Author Topic: My work is taking away our 401K. Now what?  (Read 4636 times)

monstermonster

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My work is taking away our 401K. Now what?
« on: August 10, 2015, 10:18:14 PM »
I just found out today that my work is taking away our 401k. For a few reasons: out of ~30 staff, only 3(!) of us give to retirement. (I think I might need to teach a personal finance class at work.)

The org doesn't match our contributions, but pays $600/quarter for the administration of the 401K. The org can't afford it, so our COO is trying to move us over to IRAs- either administered through work or not. She's still working out the switch over the next few months (I may be able to influence this a bit- they're leaning American Fund, which is pretty awful.) What are my options to contribute pre-tax if my work has no 401K? (I already max out my Roth so I'm at the limit. I also usually qualify for the Saver's Credit, which now will be reduced too if I can't put my money into something that qualifies.)

(Worth noting: apparently the org had been deducting $$ from paychecks but hadn't been putting it into employee's 401K's. **headdesk** They're fixing that now.)

Goldielocks

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Re: My work is taking away our 401K. Now what?
« Reply #1 on: August 11, 2015, 01:31:11 AM »
Crap, maybe you are better off without a no match 401k if they just take your money until someone notices....

Jack

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Re: My work is taking away our 401K. Now what?
« Reply #2 on: August 11, 2015, 05:58:11 AM »
It sounds like the change isn't a "done deal" yet, right? If that's the case, I have a radical suggestion: you should volunteer to be put in charge of the company's plan yourself (or to be a member/chair of the investment committee, which your company is supposed to have). Clearly, your COO considers the whole thing to be a huge hassle, so she might be happy to let you deal with it instead, and I'm sure you'd do a better job -- either at keeping the 401K or finding an appropriate SIMPLE IRA -- than she would.

If you anticipate resistance to the idea, you could go find the other 2(!) plan contributors and get them to support you before having the discussion with the COO.

It sounds like  the company may have been negligent in their fiduciary responsibilities. It's probably not the best argument to make except as a last resort, but the implication that this is a Big Deal (and legally actionable on your part) could be persuasive too.

By the way, the law allows the company to automatically enroll everybody (i.e., make them opt-out instead of opt-in). You may want to point that out to the COO too.

Finally, even if you don't try the idea above, you should certainly explain that moving to an IRA not administered through work is totally unacceptable: you're already maxing yours out, so it's equivalent to not having one at all! The COO needs to understand that it's vitally important for the new plan to be eligible for the $18000 maximum contribution limit.

forummm

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Re: My work is taking away our 401K. Now what?
« Reply #3 on: August 11, 2015, 06:08:07 AM »
Sounds like it's time to look for a new job.

MidWestLove

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Re: My work is taking away our 401K. Now what?
« Reply #4 on: August 11, 2015, 08:44:53 AM »
Why not give Vanguard a call to see if their Retirement Plan Access (Small Business 401k plan) would fit the bill in terms of costs?

https://investor.vanguard.com/what-we-offer/small-business/compare-plans
https://advisors.vanguard.com/VGApp/iip/site/advisor/support/article/SmallMarket

otherwise, giving up ability to save for retirement and delay taxes  in tune of 18k a year is a significant benefit and removing it would put your employer at competitive disadvantage in their ability to retain you as employee. if they are not willing to implement it, look for another job



forummm

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Re: My work is taking away our 401K. Now what?
« Reply #5 on: August 11, 2015, 09:32:22 AM »
Sounds like it's time to look for a new job.

The reason I suggested this is that the org doesn't value the retirement plan option at $80/year per employee ($2400/year for 30 people). That's got to be a very small amount of their cost of having employees. Also, they were misusing your funds. It's totally unacceptable for your 401k contributions to not be hitting your account the same day. That's potentially criminal. And it keeps you from earning returns on that money while it's sitting in their drawer. This sounds like an org that isn't on the ball and doesn't care about its employees.

KCM5

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Re: My work is taking away our 401K. Now what?
« Reply #6 on: August 11, 2015, 09:53:04 AM »
Sounds like it's time to look for a new job.

The reason I suggested this is that the org doesn't value the retirement plan option at $80/year per employee ($2400/year for 30 people). That's got to be a very small amount of their cost of having employees. Also, they were misusing your funds. It's totally unacceptable for your 401k contributions to not be hitting your account the same day. That's potentially criminal. And it keeps you from earning returns on that money while it's sitting in their drawer. This sounds like an org that isn't on the ball and doesn't care about its employees.

All of this.

monstermonster

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Re: My work is taking away our 401K. Now what?
« Reply #7 on: August 11, 2015, 10:01:34 AM »
It sounds like the change isn't a "done deal" yet, right? If that's the case, I have a radical suggestion: you should volunteer to be put in charge of the company's plan yourself (or to be a member/chair of the investment committee, which your company is supposed to have).
I'm going to offer up that suggestion, which is actually a great idea! For one, I'd actually enjoy it, I have a degree in Economics, and I'm in a numbers-y position so I think people would actually trust me to do it. Of course I'd love to make it opt-out at 1% (ala  prevailing Behavioral Economics research) but that might be a bigger push. We actually aren't legally required to have an investment committee because of our size and tax status (501c3), but we *do* have an employee advocacy committee but it's been languishing for nearly a year, and this is a good forum to bring this up.

