (VFINX)

3) In your opinion, what is a reasonable ER for an index within a plan?
0.18

4) Has anyone had any luck getting an employer to switch providers? How would you go about that? I'd guess you'd have to mobilize a sizeable fraction of your coworkers.
Extremely pleased with our selections. We have 17 funds (VG and non-VG, index and actively managed) and only 2 of them have ER's over 1.0 (one of which is an Emerging Markets fund, the other is T. Rowe Price Mid-Cap Growth).

[justin]

Quote:

Originally Posted by ats5g Justin, Are you saying you don't have a bond fund at all? - Alec

No, there are some fidelity actively managed bond funds available in my 401k, but they all come with ERs of 0.45%, steep ER's as compared to vanguard's ~0.2% ER on their bond funds. I don't really care if it's active or passive mgmt, I just don't feel like giving up an extra 0.25% return. DW's 401k has a single Vanguard long term treasury bond or something - that's probably where the bond allocation will go (when I switch from my current 100% equities allocation).

[devo]

It appears that clearly, I'm being fleeced...

Anyone out there who runs/chooses these plans for your company? I'm wondering what objections I'll come by from the company about why they can't switch. How do I state my case? What's in it for them to go through the effort.

thanks,
devo


edit: Also, what does it cost a company to have Fido or Vanguard run their plan? Should I assume that the company is getting some sort of "kickback" from Minnesota Life?

[jazz4cash]

I think you should assume that your 401k admin is not working in the best interest of the employees in some way,,,,,,,may not be a kickback.

One thing discussed occaisionally around here is option to do rollover from 401k to IRA at any age with no penalty. This option is at the employers descretion........just depends on how the 401k plan is drawn up. Dig into your summary plan description to see if you have that option. If not, I think it could be easier to get your admin to make this "minor" change rather than a major change such as replacing the whole plan. In this way you could do a rollover and select better funds in an IRA with a provider of your choosing.

[justin]

Quote:

Originally Posted by devo Anyone out there who runs/chooses these plans for your company? I'm wondering what objections I'll come by from the company about why they can't switch. How do I state my case? What's in it for them to go through the effort. edit: Also, what does it cost a company to have Fido or Vanguard run their plan? Should I assume that the company is getting some sort of "kickback" from Minnesota Life?

I don't know how big your company is, but I think the bigger the better in terms of cost. Our HR person told me it costs them around $1000 to change something in the plan documents - I don't know if we have a seperate plan administrator besides fidelity that charges this, or if fidelity charges this fee.

I think with fidelity or vanguard, your employer has to pay a fee to have fido or VG administer their 401k plan. I'm sure plenty of companies offer 401k's for no fee to the employer, figuring they can make much more money off of high fees and high expense ratios for plan participants.

Your employer may desire to keep the cost of benefits to a minimum by going with a high-participant cost (but free to the company) 401k plan.

You could probably call fidelity and vanguard and get them to tell you what it would cost your company to get the 401k through fido or VG. Make sure to talk to the retirement plan people for small businesses. Tell fido or VG that you are going to attempt to "sell" your HR people on the superiority of the fido or vg plan.

I know our hr people like fidelity's 401k because everything pretty much is transacted online, and employees make plan decisions and changes themselves online.

[saluki9]

Quote:

Originally Posted by devo It appears that clearly, I'm being fleeced... Anyone out there who runs/chooses these plans for your company? I'm wondering what objections I'll come by from the company about why they can't switch. How do I state my case? What's in it for them to go through the effort. thanks, devo edit: Also, what does it cost a company to have Fido or Vanguard run their plan? Should I assume that the company is getting some sort of "kickback" from Minnesota Life?

It is going to be a hard sell. Moving a 401k plan to a new provider is going to ensure weeks if not months of headaches for your HR dept. They should, but never do go as planned.

Also, the chances your employer is getting kickbacks is very low. They probably are getting a lot if not all of the plan expenses covered by the plan assets though.

[Outtahere]

Quote:

Originally Posted by saluki9 It is going to be a hard sell. Moving a 401k plan to a new provider is going to ensure weeks if not months of headaches for your HR dept. They should, but never do go as planned. Also, the chances your employer is getting kickbacks is very low. They probably are getting a lot if not all of the plan expenses covered by the plan assets though.

Weeks of headaches is right, I just went through this last year. Thankfully I had a good relationship with the person I had to deal with at the company we were leaving. I hope I'm not there when we decide to change companies again. It's a lot easier to add funds than it is to change companies.

[Bultacoman]

Hello,

I signed up for the forum just to answer this query.

Current Plan provider: Mass Mutual (was Fido)

Current S&P cost: 0.7%

Reasonable cost: 0.25%-after all it's an index

Changed providers: Yes. Talked with the CFO about how bad the MFS accounts were. Had several other people talk with him with all delivering the same message. We then began to search for better alternatives. Total company size about 100 people with about $3 million in assests. Vanguard would not deal directly with us due to the size of the 401k but would deal through a broker. Fidelity would deal direct and we went with them. We were just bought out by a larger company and were forcibly switched to a much worst 401k. We are now trying to start the process with the new management. The key thing for our new management will be to decrease their costs not to improve the lot of the plan participants.

BTW. My daughter just took a job (private) that has the best 401k I've seen. The average cost is 0.15% or less for all funds except foreign. I've already talked to the lower level accountants about it and will talk to the old CFO on Monday.

Bultacoman

[devo]

Bultacoman,
Thanks for jumping in!
Very helpful...any idea what the cost to the company was?

devo