Need serious help regarding my company's retirement plan

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fastpace_re
Posts: 45
Joined: Wed Jan 07, 2015 8:58 pm

Need serious help regarding my company's retirement plan

Post by fastpace_re » Tue Jan 27, 2015 11:57 pm

So I posted awhile back here: viewtopic.php?f=1&t=155038

However, I'd like to open up this thread specifically regarding my company's retirement plan. Basically, it's a small business (around 45 employees) and they have a retirement plan that they call the Trust. It consists of a Profit Sharing Plan and a Pension (which is going away this year). They also offer a 401k and a Roth 401k (no match). All of the Profit Sharing, Pension, 401k, and Roth 401k is lumped into your total Trust balance. All of the money is in one big pool and invested as a whole unit. We do not get individual employee investment options - and in fact, we don't even really know where this money is being invested. What I'm about to post are very specific details that I have because I have asked for this information - however, this is information that is never shared with employees unless specifically asked. I also know a bit more than most employees because I work in the IT department and we are responsible for writing code that deals with this since we do all payroll internally.

A few things worth mentioning:

1) All 401k and Roth 401k contributions that you make are kept in a savings account all year long (even though payroll deducted) and not dumped into the master Trust fund until the end of the year. This concerns me. I'm losing potential gains all year.

2) The company's contribution is usually pretty generous - anywhere from 12-25% of your gross earnings at the end of the year. This is added to your Profit Sharing account at the end of every year. They announce the percentage based on sales for the year. For some people, they think this employer contribution is enough for them and they don't bother contributing to the 401k or Roth. Regardless, you get this amount whether you contribute on your own or not. There is zero advantage to putting in more money yourself. The percentage is across the board for all employees.

3) The company utilizes UBS to manage the company portfolio and the company pays UBS some fee in order to manage this. I believe the entire balance of the trust is 12 million for the company. I think the company pays about $17k every quarter to manage this with UBS. I'm not sure if this is standard and frankly it's not really my business or up to me - but I'm pretty sure that's the number. Employees don't pay any fees other than the fact that all our money is in this big lump sum.

Click on the following link to view my company history of employer contribution amounts, total YTD investment returns, and a comparison to the stock market:
https://www.dropbox.com/s/erlhpr7wzckxu ... e.png?dl=0

Click on this link to see the performance in a graph view my company has had versus the stock market:
https://www.dropbox.com/s/up35jki7gbglz ... h.png?dl=0
(My company is the blue line)

I do have a list of ALL stocks/bonds that the company owns. This is list is super long but I'll post it if anyone would like to see it.

Basically, what I'm trying to figure out is the following:

1) We are allowed to withdrawal (with a penalty) or roll over into our own account every 5 years. My 5-year withdrawal date is coming up. Should I consider moving this into my own IRA where I could better manage this myself? Or should I continue to let the company manage it for me while I'm there and just do my own Roth IRA or something in addition?

2) The returns are pretty decent - 21.59% in 2013 - It's hard to complain about that - however, what really concerns me is that all my own contributions are being held in a savings account until the end of the year. This is simply how it's done and I have no control over this if I use my company's 401k plan. Should I be concerned about this? Should I consider taking the same amount and just putting it into my own IRA so that it could be immediately invested?

3) When reading up on the Bogleheads philosophy, it's typical to consider your entire portfolio as everything combined - taxable accounts, retirement, etc.. Considering all of my company retirement money is beyond my control and the percentages are constantly changing - so how/where do I factor this in to my own portfolio as a whole? Is it acceptable to consider my company's retirement completely separate from all investments I do personally outside of that?

There's a big part of me that simply wants to leave my employer's contributions in this Trust and let it ride - never touch it unless I leave the company... and then do my own Roth IRA in addition.. but to stop contributing anything myself... I don't know.

I do the 401k for tax benefits but it really irks me that it just sits in a savings account all year long until it's invested. However, they put a generous amount in for us at the end of the year, we as employees pay no fees at all, and the returns are pretty decent.

Any advice? I really wish I had more control over this but I simply don't. I get an annual statement once a year that shows my balance and what the YTD return % was.

It wasn't until lately that I've found these forums and started paying attention to my own investments a lot more. I want to be able to control as much as I can.

Any help would be greatly appreciated. Thanks so much!

