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401k Question
Old 01-06-2007, 05:49 PM   #1
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401k Question

Hi all,

Through a company buy-out, I recently found myself working for a new company that has a different 401k plan. As I've started to pay attention to the pricing and performance of the funds I selected to funnel money into, I've noticed that the share price of each of the publicly available funds (those with ticker symbols) that are offered through the 401k have different prices from those listed on the 401k plan's website. For example, one of the funds that I have the choice of investing in is the Oppenheimer Global Fund (OPPAX). This fund's share price as obtained through yahoo currently is listed as $73.22, whereas the 401k plan's website lists the fund price as $81.89... That's a huge difference in price!

I called the company that provides the 401k plan and asked why there was such a discrepancy in the prices that they list versus the actual fund's price, and I got this wierd half-answer that I'm not actually invested in the real Oppenheimer fund, but instead a fund offered by the company that provides the 401k that manages somehow to track the performance of the Oppenheimer fund. This alone doesn't make too much sense to me.

What I really have a problem with is the fact that the company misrepresents this fund as being *the* Oppenheimer fund. No where in any documentation that I've been able to find does it explain that it isn't the fund. My question to you all is whether this is actually legal? It seems to be some huge SEC violation or something. I'm not a lawyer nor an investment guru, so I'd like some input from you all as to what I should be doing about this.

Thanks
-JBS6
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Re: 401k Question
Old 01-06-2007, 06:15 PM   #2
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Re: 401k Question

I would be looking at the Summary Plan Description (SPD) for verbiage. That seems highly suspect to me as well. I worked for a mega-corp who had inhouse administered "FUNDS" but they never said Oppenheimer, Vanguard, Fidelity etc... Education is key and that comes from the 401K and funds SPD. If you smell a rat... you may chose or not to participate or refer to an appropriate regulatory agency. Get all the documentation possible first.
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Re: 401k Question
Old 01-06-2007, 06:29 PM   #3
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Re: 401k Question

Most likely what your 401(k) plan has is a group annuity contract.

Is the provider of your plan possibly an insurance company? (nationwide, Principal, John Hancock, etc?)

If so, they can't invest directly in the funds. Instead they invest in similar pools of investments with the same managers. You will almost certainly pay higher expenses. On top of that there is going to be a wrap fee to pay the broker and the insurance company.

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Re: 401k Question
Old 01-06-2007, 06:50 PM   #4
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Re: 401k Question

The company who offers the 401k plan is prudential investments... AFAIK, they would not be considered to be an insurance company

-JBS6
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Re: 401k Question
Old 01-06-2007, 06:58 PM   #5
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Re: 401k Question

Prudential insurance is offered through prudential life which is a child company of aegon (that part I'm not sure about but it would make sense) and aegon is a humongous insurance company that also owns the company that I work for, and we also offer insurance, annuities, investments etc. It is quite possible that the scenario that the previous posters have offered is indeed true, and you should look further into the fact that you are not actually buying shares of what you think you are buying. Good luck in your search!
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Re: 401k Question
Old 01-07-2007, 09:33 AM   #6
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Re: 401k Question

Quote:
Originally Posted by jbs6
The company who offers the 401k plan is prudential investments... AFAIK, they would not be considered to be an insurance company

-JBS6
No, they're only the largest life insurance company in the US

I just looked at their plan offerings, and most of them are group annuities.

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Re: 401k Question
Old 01-07-2007, 02:46 PM   #7
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Re: 401k Question

This does sound suspect. At first I thought maybe the funds were monetized so that a percentage of your investment is in cash or some other highly liquid asset which would offset the difference in NAV. This occurs in company stock funds, for example, but I've never heard of it in a mutual fund.

I agree with Connie re the SPD, and I would also compare the %change in NAV of the fund in your 401k to the %change in NAV of the publicly traded fund.........if the %change is identical, I would be less concerned. Beyond that, see if in-service rollovers are permitted and roll the funds over to a mutual fund company of your choice whenever permissible.
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Re: 401k Question
Old 01-07-2007, 03:51 PM   #8
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Re: 401k Question

Hey JBS,

Welcome Here

Quote:
I got this wierd half-answer that I'm not actually invested in the real Oppenheimer fund
You are indeed wise to be alerted to any response that does not meet your "truth test". I hope that you got the name of the rep that gave you this nebulous info. It may prove to be beneficial in the long run. There is only one Oppenheimer Global Fund (OPPAX) ,so I wonder what they referred to?

Oppenheimer funds is a slave owned by Mass Mutual Life Insurance company. Curious, no?


Quote:
currently is listed as $73.22, whereas the 401k plan's website lists the fund price as $81.89... That's a huge difference in price!
Again, you are wise to challenge this mega-difference. Please evaluate their response (if you get one) to your inquiry and let us know if it passes your smell test.

I think that you are on to something JBS6>
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Re: 401k Question
Old 01-07-2007, 07:44 PM   #9
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Re: 401k Question

My spouse's 401(k) is run by Hartford. They give you a list of funds you can invest in. They all have a variable annuity wrapper around them, so the NAV of the fund outside the wrapper has little to do with the share price inside the wrapper. So jbs6 that's another weird half answer.

Here's another way to put it. Suppose I'm your 401(k) plan. I sell you OPPAX, but for 1.5% more than you could buy it if you could invest your 401(k) money outside of your plan. I pocket the 1.5% difference to help pay expenses of giving weird half-answers over the phone and also just incidently to make me rich. It IS the OPPAX fund, so my literature to you is legit. I have also told you in my plan material about the extra 1.5% that I am charging you, but I carefully hid it in fine print either at the beginning or at the end of the booklet.

Full disclosure: I own OPPAX in my 401(k) plan.
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