mmmark wrote:We have a new vendor taking over over our 401k plan at work. I have just been asked to be a part of the committee that is meeting with the vendor in a week. What questions should I ask the vendor? Any advice is appreciated.
I am a Director of Finance and when we were privately held, I was part of the committee that selected the funds that mad up our 401(k) plan. I will take an approach that is a little bit different from some raised here.
First, we always used an INDEPENDENT adviser - someone who billed us a separate HOURLY fee. He would identify and propose funds to include in the plan. We looked at a variety of factors - fees, fund goal, performance against indexes and the like. In general, we would replace one to three funds for under performance. Since the committee consisted of accountants and HR, we were all looking for what was going to benefit us. The company paid most fees.
Second, since most of our employees were factory workers, we spent quite a bit of money annually holding education seminars and actively DISCOURAGING 401(k) loans and encouraging people to save for their retirements. There are limits on advice and the like.
The things that i would ask:
1) How do you select your funds?
2) How do you identify which funds are performing well or not? What is your criteria for replacing funds that are underperforming and how often do you review?
3) What kind of educational programs do you offer to employees?
4) How is the plan designed to avoid restrictions on the Highly Compensated Employees (HCEs)?
5) What is your relationship to the funds you recommend? How are YOU compensated by the funds?
Eventually, our new owners scrapped the company plan in favor of Vanguard which had some benefits and some drawbacks. The fund selections offered with Vanguard were marginally better BUT the tilt was definitely toward Vanguard even when there were better options.
Also, the people provided by Vanguard were English speaking ONLY despite 60%+ of our people speak Spanish as their primary language. Even in English, the presenters were not really all that great at explaining the importance of 401(k)s and retirement planning.
Also, Vanguard streamlined the 401(k) loan process which quickly escalated the number of employees seeking loans.