WHL
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Re: Need serious help regarding my company's retirement plan

Post by WHL » Wed Jan 28, 2015 6:21 am

If you're not making a maximum contributions n to your Roth IRA, then yes, I would cut back on the "401k" contribution. Ditto for a HSA, if you have access to that.

bberris
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Re: Need serious help regarding my company's retirement plan

Post by bberris » Wed Jan 28, 2015 6:26 am

Don't let the perfect be the enemy of the good. I don't really see much bad here; the fees are paid by the company. Remember that waiting til the end of the year means an average 6 mo delay; not really that significant. The main problem is that the investing is one-size fits all; not appropriate for someone nearing retirement.

I'm not sure why you are hot on a Roth. Are you taxed 15 % marginal rate?

fastpace_re
Posts: 45
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Re: Need serious help regarding my company's retirement plan

Post by fastpace_re » Wed Jan 28, 2015 7:44 am

bberris wrote:Don't let the perfect be the enemy of the good. I don't really see much bad here; the fees are paid by the company. Remember that waiting til the end of the year means an average 6 mo delay; not really that significant. The main problem is that the investing is one-size fits all; not appropriate for someone nearing retirement.

I'm not sure why you are hot on a Roth. Are you taxed 15 % marginal rate?
I'm actually 29 but the ones making the bulk of the "one-size fits all" investment decisions are much closer to retirement - the officers of the company are all nearing 60. I would much rather be more risky with my investments.

I'm not sure what you mean by "hot" on a Roth. I've just had other advice on these forums that I should be maxing out a Roth IRA before anything else really. I make about $52k/year - every other year I file as head of household (claim my daughter every other year) so I'm in the 25% bracket.

I guess my biggest question is if I should be rolling over any of my retirement money in the company's fund or just keep it there and let it ride.

Thanks for the help so far!

niceguy7376
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Location: Metro ATL

Re: Need serious help regarding my company's retirement plan

Post by niceguy7376 » Wed Jan 28, 2015 8:58 am

Are you contributing to Roth 401k and Roth IRA or to trad 401k and Roth IRA?

Also, what is the logic behind every other year of head of household?

Rupert
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Re: Need serious help regarding my company's retirement plan

Post by Rupert » Wed Jan 28, 2015 9:20 am

niceguy7376 wrote:Are you contributing to Roth 401k and Roth IRA or to trad 401k and Roth IRA?

Also, what is the logic behind every other year of head of household?
Probably the every other year arrangement is by divorce decree. That's a fairly common arrangement for divorced parents.

fastpace_re
Posts: 45
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Re: Need serious help regarding my company's retirement plan

Post by fastpace_re » Wed Jan 28, 2015 10:14 am

niceguy7376 wrote:Are you contributing to Roth 401k and Roth IRA or to trad 401k and Roth IRA?

Also, what is the logic behind every other year of head of household?
Right now I'm contributing to both the Roth 401k and the 401k through my company. I'm getting ready to open up a Roth IRA through Vanguard though and make that the priority (after doing much reading on these forums and finding out some of the information I found out recently). It wasn't until this year that I found out where my payroll deducted money was being held (in a Savings account all year until the end of the year).

The every other year thing is just based on my Shared Parenting Agreement. I can't file head of household on the years I don't claim my daughter. On years I do claim her, I am able to file as head of household. Don't really know of any other way to do it since that's what our paperwork says.

Thanks all the help thus far!

niceguy7376
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Location: Metro ATL

Re: Need serious help regarding my company's retirement plan

Post by niceguy7376 » Wed Jan 28, 2015 10:41 am

What is your reason for contributing to Roth 401k?
I understand about contributing to Roth IRA. This was the main observation of prev poster about asking why you are hot on Roth.

Also, any company match or contrib is always into trad 401k.

choices
Posts: 84
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Re: Need serious help regarding my company's retirement plan

Post by choices » Wed Jan 28, 2015 10:50 am

This once a year deposit on contribs into funds puzzles me. I was a business mgr for a CPA firm and had to make deposit to our fund company within 2 days of cutting payroll. Is holding the employee contribs a violation of ERISA or sumthin?

fastpace_re
Posts: 45
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Re: Need serious help regarding my company's retirement plan

Post by fastpace_re » Wed Jan 28, 2015 11:26 am

choices wrote:This once a year deposit on contribs into funds puzzles me. I was a business mgr for a CPA firm and had to make deposit to our fund company within 2 days of cutting payroll. Is holding the employee contribs a violation of ERISA or sumthin?
I would love to know more on this topic. I would really like to have something in writing to show them. It just doesn't seem right to me - I've been with this company for 10 years and they don't make this information very well known to employees. I didn't find out until this year - and only because of the department I work in.

