Author Topic: Switching 401k providers. Employee Fiduciary.......anyone???  (Read 2938 times)

MontaniTrout

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Switching 401k providers. Employee Fiduciary.......anyone???
« on: August 06, 2015, 12:57:15 PM »
First off, thanks to this insightful website/forum I've learned countless information regarding retirement and savings. Here's my situation:
Over the last 7 years of employment, all with the same company, I've contributed about 8% of my pay to my company's 401k without giving it much thought. The company has no 401k match. All of the funds that are offered have anywhere from 1.88% - 2.62% expense ratio. As of now I have $45,000 invested in the company's 401k. I realize now that my company's 401k is pretty bad and I wish I would have been aware of this sooner.
I really like the company I work for and don't plan on leaving them. I want to know what are my options for the money in my 401k? Can I move it somewhere else or am I bound by the ball and chain since I'm staying with this company?

Thanks in advance,
« Last Edit: August 27, 2015, 08:43:38 AM by MontaniTrout »

Mrs. Pomodoro

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This has been covered in great details here: http://jlcollinsnh.com/2013/06/28/stocks-part-viii-b-should-you-avoid-your-companys-401k/

Make sure you read the addendums at the end. The gist is you're mostly likely to come out ahead contributing to the max.

NorCal

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Actually, as a first step, I recommend talking to someone at your company that's on the 401k committee.  See if you can get them to look into a better plan.  They probably haven't paid attention to the plan fees in the last decade either.

It it's a small company, they may not have much better options, but you never know unless you ask.

forummm

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Actually, as a first step, I recommend talking to someone at your company that's on the 401k committee.  See if you can get them to look into a better plan.  They probably haven't paid attention to the plan fees in the last decade either.

It it's a small company, they may not have much better options, but you never know unless you ask.

Agree. There are others here on the forum doing this same thing. They may have good resources for your company if they are interested in changing. One key thing to know is how many assets are invested in the 401k in total. If it's $2M or above, you should be able to get some good options (like Vanguard).

MDM

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To quantify "bad 401k fees vs. taxable", consider using the "401k vs Taxable" tab on the case study spreadsheet

There is a "rule of thumb" in the Bogleheads' 401k wiki entry: ''consider investing in a taxable account if the product of the extra costs and the number of years you will stay in the plan exceeds 30%."  Unfortunately the conditions under which that rule is appropriate aren't given, so caveat user

The Bogleheads wiki also links to http://thefinancebuff.com/alternatives-to-a-high-cost-401k-or-403b-plan.html, from which one can access an online evaluation tool.  The linked article was written in 2008, when things such as backdoor Roths weren't in use.  The online evaluation tool doesn't allow one to see calculation details, but it and the case study spreadsheet match exactly for traditional 401k and taxable account calculations over a variety of inputs.  Ease of use is in the eye of the beholder, so use whatever is easiest for you.

MontaniTrout

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Thanks for the replies. I wanted to give an update since I originally posted.
My company had their monthly Upper Level Management meeting today and I had the opportunity to attend and discuss our current 401k plan. I had the chance to show the Chief Executive Officer, Chief Financial Officer, and Vice President of Operations the money that we are leaving on the table with our current plan. I must have drawn some interest because they are all in agreement to trying to improve our 401k. 
They want to meet with our current Broker, Mutual of Omaha, to see if there are better options that he can offer. I think this is a bad idea because the man is always trying to sell us snake oil. Our CEO has had a good relationship with this Broker since the inception of our company in 2004.
I don't get to make any decisions, but I was asked if I could attend the meeting that they will set up with the Broker. Of course I will. Here's where I need help. What kind of questions should I ask the Broker? Should I be prepared to propose a different 401k plan service provider prior to meeting the Broker?
This is a great opportunity for me to make improvements to our 401k. I want to know how I can optimize it.
FWIW, we are a small company of about 125 employees.

Thanks in advance,

« Last Edit: August 11, 2015, 12:57:02 PM by MontaniTrout »

MDM

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What kind of questions should I ask the Broker?
Here are a few:
 -  "I understand that one needs to look at benefits vs. cost, but first let's understand what the low cost options are.  What are the three lowest cost stock-based funds you can offer to our employees?"
 -  "What are all the investment options, including total fees and 1-10 year performance, we can offer through you?"
 -  "What are the costs to the company and to the employees for your services?"
 -  "What services differentiate you from other 401k administrators?"

Quote
Should I be prepared to propose a different 401k plan service provider prior to meeting the Broker?
This is a great opportunity for me to make improvements to our 401k. I want to know how I can optimize it.
FWIW, we are a small company of about 125 employees.
Assuming the CEO won't be signing a contract at the meeting with Broker, you don't have to have a prior alternative.  But you will need an alternative at some point.  Gather the needed information (e.g., what is the total amount invested now in the 401k?) and call Vanguard, Fidelity, etc. to ask for their prices and offerings (using questions as above).

TomTX

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What kind of questions should I ask the Broker?
Here are a few:
 -  "I understand that one needs to look at benefits vs. cost, but first let's understand what the low cost options are.  What are the three lowest cost stock-based funds you can offer to our employees?"
 -  "What are all the investment options, including total fees and 1-10 year performance, we can offer through you?"
 -  "What are the costs to the company and to the employees for your services?"
 -  "What services differentiate you from other 401k administrators?"

Quote
Should I be prepared to propose a different 401k plan service provider prior to meeting the Broker?
This is a great opportunity for me to make improvements to our 401k. I want to know how I can optimize it.
FWIW, we are a small company of about 125 employees.
Assuming the CEO won't be signing a contract at the meeting with Broker, you don't have to have a prior alternative.  But you will need an alternative at some point.  Gather the needed information (e.g., what is the total amount invested now in the 401k?) and call Vanguard, Fidelity, etc. to ask for their prices and offerings (using questions as above).

"Are you aware of Tibble v. Edison and the fiduciary requirement to offer low cost 401k options? Here's a sampling of what low cost means [pass over list of Vanguard funds and costs]"

http://www.forbes.com/sites/nextavenue/2015/05/20/what-the-supreme-courts-401k-ruling-means-to-you/

MontaniTrout

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Re: Might be switching 401k provider. Employee Fiduciary.....anyone???
« Reply #8 on: August 27, 2015, 08:41:20 AM »
Update #2. I think my company is fully convinced there are better options for our 401k because they have started shopping around. They asked me what I thought of Employee Fiduciary as an option for our 401k. From what I've read Employee Fiduciary gets nothing but good reviews.
Does anyone have their 401k through Employee Fiduciary? What are your thoughts of this company?

Thanks,