bUU, speaking as someone who works at a company that did improve its 401(k) plan last fall, which lowered my account ER from 0.9% ER to 0.5% ER
, here are a few insights that might be able to help you in your situation.
First, I can't claim credit for the change. Maybe a little credit, though. I did politely request a number of times to the CFO and our plan broker that I would like low-expense index funds, and even wrote up a detailed explanation of why. Maybe my reasoned persistence helped in some way. I felt like they listened to me and tried to consider my requests.
Part of why our plan improved is:
- Our company grew significantly since the last time we changed providers, which results in more assets under management (AUM), which means our company has more leverage in negotiating a good deal with 401(k) plan providers. Money talks. And, as companies stick around, the balances tend to grow as people contribute more and compounding kicks in.
- Part of the reason the assets grew is because several years ago the company started a matching program, which obviously encouraged many more people to contribute, hence more AUM.
- We got a reformer CEO a couple of years ago who wanted to fix things and cut costs, and this was one of many items on his list. As I understand it, with the switch in 401(k) providers, not only did the participants get a better deal, but the company is paying less too.
The point I'm making is that if your company is staying the same or declining, then your company might not have the clout to negotiate much with your current provider, or shop around for a new provider. But if your company is growing, and employees are sticking around and amassing more balances, then the opportunity to improve the plan might be there.
Another thing you really need to do is asses just what your plan expenses should
be, based on the average plan at a comparable company. Browsing this forum, you see people posting plans with ER's under 0.1% and you feel jealous. I know I do. But they probably work at big companies that can negotiate those rates.
See this report on what participants' all-in costs (fund expenses plus any other participant expenses) are, depending on the size of the plan as measured by AUM:http://www.ici.org/pdf/rpt_11_dc_401k_fee_study.pdf
Page 24 has the information. Now, you might not know what the AUM is for your company. I'm not sure if you are entitled to know this (I doubt it) but you can make a guess by multiplying the number of employees * $75,000 (?) or whatever you think the average 401(k) balance might be (I got $75,000 from this article
), then cut that by a third (?) (because not all employees are enrolled). That's really just a WAG. If your company has a lot of long-time employees, maybe bump the number up. If it's a 3-year-old dot-com where the average age is 28, then bump it down significantly. Finally, take that number and see where it stacks up in the chart on p. 24.
You'll also need to know what your all-in expenses are. Are they bundled into your fund expenses? Or do you pay something on top of fund expenses?
If your all-in expenses are on the low end, then be happy about that, and be aware that your company might not be able to do much better unless they are really intent on doing so. If your all-in expenses are on the high end, then you might be able to make a stronger case.
For more reference here's an article talking about average all-in 401k plan expenses, relative to the size of the company. Larger companies with more participants and assets tend to have better and cheaper plans because of economies of scale (admin costs spread out over more employees) and more negotiating leverage. http://money.cnn.com/2012/07/25/retirem ... /index.htm
I was a bit surprised that even the biggest plans, with an average of 50,000+ employees, still have a total all-in of 0.35% in average. Plans with under 1,000 employees have an average of 0.85% total all-in.
The key thing I'm trying to say here, is know the details and context before you just say, "I want cheaper index funds."
Finally, I know this is frustrating, but having a 500-index fund at 0.57% ER isn't all that bad--unless you work at a huge company. My current plan has one at 0.53% (all-in). The previous plan was 0.93%. Hence my joy when we switched plans. For reference, I work at a ~200 person company in a metro area (i.e. larger salaries) that's been around 15+ years.