More fees

[jazz4cash]

It’s imperative to read your plan prospectus or at least SPD to know what your options are, esp wrt rollovers.

Megacorp maintained some pretty employee-friendly policies and were pretty good about holding costs down. Their sheer size gave them good leverage with Fidelity. They even transitioned out of all mutual funds into a category of “commingled pools” which were identical but slightly less expensive to manage. When Mega spun off my division we maintained Fido but fund choices and plan policies were slightly less employee friendly. I read the SPD so I knew I should keep the old 401k. The new plan was charging me fees for admin and withdrawals so I dumped it when I retired but still have the Mega 401k.

 

[Texas Proud]

You might raise it forthrightly but politely with the management. The decision was likely taken by some HR or finance drone that doesn't even understand investing returns. They were given a financial target to hit and they did it.

But I wouldn't say to them its going to cost you thousands of dollars. No one is going to work hard to fix an issue for a guy with $1m in a 401-k.

Better to explain to them the aggregate hit to everyone.

For example, show them that if the 401k participants are averaging a 6% return and there is 3% inflation, then they really just took .25%/3% = 8.5% of the year gain they employees make on the investments.

You're unlikely to change the decision though.

Except that accounting drone was tasked with reducing the cost of a 401(k) plan to the company and this is an easy fix...


Do not think that the decision by the company was an afterthought...

 

[Ncc1701]

I would remind management that they have a legal, fiduciary responsibility to ensure that costs are reasonable. Remind them of the DOL regulations:

The primary responsibility of fiduciaries is to run the plan solely in the interest of participants and beneficiaries and for the exclusive purpose of providing benefits and paying plan expenses. Fiduciaries must act prudently and must diversify the plan's investments in order to minimize the risk of large losses. In addition, they must follow the terms of plan documents to the extent that the plan terms are consistent with ERISA. They also must avoid conflicts of interest. In other words, they may not engage in transactions on behalf of the plan that benefit parties related to the plan, such as other fiduciaries, services providers or the plan sponsor.

Fiduciaries who do not follow these principles of conduct may be personally liable to restore any losses to the plan, or to restore any profits made through improper use of plan assets. Courts may take whatever action is appropriate against fiduciaries who breach their duties under ERISA including their removal.

https://www.dol.gov/general/topic/retirement/fiduciaryresp

 

[ncbill]

Years after I left my last corporate job I got what I thought was quite a hefty check in relation to what my 401k balance had been with the company.

It was part of a settlement for a class-action lawsuit over excess 401k fees.

And that company (a large, regional bank) managed its own retirement plans!

 

[KT1R]

Truist Policy SUCKS

My Truist bank charged me a few dollars to cash a small container of coins. This was during the famous "coin shortage". I am not happy with this policy. To put this into perspective, the bank charged me more to cash $200 in change then they paid me interest on over $400k in cash in their bank last year.

 

[JJpop]

This probably falls in the category of just a rant but I am really ticked off!

I've posted in another thread that I am just over 2 years from my retirement date but could retire any time if management does something stupid.

Well, today it was announced that our 401k will have a new fee. A fee of 0.25% is being added on top of any fund fees. This is not a load, this fee is applied to our full balance. So I have a very large holding in Vanguard Wellsley Admiral shares that I pay about 0.15% for. Vanguard does the hard work and now plan administrator decides to take 67% more than Vanguard. We get Vanguard total stock market for about 0.05% so the new fee means we will pay 6 times as much for it!

This is on our full accumulated balance with no recourse! I am beyond livid. This will cost me thousands of dollars per year until retirement when I can get the money out.

I am considering 3 options:
- retiring immediately before the new rules go into effect
- making a BIG stink about this to encourage a movement among other employees. I could very well get fired but that's jus option 1 and could be fun
- sucking it up and sticking with my plan. My salary over the next couple of years more than covers the fees but there is a principle at stake here.

Meeting late next week where the stink could begin so my decision timeline is short.

Open to comments but not really seeking advice here, just a rant!

Are you livid when you add up all the money your company contributed to your 401k over the years and how much you made off of it?
Be grateful instead of angry. I never had any benefits in my entire work life. None.

 

[Koolau]

Years after I left my last corporate job I got what I thought was quite a hefty check in relation to what my 401k balance had been with the company.

It was part of a settlement for a class-action lawsuit over excess 401k fees.

And that company (a large, regional bank) managed its own retirement plans!

That must have been a rather sweet surprise. I recall when banks began treating people as "profit centers" rather than as customers (and the source of much of their capital.)

I still recall when DW's small business kept $20K to $30K in the checking account (lots of cash and checks in each day - lots of EOM bills to pay). The regional bank (that had started years earlier as a home-town bank) wanted to charge DW $3 per night-deposit use. She went as high as she could in the bank organization to protest with no results. So she withdrew her entire account and went to the last "home town" bank in the city. They were happy to provide the night-deposit for free. 6 months later, a bank exec. from the regional called to ask why DW had suddenly closed her account. Fortunately for the excec. DW is neither foul-mouthed nor particularly vindictive. She simply relayed that she thought loyalty should go both ways. After almost 50 years with their bank, she thought they should be more flexible to good customers who make them a lot of money.

I tell this dreary story to suggest we should not be surprised when even our OWN companies take advantage of employees (in this case, overcharging for 401(k) services and treating employees as "profit centers.") YMMV

 

[SecondAttempt]

An update...

Meeting was held to explain the new fees. The situation is not as bad as it originally appeared.

What they have done is swapped out funds that had relatively large fees and "revenue share" that went to the administrator for lower cost funds and added a separate fee that is directly charged to each member of the plan. They have taken every fund, mapped it to a new fund with similar objectives and performance, and tried to arrive at an overall lower price.

For example,

Mickey Mouse Global Cartoon Equity Fund (1.25%) --> Donald Duck International Animation Stock Fund (0.68% + 0.25% = 0.93%)

The idea is that the administrator still makes their money (0.25%) and we pay less in general (1.25% --> 0.93%). Overall the average of all funds, notably NOT weighted by how much employees actually invested, went from about 1% to about 0.7%. Of about 50 funds only about half a dozen have higher fees after the change.

In my case though Vanguard Wellesley Admiral shares is one of them and will be about 5 times more expensive since they are available extremely cheaply.

They noted that they no longer get any revenue share from any fund so they have no financial incentive to recommend any fund over another when advising us, which is available but I have never used.

I am less angry/annoyed about the change but still need to evaluate what I do personally. It might be better to adjust across several accounts to get low cost funds at work and get my Wellesley fix in other accounts.

I recognize this was a sales pitch by seasoned salesmen but I will give them some credit. We have fixed annuities available. There were some questions from employees about those. They generally poo-poo-ed the annuiies because of the surrender periods saying the main attraction is lifetime income and you can roll into them at retirement if you choose. They said if you want to be ultra conservative until then there are better options in teh avaialable funds.

They also said that this is an industry trend toward transparency. By showing fees as a direct charge on quaterly statements it is more transparent.

They said my employer shifted the administrative fees to entirely employee paid many years ago. They claim the total amount they receive is a little higher this year but a lower percentage of total assets.

The presentation was mostly devoid of numbers except a list of individual fund fees. But we get a report every year stating the total plan details like amount invested and total administrative fees.

Thanks to everyone who pointed out that I have it relatively good and should be thankful and also talking sense that I should not overreact.

 

[Luvtoride]

Glad you took the time to “Aim” before shooting. Makes sense.