Author Topic: 401k plan (John Hancock) adds 1% annual fee to Vanguard index funds  (Read 1010 times)

OldandGrumpy

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After a long discussion of 401k plan investment options we instructed our plan designated broker to add a few Vanguard Index funds to our plan offering.

A week later, our broker presented a new lineup of plan investment options

The Vanguard Index funds were offered at an expense ratio of 1.1%

I asked why the fee was at 1.1% when the underlying fund cost was .1%? - the response was "that is the shared cost to operate the fund"

At this point I would be better off to roll over my 401k money out of my employer plan into an IRA / Vanguard Targeted fund.

Thoughts on this?   

Psychstache

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Re: 401k plan (John Hancock) adds 1% annual fee to Vanguard index funds
« Reply #1 on: September 26, 2018, 07:57:44 AM »
After a long discussion of 401k plan investment options we instructed our plan designated broker to add a few Vanguard Index funds to our plan offering.

A week later, our broker presented a new lineup of plan investment options

The Vanguard Index funds were offered at an expense ratio of 1.1%

I asked why the fee was at 1.1% when the underlying fund cost was .1%? - the response was "that is the shared cost to operate the fund"

At this point I would be better off to roll over my 401k money out of my employer plan into an IRA / Vanguard Targeted fund.

Thoughts on this?   

I don't think you can do this if you are still employed by the company sponsoring the 401k.

If you have the leverage at your company to get plan changes happening, why not lobby to have the vendor changed to Vanguard.

reeshau

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Re: 401k plan (John Hancock) adds 1% annual fee to Vanguard index funds
« Reply #2 on: September 26, 2018, 08:10:27 AM »
After a long discussion of 401k plan investment options we instructed our plan designated broker to add a few Vanguard Index funds to our plan offering.

A week later, our broker presented a new lineup of plan investment options

The Vanguard Index funds were offered at an expense ratio of 1.1%

I asked why the fee was at 1.1% when the underlying fund cost was .1%? - the response was "that is the shared cost to operate the fund"

At this point I would be better off to roll over my 401k money out of my employer plan into an IRA / Vanguard Targeted fund.

Thoughts on this?   

I don't think you can do this if you are still employed by the company sponsoring the 401k.

If you have the leverage at your company to get plan changes happening, why not lobby to have the vendor changed to Vanguard.

Actually, it would be easier to do if you aren't employed there anymore.  If you are still employed, you need to check if the plan allows in-service rollovers.  There are commonly age limits as well as limits on the percentage you can withdraw.

There's no doubt that cost is very high.  How many people are there in this plan?  My employer, a very large company, is with Fidelity and the plan administration fee is .11%.  Our prior HSA provider (now also Fidelity) charged .5% per year.  But in the end, even a 1% drag can be worth a very generous company contribution / match.  You should at least keep that.

OldandGrumpy

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Re: 401k plan (John Hancock) adds 1% annual fee to Vanguard index funds
« Reply #3 on: September 26, 2018, 08:23:45 AM »
I am over 59.5 years old - the plan allows withdrawals without termination.

So I am able to withdraw my 401k funds

John Hancock has done a great job overall, so we don't want to change carriers. - but the added cost without added benefit just irritates me.

We have over 200 people in the plan.

reeshau

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Re: 401k plan (John Hancock) adds 1% annual fee to Vanguard index funds
« Reply #4 on: September 26, 2018, 09:24:21 AM »
Well, then, why wouldn't you?  Assuming you have a good 'stache in there, there is 1% at stake (or .25% per quarter) being wasted not moving to Vanguard.

Honestly, I am itching to do so just for my .11%.  The only thing holding me back, besides age (Not old enough--I would have to withdraw--all or nothing) is wanting to do back door Roths with no tax while I am working.

tj

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Re: 401k plan (John Hancock) adds 1% annual fee to Vanguard index funds
« Reply #5 on: October 01, 2018, 08:01:32 PM »
That's pretty normal. Nationwide charged us 75 bps wrap unless they received a 12b1 kickback.

Retirement plans are way more regulated than IRA's, taht's why they cost more.

Vanguard isn't going to touch a plan so small.

Gronnie

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Re: 401k plan (John Hancock) adds 1% annual fee to Vanguard index funds
« Reply #6 on: October 01, 2018, 09:48:17 PM »
I'd start mumbling something about fiduciary responsibility and see if that gets them to change their tune.

HeartlandBrad

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Re: 401k plan (John Hancock) adds 1% annual fee to Vanguard index funds
« Reply #7 on: October 06, 2018, 04:25:11 AM »
I am over 59.5 years old - the plan allows withdrawals without termination.

So I am able to withdraw my 401k funds

John Hancock has done a great job overall, so we don't want to change carriers. - but the added cost without added benefit just irritates me.

We have over 200 people in the plan.

This is a perfect example of how the financial industry is designed to transfer wealth from investors to itself.  Over a period of 30 years 1% annual fees reduce portfolios by 20% compared to a portfolio with a 0.25% annual fee.  Yes, that's right.  The long term plan is to take 20% of your wealth for no benfit to you.  That irritates me too.  So much in fact that I'd actually take action to move my money to a much lower fee account.

DaMa

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Re: 401k plan (John Hancock) adds 1% annual fee to Vanguard index funds
« Reply #8 on: October 06, 2018, 05:17:20 AM »
My last employer had a plan that added 1.5%.  The two Vanguard funds available were not the best ones, either.  You are lucky you can take it out while still employed.  I didn't have that option.

chasesfish

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Re: 401k plan (John Hancock) adds 1% annual fee to Vanguard index funds
« Reply #9 on: October 06, 2018, 06:29:17 AM »
I would send a letter to ERISA Enforcement at the Department of Labor requesting to file a complaint against your 401k provider

https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/enforcement/erisa

Steeze

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Re: 401k plan (John Hancock) adds 1% annual fee to Vanguard index funds
« Reply #10 on: October 06, 2018, 07:42:46 AM »
My 401k is similar. Basic US Stock index fund has an ER around 1.75%. Target date funds are over 2%. Active managed funds are in the 2.5% range.

I still max my 401k and drop everything into the US index since it is the lowest ER. Pretty aweful, but the tax savings still make it worthwhile.

MustacheAndaHalf

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Re: 401k plan (John Hancock) adds 1% annual fee to Vanguard index funds
« Reply #11 on: October 06, 2018, 11:35:34 AM »
Vanguard isn't going to touch a plan so small.

Actually you might be surprised by how small a plan Vanguard will support.

"For one-participant plans, annual filing of Form 5500 is required once the plan's assets reach $250,000 or you terminate the plan. We'll provide you with information each year to help you complete the form."
https://investor.vanguard.com/small-business-retirement-plans/individual-solo-401k

tj

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Re: 401k plan (John Hancock) adds 1% annual fee to Vanguard index funds
« Reply #12 on: October 10, 2018, 01:09:06 PM »
Vanguard isn't going to touch a plan so small.

Actually you might be surprised by how small a plan Vanguard will support.

"For one-participant plans, annual filing of Form 5500 is required once the plan's assets reach $250,000 or you terminate the plan. We'll provide you with information each year to help you complete the form."
https://investor.vanguard.com/small-business-retirement-plans/individual-solo-401k


Yeah...no.

That's an individual 401(k).

That's completely different.


Actual company 401(k)'s, they won't touch. They refer you to Ascensus.