spouse with bad 401k, any option to change it

[litovskyassetmanagement]

billy wrote:

Shes not a physician, but in a healthcare related field.  I think her company has a few hundred employees, but that’s just an educated guess.  She is an employee, not in management nor is she a partner.

Click to expand...

With dental and medical groups, everyone is in it together, especially if the owners have significant money in the plan. So the first step is to identify who the decision makers are, and then to set up time to go speak with them.  She will need to educate them on what their options are first.  Once they are open to the idea of improving a plan (and who would NOT want to save lots of money by upgrading their plan?) then there may be an opening to act. I also find that in smaller companies HR manager might take the active role as well, so that's another person to talk to.  Quite often owners would defer to the HR once they make a decision to do something along the lines of making changes to their 401k plan, so you don't want to bypass the HR manager/director, who might be the first person she can get in touch with. 

Also, the amount of effort spent on trying to make changes can depending on how long she'll stay there and whether she has some growth potential within that company. 

[billy]

Shes not a physician, but in a healthcare related field.  I think her company has a few hundred employees, but that's just an educated guess.  She is an employee, not in management nor is she a partner.

[litovskyassetmanagement]

billy wrote:

I just looked at my fiance’s (soon to be wife) 401k from her job- Despite it being a large company (>50 employees) and having a plan through VOYA, it looks like all 25 fund options are actively managed, lowest net expense ratio is 0.91, most are 1.3%, and they all have 12b-1 fees of 0.5 (which I guess is why the net expense ratios are horrible).  My significant other is not usually someone who will speak up to try and get this changed (not really interested in finances), but is there some way to bring it to the attention of a large employer? Or should we just suck it up and realize at least it gives us a tax break (live in NJ so deferring that 18000 helps a lot).

 

thanks,

billy

Click to expand...

First, is your fiance a partner in the group? If so, she can have a say as far as retirement plan.

There are several items to be aware of.  Plan sponsor has significant fiduciary responsibility to make sure that the plan is operating for the best interest of plan participants.  If the cost of investments is high, and there is no fiduciary in charge (and Voya is a broker, not a fiduciary), then the plan sponsor is fully liable if any of the employees want to sue the practice for excessive cost 401k plan, especially if the participants are not highly compensated.

Second, how large is large?  For a company with several hundred participants or fewer it is usually relatively easy to initiate a full plan review, provided the key decision makers are on board.  If the owners are doctors themselves, then their own money is invested in the plan.

If your fiance is a partner, then there is a chance that senior partners would listen to her.  At the very least, she needs to come to them with a proposal in hand that can show side by side the cost difference in switching to a lower cost provider.  I find that such proposals can easily sway senior partners' mind especially if their own money is invested in such a plan. The downside is that you would need to switch all providers, including TPA/record-keeper/adviser, but usually this is rather seamless, and the money saved in the process can be significant. 

I would recommend this calculator to compare the fees you are paying with what you could be paying:

retirementplanhub.com/retirement-plan-cost-calculator/

Ideally you want low cost index funds with an average expense ratio of ~0.15%, no AUM fees whatsoever for administrative/record-keeping, and a fixed/flat fee for an ERISA 3(38) fiduciary.  This way you can easily save millions of dollars for the group (and hundreds of thousands for individual doctors over several decades).

Last resort is to use a self-directed brokerage account, but you will still often pay high asset-based fees for administration and record-keeping, so that might not be the ideal solution.

[Virajith Wijeweera]

You may want to have her contact the Plan Admin and see if the Plan offers a Self-Directed Brokerage Account.  This option allows you invest in funds/ETF's outside of the pre-selected funds offered by the Plan.  SDBA's are becoming more and more popular so it may be an option.

There are fees associated with SDBA's.  Usually, there is an annual fee that ranges between $50 to $150.  Also, you will have to pay for transactions.  If the account is large enough and the current funds consistently under-perform respective benchmarks, you may be better off paying the annual fee and transaction fees to buy and sell.

[Peds]

billy wrote:

its a corporation type setting.  I’m guessing her HR department set it up. I doubt they would change it for one person since “its been that way forever” but I also dont think my fiance wants to look like shes causing any issues at her job.

Click to expand...

then you are stuck. 

[billy]

its a corporation type setting.  I'm guessing her HR department set it up. I doubt they would change it for one person since "its been that way forever" but I also dont think my fiance wants to look like shes causing any issues at her job.

[jhwkr542]

I think a lot depends on the structure of the group.  Is this a physician-owned practice that set it up a while ago?  If so, they may have no idea with what's going on and bringing it to their attention may be useful.  Happened with my company of 57 employees.  The plan had been set up years ago.  No current partner knew much about investing or at least cared enough to change it.  They're happy I brought it up and I'm working on changing it.  If your fiance is close with the employers, then she may have some sway.  If it's some administrator in charge who doesn't even know her name, then she may not get anywhere.  A sort of grassroots uprising may do her some good in that instance.

[jfoxcpacfp]

She can always try, but that's a personal decision based on her comfort level. Or you could write an anonymous letter  :twisted: !

[billy]

I just looked at my fiance's (soon to be wife) 401k from her job- Despite it being a large company (>50 employees) and having a plan through VOYA, it looks like all 25 fund options are actively managed, lowest net expense ratio is 0.91, most are 1.3%, and they all have 12b-1 fees of 0.5 (which I guess is why the net expense ratios are horrible).  My significant other is not usually someone who will speak up to try and get this changed (not really interested in finances), but is there some way to bring it to the attention of a large employer? Or should we just suck it up and realize at least it gives us a tax break (live in NJ so deferring that 18000 helps a lot).

 

thanks,

billy