pkcrafter
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Re: Need serious help regarding my company's retirement plan

Post by pkcrafter » Wed Jan 28, 2015 12:23 pm

All of the Profit Sharing, Pension, 401k, and Roth 401k is lumped into your total Trust balance. All of the money is in one big pool and invested as a whole unit. We do not get individual employee investment options - and in fact, we don't even really know where this money is being invested.
Obviously, this must be legal, and I can understand the profit sharing and pension being out of your control, but handling a 401k this way is something I've never heard of. It sounds like all options may be tied into the company's performance, which makes using all of them very risky.
All 401k and Roth 401k contributions that you make are kept in a savings account all year long (even though payroll deducted) and not dumped into the master Trust fund until the end of the year. This concerns me. I'm losing potential gains all year.
Yes, it may be a concern. This is from the 401k Help Center
Government regulations require that participant contributions to a 401k be deposited to the plan on the earliest date that they can be reasonably segregated from the employer's general assets, but in no event may they be deposited later than the 15th business day of the month following the month in which the participant contributions are deducted from their pay.
http://www.401khelpcenter.com/faq/faq_1 ... MkYfy60Lb4

It sounds like you company is violating this rule, but if the company is controlling the investments, it's possible they are putting the money into the trust as required and then investing it in cash. Is there a return on the cash in the trust account?

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

mnvalue
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Re: Need serious help regarding my company's retirement plan

Post by mnvalue » Wed Jan 28, 2015 12:37 pm

fastpace_re wrote:All of the money is in one big pool and invested as a whole unit. We do not get individual employee investment options
Does anyone here know if that's legal?
fastpace_re wrote:1) We are allowed to withdrawal (with a penalty) or roll over into our own account every 5 years. My 5-year withdrawal date is coming up.
Unless this causes you to forgo a match or profit sharing, yes, you should get your money into your own control as soon as allowed. However, the law prohibits employees under age 59.5 from withdrawing their elective deferrals. But if all of your money is from the employer profit sharing, and the plan lets you, I'd roll it all over to a Traditional IRA whenever and as soon as allowed.

DGE
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Re: Need serious help regarding my company's retirement plan

Post by DGE » Wed Jan 28, 2015 1:04 pm

fastpace_re wrote:1) We are allowed to withdrawal (with a penalty) or roll over into our own account every 5 years. My 5-year withdrawal date is coming up. Should I consider moving this into my own IRA where I could better manage this myself? Or should I continue to let the company manage it for me while I'm there and just do my own Roth IRA or something in addition?
If I'm understanding the situation correctly, my suggestion is as follows:

- Yes, you should roll the money into your own Trad IRA that you can better manage
- continue to utilize the "Employer Trust" offering, BUT roll the funds over every 5 years into you Trad IRA
- change your contribution type from Roth 401k to Trad 401k for tax saving purposes

The tax advantages of using the trad 401k contributions helps to offset the increased risk you're realizing with the black whole your Employer Trust seems to be.

fastpace_re
Posts: 45
Joined: Wed Jan 07, 2015 8:58 pm

Re: Need serious help regarding my company's retirement plan

Post by fastpace_re » Thu Jan 29, 2015 1:45 pm

DGE wrote:
fastpace_re wrote:1) We are allowed to withdrawal (with a penalty) or roll over into our own account every 5 years. My 5-year withdrawal date is coming up. Should I consider moving this into my own IRA where I could better manage this myself? Or should I continue to let the company manage it for me while I'm there and just do my own Roth IRA or something in addition?
If I'm understanding the situation correctly, my suggestion is as follows:

- Yes, you should roll the money into your own Trad IRA that you can better manage
- continue to utilize the "Employer Trust" offering, BUT roll the funds over every 5 years into you Trad IRA
- change your contribution type from Roth 401k to Trad 401k for tax saving purposes

The tax advantages of using the trad 401k contributions helps to offset the increased risk you're realizing with the black whole your Employer Trust seems to be.
Thank you for all the help. I guess the hard part for me is seeing the YTD returns the company normally gets. It's still generally pretty decent.

