In my 401k they have an international index fund that used to have tickler JEIEX. Back last year they notified us that they were reducing the expense ratio by 1 basis point and the underlying fund was changing from JHVIT International Equity Index Trust A (Class I) [JEIEX], which no longer appears to exist, to International Equity Index Trust B (Class 1) without any mention of tickler. So I go on morning star to find the tickler for this fund. I find 3 available:
JHVIT International Equity Index Trust B Series I - JEIQX
JHVIT International Equity Index Trust B Series Nav - US41015F2020 (and FOUSA06B3D also works for the same one)
JHVIT International Equity Index Trust B Series II - US41015J6597 (and F00000ONG6 also works for the same one)
So when John Hancock says "Class 1" I think this corresponds to Morningstars reporting of "Series 1." So I look at the SEC fillings for the prospectus on morning star for JEIQX. It states the follow for fees:
Management fee: 0.54%
Other expenses: 0.04%
Total fund operating expenses: 0.63%
Contractual expense reimbursement*: -0.24%
Net fund operating expenses: 0.39%
*Adviser contractually agrees until April 30, 2014 to waive certain fund expenses.
Okay, so I look at our 404a-5 Plan & Investment Notice and it points to a URL that shows our plan's "prospectus". The fees are reported this way:
Fund Expense Ratio 0.39
Sales & Service Fee 0.10
Expense Ratio 0.72
Okay the "Fund Expense Ratio" in the John Hancock "marketing" prospectus matches the prospectus filed with the SEC of 0.39%. Our 401k always tacks on the sales and service fee of 0.10%. So I look at this AMC fee and notice that it's only 1 basis point off from the "contractual expense reimbursement." They said our expense ratio would be reduced by 1 basis point. Are our plan "adviser[s]" pocketing the rest of the temporary reimbursement (23 basis points)? Maybe I don't understand what this fee waiver is about, but when other fund companies have a fee waver usually the person that invests in the fund (i.e you as the shareholder) gets the temporary savings in ER reduction while the waiver is in effect. So why isn't that the case with my 401k? (yes I know with John Hancock I don't own "shares" in the underlying fund, but rather own "units"). Does anyone have an idea of what is going on? I thought the new laws about 401k fees was suppose to make the fees transparent. To me it feels like the 23 basis point AMC fee is pure profit hiding the fact that there is a 24 basis point ER reduction wavier in effect for this fund.
Just to point out, JEIEX used to have "Net fund operating expenses" of 0.63%, with no AMC fee added, and a sales and service fee of 0.10% for a total ER of 0.73%. Compared to what I'm seeing now, of 0.72%, is the 1 basis point reduction. Something about this just feels shady, or maybe this is just baseless or naive skepticism on my part. That whole AMC fee thing John Hancock does seems very arbitrary. Basically if the overall ER seems to be much lower than the rest of the funds, they jack up the AMC to compensate and bring the fund up (i.e. we have a few vanguard funds like short term federal that they tack on 50 basis points to + the sales and service fee of 10 basis points to bring the overall ER up to 0.80 from 0.20. For other non-John Hancock-fund-famliy funds that already have a high underlying fund ratio they don't tack on an AMC.
John Hancock says this about their fees:
The Expense Ratio
(ER) includes John Hancock USA's administrative maintenance charge (AMC),
sales and service fee, and the expenses of any underlying mutual fund (based on
expense ratios reported in the most recent prospectuses available as of the date
of printing) and is subject to change. John Hancock USA's AMC will be reduced if
John Hancock USA or an affiliate receives asset based distribution charges ("12b-
1 fees"), sub-transfer agency fees, or other fees from an unaffiliated underlying
mutual fund or its agent(s). These fees, collectively, range from 0% to 0.50%. The
amount of the AMC charged under each sub-account has been determined net of
such fees. The underlying fund expense is determined by the underlying mutual
fund company and may be increased or decreased at any time to reflect changes
in the expenses of the underlying mutual fund or other factors.