Work's 403(b) plan fees are too high - what to do?

[Megma]

I could use some advice on how to approach this situation. My company offers an employee 403(b) plan (similar to a 401k but more typical among nonprofits).

The company that manages it doesn't charge us an administrative fee (nor to the organization so far as I can determine) but has very high expense ratios for the funds - none are below 1% and many are above 2%. In one case, I'm paying over 2% for a health sciences fund with the company program and have the exact same fund for my personal IRA (t rowe price) and paying only .79%.

If my understanding of this is correct this means to own the same fund I pay 200+/year though the company plan and only 79/year per every 1,000. Over say the next 30 years (or 10 if my FIRE plans go well) this adds up to a lot of money.

I am thinking I am going to periodically do a partial rollover from my company account into my IRA so that I can get the employer match (10%, so quite good) but not have the higher fees. Any ideas on other ways to approach this?

As we are a small nonprofit, I am thinking to also approach the Executive Director about maybe switching our company plan to someplace else (he is pretty approachable, open to these ideas). Is it possible that it's somehow "cheaper" for my organization to use this company? Do company plan fees have higher admin costs as a general rule? Or is this company opportunistically screwing myself and my nice colleagues as I suspect?

[Cromacster]

In situations like these it is typically advised to pick the lowest expense funds you have available, and contribute enough to get your match.  The tax advantage is still going to outweigh the high expense funds if you contribute beyond your match, sometimes you just gotta suck it up.  See Should you avoid your company’s 401k?

Talking to your company can help.  though being a small company reduced their bargaining power with the providers.  One suggestions is investigate to see if you can invest it ETF's.  My 401(k) through fidelity allows me to invest in ETF's, which opens up a world of low expense options.  In my case, trade fee's vary on what you are trying to buy, some ETF trades are free.

I do question why you own the same fund in two locations, where one is more than double the expense.  Do you have an investment plan or asset allocation?  I would suggest starting with http://jlcollinsnh.com/stock-series/.

[Megma]

Asking why I own the same fund in two different accounts is a valid point, it performs well I guess would be my answer and I previously did not realize it cost so much more to have it in my company 401k (stupid, I know). I noticed today when checking up on my funds, I've only worked here a year and really did not consider it last year when I set it up or my previous few check ups, but thanks to MMM I'm wiser now and look at the fees!

So you don't think a periodic partial rollover to my IRA would be a good idea? The lowest cost investment option is still 1.2%. I would still get all of the match and tax benefits if I rolled over.

[Another Reader]

Very few plans offer in-service rollovers.  If your plan allows it, I would do that.

With fees this high, my guess is the provider is an insurance company.  Often 403(b)'s are really annuities.  Is that the case here?

[Cromacster]

Asking why I own the same fund in two different accounts is a valid point, it performs well I guess would be my answer and I previously did not realize it cost so much more to have it in my company 401k (stupid, I know). I noticed today when checking up on my funds, I've only worked here a year and really did not consider it last year when I set it up or my previous few check ups, but thanks to MMM I'm wiser now and look at the fees!

So you don't think a periodic partial rollover to my IRA would be a good idea? The lowest cost investment option is still 1.2%. I would still get all of the match and tax benefits if I rolled over.

I am unsure of how 403(a)'s vary from 401(k).  As Another Reader stated,  you cannot rollover these accounts while you are still employed.  You usually have to quit.  I have not heard of in-service roll overs.

[Megma]

The 403(b) we have functions exactly the same as past 401(k)s I've had. There is a range of investment choices mostly mutual funds but also money markets and bonds.

I realized I had a mistake in my math from yesterday I'm paying 20/year vs 7.9/year for the same fund per 1,000, which is still a lot, especially when considered over time.

I will check if I can do an in-service rollover and speak to our Director, since we are a small group maybe we don't have any more buying power than this, thank you Cromacster for your feedback!

[thd7t]

Do you ever have meetings to discuss the 403b?  I've only had 401k's, but we usually meet annually about them, at least.  At my current job, the lowest options were 1.5% for not very good options, so I asked for an index fund.  We had to get rid of a different fund, but no one was in it.  Try asking!