As far as Trad 401k, I still hate the fact that my contributions will be sitting in a Savings account all year long.

fastpace_re
Posts: 45
Joined: Wed Jan 07, 2015 8:58 pm

Re: Need serious help regarding my company's retirement plan

Post by fastpace_re » Tue Feb 03, 2015 2:16 pm

http://www.401khelpcenter.com/faq/faq_1 ... MkYfy60Lb4

It sounds like you company is violating this rule, but if the company is controlling the investments, it's possible they are putting the money into the trust as required and then investing it in cash. Is there a return on the cash in the trust account?

Paul
I've talked to a few people about this and it sounds like this is only a violation if they were using the money for their own expenses, etc... It is definitely sitting in a savings account all year long and they do account for any interest. Basically, my contributions earned a whole $3 or something ridiculous last year.

ERISA Stone
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Re: Need serious help regarding my company's retirement plan

Post by ERISA Stone » Tue Feb 03, 2015 3:18 pm

choices wrote:This once a year deposit on contribs into funds puzzles me. I was a business mgr for a CPA firm and had to make deposit to our fund company within 2 days of cutting payroll. Is holding the employee contribs a violation of ERISA or sumthin?
The 7 business day rule is for the funds to be deposited in to the plan trust. It does not mean the funds have to be deposited into an account specifically for the EE. It appears they are meeting this requirement.

EDIT TO ADD: I am making the assumption that the savings account is in the plan name. If it's a savings account in the company name and funds are being held there past eligible time periods, that's a big no no. It's a prohibited transaction.
Last edited by ERISA Stone on Tue Feb 03, 2015 3:34 pm, edited 2 times in total.

ERISA Stone
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Re: Need serious help regarding my company's retirement plan

Post by ERISA Stone » Tue Feb 03, 2015 3:21 pm

fastpace_re wrote:
DGE wrote:
fastpace_re wrote:1) We are allowed to withdrawal (with a penalty) or roll over into our own account every 5 years. My 5-year withdrawal date is coming up. Should I consider moving this into my own IRA where I could better manage this myself? Or should I continue to let the company manage it for me while I'm there and just do my own Roth IRA or something in addition?
If I'm understanding the situation correctly, my suggestion is as follows:

- Yes, you should roll the money into your own Trad IRA that you can better manage
- continue to utilize the "Employer Trust" offering, BUT roll the funds over every 5 years into you Trad IRA
- change your contribution type from Roth 401k to Trad 401k for tax saving purposes

The tax advantages of using the trad 401k contributions helps to offset the increased risk you're realizing with the black whole your Employer Trust seems to be.
Thank you for all the help. I guess the hard part for me is seeing the YTD returns the company normally gets. It's still generally pretty decent.

As far as Trad 401k, I still hate the fact that my contributions will be sitting in a Savings account all year long.
Not only that. Look at how "good" the loss is in the bad years. It looks like they're invested in a fairly conservative model.

ERISA Stone
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Re: Need serious help regarding my company's retirement plan

Post by ERISA Stone » Tue Feb 03, 2015 3:37 pm

Here's an article from Whitecoat that might give you some insight why an employer might choose a pooled account rather than self-directed. http://whitecoatinvestor.com/the-best-4 ... ?print=pdf

fastpace_re
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Re: Need serious help regarding my company's retirement plan

Post by fastpace_re » Tue Feb 03, 2015 3:41 pm

ERISA Stone wrote:
Not only that. Look at how "good" the loss is in the bad years. It looks like they're invested in a fairly conservative model.
Are you saying this fairly conservative model is a good or bad thing in my case?

So are you suggesting I keep things in the plan or should I roll over when I have the chance? Also, would you suggest I stop contributing on my own to the trust?

ERISA Stone
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Re: Need serious help regarding my company's retirement plan

Post by ERISA Stone » Tue Feb 03, 2015 3:52 pm

fastpace_re wrote:
ERISA Stone wrote:
Not only that. Look at how "good" the loss is in the bad years. It looks like they're invested in a fairly conservative model.
Are you saying this fairly conservative model is a good or bad thing in my case?

So are you suggesting I keep things in the plan or should I roll over when I have the chance? Also, would you suggest I stop contributing on my own to the trust?
Any advice I generally give on here is related to the administration of a plan. I think other members on this board could probably offer you better advice on if you should rollover or stop contributing. The reality is you have a pooled account and you don't have direct control over your investments. You need to decide how important that is to you.

I'm not saying your investments are good or bad, especially since I don't know what they are. However, the returns haven't been terrible. It looks like there were some stinkers in there around 1997-2000, but overall the results are mixed when compared to the indices.

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