Author Topic: Letter to Human Resources Regarding 401k Choices  (Read 2044 times)

Haimons Mustache

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Letter to Human Resources Regarding 401k Choices
« on: January 29, 2016, 05:50:49 PM »
Since finding this community last year, so much has changed with regards to what I thought I knew about investing, spending, and life in general. I cannot thank MMM and you guys enough. Please don’t let my post count fool you; I am an avid reader of the forums, I just don’t post yet. I prefer to absorb the wisdom here for a while before opening my big trap and adding my 2 cents.

MMM and this community helped turn me from a small % 401k contributor to max, no other accounts to a fully funded tIRA (2015 and 16), a taxable account, and from a 5 figure savings account rotting in a bank to a few months safety net, letting those dollars work for me instead of wasting away.

The reason for this post is, the more I read and learn the more I look at my 401k choices and think “damn, these stink!” I composed an email to my HR director which I have copied below, valiantly (but briefly) trying to see what I could do to have some additional choices made available. We’ve recently moved from Mercer to Charles Schwab. Disclaimer: I am a noob so some of the verbiage will probably read rather rudimentary:

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I would like to inquire about having more fund choices available to employees now that we’ve moved to Schwab.
When it comes to expense ratio, our limited choices are what I consider very expensive. For example, the target date funds have an expense ratio of .75%. For an account with $100,000 this equates to a yearly expense of $750. I understand that this pays the fees for the fund manager, etc, but it is quite exorbitant compared to other choices Schwab offers. The most expensive choice in our lineup (ARTMX) sits at a whopping 1.2%, or $1200 per year cost to the employee per $100,000 of holdings.

There is one shining light in our choice lineup, and that is the Vanguard Institutional Index (VINIX) which is a “passive” fund and sits at a very appealing .04%, or $40 per $100,000 per year. The Vanguard Company has no stockholders or outside owners to answer to (read: make a profit for) so they can offer their funds at a much lower cost, which allows us to keep more of our money we elect to put into 401k.

Charles Schwab has many fund choices that resemble VINIX, and it would be great if employees had a more diversified choice. The following are some examples and their respective expenses:

SWPPX-- Schwab S&P 500 Index Fund. 0.09%
SWTSX-- Schwab Total Stock Market Index Fund 0.09%
SNXFX Schwab 1000 Index Fund. 0.29%
SWSSX Schwab Small-Cap Index Fund. 0.17%
SWISX Schwab International Index Fund 0.19%

There are many others offered by Schwab that could be included for the more knowledgeable employee that would prefer to manage their 401k fund choices and % allocations, rather than pay someone else to do it for them.
If you would like me to add more information to this, please just let me know.

My email was sent to our corporate Investment Advisor and the reply I received was:

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“Please let him know that the Investment Committee acknowledges and appreciates his input and we have added this topic to our next meeting agenda for discussion.   Every quarter, we are constantly reviewing our investment funds against benchmarks and discussing alternatives that would serve the best interests of all participants.  Our professional Investment Advisor was impressed with his observations and engagement in the process.  He called employee_001 a true “indexer” which is just fine.

I will follow-up with you after our next quarterly Investment Committee meeting scheduled in Feb. and let you know what was discussed.  At that time, I would be happy to schedule a conversation with employee_001 if he’s interested.”

Are there any words of advice on where to go from here to further the cause? I am posting this not only to get assistance in my plight, but to help others like me that would like to see their work place 401k’s fund lineup improved and more along mustachian lines.


Thank you in advance.

Haimon’s Mustache


MDM

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Re: Letter to Human Resources Regarding 401k Choices
« Reply #1 on: January 29, 2016, 07:52:12 PM »
Good work, and best wishes for success!

https://www.bogleheads.org/wiki/How_to_campaign_for_a_better_401%28k%29_plan might be of interest.

Haimons Mustache

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Re: Letter to Human Resources Regarding 401k Choices
« Reply #2 on: January 29, 2016, 08:04:20 PM »
Wonderful, thank you MDM.

Haimons Mustache

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Re: Letter to Human Resources Regarding 401k Choices
« Reply #3 on: February 21, 2017, 12:48:55 PM »
After over a year of being a pest to local and corporate HR in my somewhat mega-corp (we're in most U.S. states and Canada, and have over 20,000 employees) I received word recently that three more index fund options are being added to our 401k lineup starting in March. To make it even better, all three are Vanguard funds.

I wanted to follow up for anyone that may be interested in trying to do the same. It can be done! Just keep at it.

My original email was sent out in January of 2016 and is quoted above, along with the reply. A conference call was set up in March 2016 where we discussed several investing/retirement related topics such as the lack of index fund options offered, self-directed options and after tax contributions (the latter two a no-go). It was evident that no employee had brought up these questions before, which made me feel proud and sad at the same time. This forum, several of Bogle's books, MDM's link and other platforms armed me to the teeth.

The call was followed up with an email in April 2016 asking about the status of including index funds in our options. The email was not returned. In August 2016 I followed up yet again and this time was informed that the next Investment Committee meeting would be in September and this topic would be brought up, and at the very least discussed. In September the Investment Advisor agreed  to "research the market and bring their recommendations to the next committee meeting" scheduled in November.

In December 2016 I sent another email requesting the outcome of the November meeting. It was then that I was informed that three new Vanguard index funds would be added (Total Bond Market, Extended Market, and Total International Stock) to accompany our lone S&P 500 index fund.

I just wanted to share my excitement, and leave a success story where others could find it if they want to do the same. I was going to start a new topic in the Share Your Badassity but figured I'd just bump this.

Haimons Mustache

Heroes821

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Re: Letter to Human Resources Regarding 401k Choices
« Reply #4 on: February 21, 2017, 12:57:43 PM »
Congrats! That is inspiring that one person's persistence can change something like that in a big company.

Good job keeping up on them.

MDM

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Re: Letter to Human Resources Regarding 401k Choices
« Reply #5 on: February 21, 2017, 01:08:02 PM »
Well done - congratulations!

ysette9

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Re: Letter to Human Resources Regarding 401k Choices
« Reply #6 on: February 21, 2017, 01:12:04 PM »
Great work fighting the good fight! I love the Bogleheads resource link that someone included. I really wish I had stumbled upon that earlier when I was helping my sister craft a similar letter to fight her company's ridiculous 401(k) choices.

marty998

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Re: Letter to Human Resources Regarding 401k Choices
« Reply #7 on: February 21, 2017, 01:16:45 PM »
Stripping this back to basics, essentially this is your money, and you deserve the choice to manage it in a way that you see fit.

Your freedom should not be overridden by a vested interest whose goal is to profit from you.

Livingthedream55

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Re: Letter to Human Resources Regarding 401k Choices
« Reply #8 on: February 21, 2017, 01:18:12 PM »
Way to go! In addition to aligning your options with your own mustachian investment philosophy, you will leave a lasting legacy for others - this is huge!! Well done!!

Haimons Mustache

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Re: Letter to Human Resources Regarding 401k Choices
« Reply #9 on: February 21, 2017, 01:37:02 PM »
Thanks! I'm really, really excited this all worked out. When I try explain to fellow employees what this means, or express my excitement, I get varied looks of boredom and shrugs of indifference. It makes me want to scream.

I know you guys can relate.

Since this all started last year, I've talked with lots of close co-workers about their 401k's and this communities philosophy in general. The number one thing that I've heard from others is "I have no idea what funds I'm invested in, I just picked the ones that looked good X amount of years ago." I offer my "help" (in quotes because I always say I can't give investment advice, but I can tell you why I do what I do) and try to press upon them the importance, but unfortunately it all falls on deaf ears. :(