Sounds like it's time to look for a new job.
removing it would put your employer at competitive disadvantage in their ability to retain you as employee. if they are not willing to implement it, look for another job
That I *sincerely* do not want to do (I genuinely love my job and the organization, despite itself right now) but I am going to make it very clear that part of the reason I accepted a full-time job here (I was consulting/working part-time before) was access to the 401K and benefits. Taking away the 401K is seriously taking away a huge benefit, and I'm going to make a huge stick in the mud about what this does to my finances. It's not just the initial tax savings for me, too, I also qualify for the saver's credit because of my income, so this is double-screwing me.

Crap, maybe you are better off without a no match 401k if they just take your money until someone notices....
I can't even get over what a cluster this is. Our "admin/HR/finance" department is only one person, and it was vacant for nearly 6 months, which is I guess what led to this cluster- no institutional memory at all- I guess we didn't even have the login code for the Fidelity account. I've only actually qualified for the 401K 3 months ago, as you have to be here for a year before it triggers, and I guess I was the only one excited enough to email and enroll on the day I qualified (I suspect that's part of our low participation rate.) So I only lost 3 months of gains.

This sounds like an org that isn't on the ball and doesn't care about its employees.
It's more a case of being understaffed, but yea, I'm going to pitch a fit about this. I'm also the department that's the major source of revenue - nearly 50% - (my department of 1.5 raises as much as the department of 15 staffers) and hell, I'll go out and raise another $2400 for the org if they don't figure this out.


COlady

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Re: My work is taking away our 401K. Now what?
« Reply #8 on: August 11, 2015, 02:59:23 PM »
Maybe they could pay you as a  contractor (you'd want to equalize your contract rate for self employment tax)??? That way you could set up an individual 401k and contribute the max. No match but sounds like that's the least of your concerns.

Jack

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Re: My work is taking away our 401K. Now what?
« Reply #9 on: August 11, 2015, 03:55:29 PM »
Maybe they could pay you as a  contractor (you'd want to equalize your contract rate for self employment tax)??? That way you could set up an individual 401k and contribute the max. No match but sounds like that's the least of your concerns.

That's not a bad idea either, especially considering that the 2015 maximum contribution for a solo 401K is $18000 plus 20% of your self-employment income.

Paul der Krake

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Re: My work is taking away our 401K. Now what?
« Reply #10 on: August 11, 2015, 08:49:58 PM »
In that order:

1) Ask to be put in charge of researching options.
2) Get bids.
3) Present options to the head honchos. Extra points if the one you're rooting for has some "employee educational program" in there, even if it's just you speaking to the 27 knuckleheads who don't contribute.
4) If the answer is no, request an immediate reevaluation of your compensation package.
5) Walk if necessary.

forummm

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Re: My work is taking away our 401K. Now what?
« Reply #11 on: August 12, 2015, 05:48:00 AM »
Maybe they could pay you as a  contractor (you'd want to equalize your contract rate for self employment tax)??? That way you could set up an individual 401k and contribute the max. No match but sounds like that's the least of your concerns.

That's not a bad idea either, especially considering that the 2015 maximum contribution for a solo 401K is $18000 plus 20% of your self-employment income.

Just ask them to pay you more for the employer side of the FICA tax they are paying now and for any health insurance premiums they are paying now (then you can pick out your own plan on the Marketplace). You do lose some protections you might have for being an employee though, unless they go in the contract.

monstermonster

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Re: My work is taking away our 401K. Now what?
« Reply #12 on: August 12, 2015, 09:06:00 AM »
Hey everybody! Thanks for the encouragement/information! I proposed
1) doing a training on personal finance for folks (I actually teach these in my free time to college students, didn't know my coworkers needed it too!)
2) being the person to research options for the org and propose a solution

And she agreed! My COO actually said she didn't think anyone would have maxed out their IRAs so she didn't anticipate this would be a problem, and she was impressed I did (if only she knew about mustachianism...) So I get to research and pick something. At the moment it looks like a 403(b) through Vanguard might be perfect (and free for my work.)

markbike528CBX

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Re: My work is taking away our 401K. Now what?
« Reply #13 on: August 12, 2015, 09:51:22 AM »
Nice,  win (401K stays), win (you get to "pick"), a win (Vanguard, cheaper)!

Druid

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Re: My work is taking away our 401K. Now what?
« Reply #14 on: August 12, 2015, 09:16:18 PM »
The traditional 401k benefit, assuming all of the money reduces income from the 25 percent bracket, is worth a little less than $4625 (18500 *.25). I say a little less because if you invest money outside a 401k there is a basis in your investment asset, and that makes traditional retirement accounts less valuable dollar per dollar. I would approach this issue as a reduction in compensation and insist on a 4k raise. You can then put away what ever money you can in a taxable account. If you have been using the 401k as a Roth account it makes the value of the benefit harder to determine.
« Last Edit: August 12, 2015, 09:20:14 PM by Druid »

Paul der Krake

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Re: My work is taking away our 401K. Now what?
« Reply #15 on: August 12, 2015, 09:39:55 PM »
The traditional 401k benefit, assuming all of the money reduces income from the 25 percent bracket, is worth a little less than $4625 (18500 *.25). I say a little less because if you invest money outside a 401k there is a basis in your investment asset, and that makes traditional retirement accounts less valuable dollar per dollar. I would approach this issue as a reduction in compensation and insist on a 4k raise. You can then put away what ever money you can in a taxable account. If you have been using the 401k as a Roth account it makes the value of the benefit harder to determine.
It's worth so much more than that. Putting a dollar amount to the fringe benefits of the 401k is hard but that makes it a lot more valuable than "just $4k".

- tax free growth
- stronger legal protection from creditors and lawsuits
- avenues for early retirees to convert it to Roth later on
- ability to reduce taxable income by a substantial amount, opening the door to other tax goodies

It would take my employer a lot more to retain me if they decided to pull something like this.