Author Topic: Questions for new, pitching 401k Adviser for our company?  (Read 401 times)

Steven37NJ

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Questions for new, pitching 401k Adviser for our company?
« on: June 26, 2019, 07:49:48 PM »
Our company's current 401k is bad, considering high expense fees (2.2%). Finally we have another adviser coming to pitch his services, 401k. I know about the fees and I know to push for ability to have index funds at low cost, but what else??? What questions should we be asking of a new 401k adviser?

Our meeting is tomorrow morning.

Thank you.

Goldy

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Re: Questions for new, pitching 401k Adviser for our company?
« Reply #1 on: June 26, 2019, 08:43:07 PM »
Maybe ask if in service distributions for mega backdroor roths are allowed

Steven37NJ

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Re: Questions for new, pitching 401k Adviser for our company?
« Reply #2 on: June 27, 2019, 07:00:34 AM »
Follow up question ... it would help me if I knew exactly what it costs companies like ours to offer 401k. What determines the cost that company pays for offering 401k?  thank you

Candace

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Re: Questions for new, pitching 401k Adviser for our company?
« Reply #3 on: June 27, 2019, 07:29:45 AM »
A Third-Party Administrator (TPA), which I assume is coming in to give your company the pitch, will charge for their services based on how many employees there are (among other things). For a company of only 3-5 people, I've heard of fees to the company as low as $1500, which frankly seems a bit low, up to $3600 or so, just for administrative costs. If the administrative cost to the company is of interest to you, then obviously you'll want to know what that is.

A Google search turns up the following from http://www.401khelpcenter.com/faq/faq_45.html#.XRTDUOhKhPY:

"A Third Party Administrator (or TPA) is an organization that is hired by the 401k plan sponsor (your employer usually) to run many day-to-day aspects of your retirement plans. These include, but are not limited to, amending and restating plan documents; preparing employer and employee benefit statements; assisting in processing all types of distributions from the plan; preparing loan paperwork for plan participant; testing the plan each year to gauge its compliance with all IRS non-discrimination requirements as well as plan and participant contribution limits; allocation of employer contributions and forfeitures; calculating participant vested percentages; and, preparing annual returns and reports required by IRS, DOL or other government agencies."

In addition to low-cost index funds in general, you'll want to make sure there is a good smattering of total stock market index funds, total stock market "ex-US" fund or funds, something(s) that tilts toward value rather than a straight growth focus, a decent bond fund or three, and maybe a small-cap index as well. That would be a nicely full-featured list of good funds. Also, it could be a good idea to have the target date retirement funds. Even though those have slightly higher fees, they're good for people who won't rebalance their portfolios by themselves. Which is a lot of people.

Good luck!

jinga nation

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Re: Questions for new, pitching 401k Adviser for our company?
« Reply #4 on: June 27, 2019, 08:00:40 AM »
FWIW, I did an analysis of the company's 401k with American Funds last year and compared to Vanguard, Employee Fiduciary, Guideline, Betterment for Biz.

American Funds gave us a "better proposal", and we got another advisor via the employer's bank provide 2 proposals.

We ended up switching to Guideline. In addition to lower costs funds (mostly Vanguard), they integrate fully with our payroll and HR platforms and allow employer to have control.

Hat tip to the MMM'er who told me about Guideline in 2018.