401(k) - What's your opinion?

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Has the mandatory 401(k) Fee Disclosure helped to lower plan costs to where they should be?

Yes.
3
18%
No.
14
82%
 
Total votes: 17

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fcirullo
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401(k) - What's your opinion?

Post by fcirullo »

Has the mandatory 401(k) Fee Disclosure that became effective over nineteen months ago helped to lower plan costs to where they should be? Or has it been a failure?
Frank R. Cirullo | | "It isn't what we don't know that gives us trouble, it's what we know that ain't so." -- | Will Rogers
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Re: 401(k) - What's your opinion?

Post by placeholder »

How would I possibly know?
chaz
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Re: 401(k) - What's your opinion?

Post by chaz »

Tough question. Too soon?
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Alskar
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Re: 401(k) - What's your opinion?

Post by Alskar »

I've seen no discernible change in 401(k) fees; they're still exorbitant! On the positive side, there is lots of talk about fees now, but it's all talk and no action.
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fcirullo
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Re: 401(k) - What's your opinion?

Post by fcirullo »

placeholder wrote:How would I possibly know?
Are you saying that you have no way of knowing what plans other than yours costs? Or are you asking what a low cost 401(k) plan looks like so that you can use it as a benchmark to compare the cost and investment performance of 401(k) plans?
Frank R. Cirullo | | "It isn't what we don't know that gives us trouble, it's what we know that ain't so." -- | Will Rogers
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Re: 401(k) - What's your opinion?

Post by placeholder »

Do you expect me to do a nation wide survey of a representative sample of plans to see if any came down?
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fcirullo
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Re: 401(k) - What's your opinion?

Post by fcirullo »

chaz wrote:Tough question. Too soon?
It may be too soon to ask this question, but I'm not sure how much time employers who have high cost plans should be given to wake up to the fact that investments are a plan's biggest cost and neither they nor their consultant has the skills to pick managed funds that will beat a core mix of low cost index funds in performance, long term.
Frank R. Cirullo | | "It isn't what we don't know that gives us trouble, it's what we know that ain't so." -- | Will Rogers
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fcirullo
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Re: 401(k) - What's your opinion?

Post by fcirullo »

placeholder wrote:Do you expect me to do a nation wide survey of a representative sample of plans to see if any came down?
No, I just wanted to know if you had an opinion.
Frank R. Cirullo | | "It isn't what we don't know that gives us trouble, it's what we know that ain't so." -- | Will Rogers
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Alskar
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Re: 401(k) - What's your opinion?

Post by Alskar »

fcirullo wrote:
chaz wrote:Tough question. Too soon?
It may be too soon to ask this question, but I'm not sure how much time employers who have high cost plans should be given to wake up to the fact that investments are a plan's biggest cost and neither they nor their consultant has the skills to pick managed funds that will beat a core mix of low cost index funds in performance, long term.
My current employer is considering a switch to a different TPA and record keeper for our tiny 401(k) plan. I've been intimately involved in the process of selecting a new provider. The Dir of HR that is in charge of the 401(k) plan selection insists on getting advisers involved in every discussion. Based on my experiences in this process it appears that advisers are a bit threatened by index funds. They realize that they can't add any value to an index fund so it is very difficult to justify their management fee if the plan line-up is only index funds. So to justify their 50 -100 bps of overhead they load up the plans they manage with wildly inappropriate, risky and expensive funds that have recently shown great returns.

One of the advisers that came to talk to our 401(k) committee had the guts to present a fund line up that included a Rydex S&P 500 index fund with an ER = 2.3% (RYSYX)! That's not a typo. An S&P 500 Index Fund with an ER of 2.3%...yeehaw! Another proposal (this one from John Hancock) included a 75 bps front-end load on all new money coming into the plan and 75 bps on all of the existing money that was transferred to the new provider. I really can't believe the adviser had the nerve to present that to us. He apparently thought we were idiots and the feeling was very mutual.

So, NO; the fee disclosure has had no measurable impact on the 401(k) industry. It is business as usual.

Disclosure is meaningless if employees have no say in the fund selection. Expensive 401(k) plans will be around forever until employees start leaving jobs because the fees in the 401(k) plan are too high.
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fcirullo
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Re: 401(k) - What's your opinion?

Post by fcirullo »

Alskar wrote:So, NO; the fee disclosure has had no measurable impact on the 401(k) industry. It is business as usual. Disclosure is meaningless if employees have no say in the fund selection. Expensive 401(k) plans will be around forever until employees start leaving jobs because the fees in the 401(k) plan are too high.
True! Perhaps employers need more time to get educated on index funds and what a low cost plan looks like, but as of today most 401(k) plans cost employers and employees more than they should.
Frank R. Cirullo | | "It isn't what we don't know that gives us trouble, it's what we know that ain't so." -- | Will Rogers
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