Forums
401(k)
Benefits & Compensation
401(k)
Exchange ideas about health plans, retirement, work/life benefits, and employee assistance.
What are reasonable fees and expenses under a 401(k) plan? We offer a bunch of different investment options through ING. The fees and expenses are 1.96% on average. The target date funds are all over
0
Cat:Topic ForumsForum:ForumId52
Cat:Topic ForumsForum:ForumId52Discussion:DiscussionId36804
Forums » Topic Forums » Benefits & Compensation » 401(k)
|
401(k)
posted at 11/10/2010 9:08 AM EST
|
Posts: 58
First: 10/17/2006 Last: 9/13/2011 |
What are reasonable fees and expenses under a 401(k) plan? We offer a bunch of different investment options through ING. The fees and expenses are 1.96% on average. The target date funds are all over 2%, and the index funds are about 1.5%. The funds in my IRA are under 1%. We are a small company - even so I would have thought the costs would be lower in the 401(k). We just started shopping the plan to see if we can do better. What are your thoughts and recommendations? |
|
|
401(k)
posted at 11/10/2010 4:06 PM EST
|
|
Posts: 2146
First: 2/15/2006 Last: 9/14/2011 |
Thqt sounds about normal for small plans. The higher the equity/asset balance, the lower the fees...but if you are small, you don't have much choice if you want to offer those options. I would however make sure the fees for each fund are well disclosed. so the participants can choose. |
|
|
401(k)
posted at 11/11/2010 6:37 AM EST
|
|
Posts: 1047
First: 4/11/2002 Last: 9/14/2011 |
Have you done an RFP on your 401(k) plans lately? That may be a good place to start. While I don't consult on retirement plans, Schwab's 0.5% expense ratio would seem fairly attractive to me from an employer perspective. Schwab's platform may not fit sophisticated investors, however, group 401(k) plans aren't sophisticated. |
|
|
401(k)
posted at 11/11/2010 6:59 AM EST
|
|
Posts: 2146
First: 2/15/2006 Last: 9/14/2011 |
Just realize that if you do an RFP and decide to switch vendors, there will be time and fees involved (usually from the prior vendor) to get the records transferred over. The company would need to decide if the cost of the change (and the headaches involved) are worth it. And they have to see if the plan allows them to pass those fees back through the plan to the participants or if it is something the company will pay out of pocket.
I can tell you that in my previous life I was a 401k recordkeeper with clients from 10 ees to thousands of ees. I did many transfers of plans both in and out of our company. While it has gotten better and is often better when both vendors are on the same software, it still can be a hassle and sometimes a bear! Depending on how much historical data the client wants brought over, it can be interesting to say the least. Check with your current vendor to see what funds are available. Discuss the fee structurs with them. They might have suggestions to bring the fees down that they haven't told you about. |
|
|
401(k)
posted at 11/13/2010 10:10 AM EST
|
|
Posts: 2442
First: 2/12/2000 Last: 9/14/2011 |
James-If you check with the major vendors like Vanguard or Fidelity you will find that you fees are WAY out of line.............. 2% is an outrageous fee in today's market. In fact anything above 1.5% in a 401(k) should be removed.
Some index funds are now down at 10-15 basis points. |
|
|
401(k)
posted at 11/15/2010 4:43 AM EST
|
|
Posts: 2146
First: 2/15/2006 Last: 9/14/2011 |
just make sure you are comparing apples to apples...that is fees and expenses...not just the stated fees. And make sure that there aren't other "hidden" fees. For example, what services do they provide free -- plan documents, forms, testing etc. What services will you need a TPA for (that you will have to pay on top of straight fund fees).
|
|
|
401(k)
posted at 11/15/2010 9:09 AM EST
|
|
Posts: 58
First: 10/17/2006 Last: 9/13/2011 |
I am having a hard time finding both reasonable fees and high level of service. For example, Vanguard's fees are low, but unless we have $5 mil in the plan, their services are non-existent. They provide no individual account services such as statements, or website tools to view and manage one's account. We would have to pay our 3rd party administrator to do this. ING does a very good job of this, but fees of 2% crush returns.
How can I recommend that employees contribute to their 401(k) accounts, when I wonât put my money where my mouth is -- an IRA is a better option. Iâm frustrated, but not giving up. Thank you all for your advice so far. It is very, very much appreciated. |
|
|
401(k)
posted at 11/15/2010 11:53 AM EST
|
|
Posts: 1047
First: 4/11/2002 Last: 9/14/2011 |
Actually, there are administrative fees usually charged above and beyond the fund fee. However, they usually aren't 1%. I would suggest putting out an RFP so that all fees can be ferretted out and so you can compare apples to apples. |
Forums » Topic Forums » Benefits & Compensation » 401(k)
