Bogleheads

[tolak]

Hi. I'm looking to hear experiences of people who have tried this.

We have a TPA which in turn consults with an "independent" firm that selects the funds. Our company, in turn, has its own "independent" consultant who advises them on various dealings with the TPA. Everything is a-okay, right? Still, our funds selection sucks.

From our HR department I got not much more than a shrug and explanations to the effect of "we're a small company, don't have the resources to pursue better options..." etc. I asked for a self directed option and was denied because again, they don't want to offer it to everybody and manage it.

When I talked to our consultant who mediates between us and the TPA, he admitted in a roundabout way that there is no chance of getting cheap index funds (our only index fund is an obscure S&P500 just under 1%), because that's how the plan pays for itself. I was not able to get direct answers on compensation schemes and how decisions are arrived at.

For my first 401k committee meeting, I've decided to begin by pointing at the performance figures of the funds, which all come short of their benchmark indexes by the amount of the fees, and simply point out that all our funds are under performing and that nothing is stopping us from directly investing in those very same benchmarks. I get a sense that under performance of mutual funds has been presented as an acceptable outcome industry-wide.

My greatest concern is not knowing which side management takes here. Are they simply uninformed or are knowingly going with this, which can negatively affect my situation. Any suggestions on tactful and assertive strategies in this situation?

Thanks in advance!

[MossySF]

Your company is like everybody else's. They simply shrug and hand off the TPA/plan/fund selection to a consultant. The consultant then presents a plan that has low expenses for the employer and the employer is happy. Nevermind the funds chosen have high expenses to pay the consultant's salary.

To fix this situation, you need to be proactive not only on the fund selection side but also the plan administration side. Offer up an alternative so you can fire the consultant and switch to a plan that can reduce expenses on both sides. Show how much money over 30 years that ~1% saves both employer and employee.

Here's a few options I've been looking at for my company.

[lucky7]

Mossy,
Do any of above apply for 403b?
_________________
Scotty, beam me up.

[MossySF]

[tarnation]

our is the same. i was told our admin/advisors don't want to offer index because they don't make any money. I checked our plan documents; I think my company paid $1,000 total fees for admin. what a bargain!

At least we have a self-directed option. My favorite warning from our "401k person" at work when asking about this option was. "well it's risky because your going into the stock market"

[tolak]

Thanks MossySF. The Vanguard investment-only plan might keep everyone happy.