y 401k plan was completely overhauled - and I don't like it

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bironology
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y 401k plan was completely overhauled - and I don't like it

Post by bironology » Fri Mar 10, 2017 9:29 am

My new (just a few weeks in) employer's 401k plan is administered by Vanguard. This made me very happy, and I selected a nice mix of Vanguard funds with famously low fees.

I then initiated a rollover from my previous 401k which had higher fees. The check was sent to Vanguard.

In the interim 2 weeks, two things came up

1) the previous plan administrator (TRS) did not properly document my Roth cost basis and start date, so Vanguard is holding the check while they await this information, and of course I am the one who has to run around getting this info from TRS. In the meantime my check is sitting on someone's desk, undeposited.

2) the kicker: my employer JUST decided to completely overhaul the new plan, tossing all VG funds and replacing with only target date funds from SSgA. *NO* VG funds at all, even though VG is the plan admin. Crazy. Worse, these target date funds currently have zero description, no historical performance information, and not even asset allocation details.

Should I:

1) abort mission to rollover-in? I can't go back to TRS, they confirmed that. I'd have to deposit the rollover into an IRA. I have some non-taxable and some Roth contributions, so this would mean I'd now have an IRA with non-taxed contributions, ruining my ability to start backdoor Roth contributions cleanly

2) just let it go into one of these target date funds, hoping someday in the near future I either change jobs and can get into a better new employer's plan, or my company overhauls again (based on many thousands of employees' loud feedback)

Maybe I shouldn't be too worried about these target date funds?

Please advise.
Thanks.

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jazman12
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Re: y 401k plan was completely overhauled - and I don't like it

Post by jazman12 » Fri Mar 10, 2017 12:40 pm

roll over to personal IRA. Keep proceeds separate so after tax can be deposited into Roth account. You can have Vanguard direct the proceeds on your behalf by calling CS and asking for IRA specialist.
Act soon... time is running out

stevew7
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Re: y 401k plan was completely overhauled - and I don't like it

Post by stevew7 » Fri Mar 10, 2017 1:30 pm

Do you have any more details on the ssga funds?

Sometimes really large companies contract with ssga to provide institutional index funds with even lower expense ratios than Vanguard's funds. So without more details on the ssga funds, it is hard to provide good suggestions.

dad2000
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Re: y 401k plan was completely overhauled - and I don't like it

Post by dad2000 » Fri Mar 10, 2017 1:36 pm

I'm sure that if you dig a little, you can figure out the AAs of the SSGA Target date funds.

My decision to continue the rollover would be primarily based on the ERs of the new funds. As long as they're 20bp or less, I'd be inclined to let it slide. Otherwise I'd do the IRA.

Dottie57
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Re: y 401k plan was completely overhauled - and I don't like it

Post by Dottie57 » Fri Mar 10, 2017 1:43 pm

Look at the performance of the target funds too. Target funds are not created equal. The ones in my 401k have not done well and I am pleased I have not chosen them.

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Duckie
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Re: y 401k plan was completely overhauled - and I don't like it

Post by Duckie » Fri Mar 10, 2017 8:17 pm

bironology wrote:Worse, these target date funds currently have zero description, no historical performance information, and not even asset allocation details.
Here are some details. If the plan expense ratio is below 0.30% then these are good options.

And you pick a target-date fund by the AA inside, not the date in the title.

bironology
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Re: y 401k plan was completely overhauled - and I don't like it

Post by bironology » Mon Mar 13, 2017 4:27 am

jazman12 wrote:roll over to personal IRA. Keep proceeds separate so after tax can be deposited into Roth account. You can have Vanguard direct the proceeds on your behalf by calling CS and asking for IRA specialist.
I should have mentioned that I cannot contrib directly to a Roth, so I was trying to keep my pre-tax savings in the 401k so I can execute backdoor Roth contributions without worring about pro-rata taxation.

bironology
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Re: y 401k plan was completely overhauled - and I don't like it

Post by bironology » Mon Mar 13, 2017 4:46 am

dad2000 wrote:I'm sure that if you dig a little, you can figure out the AAs of the SSGA Target date funds.

My decision to continue the rollover would be primarily based on the ERs of the new funds. As long as they're 20bp or less, I'd be inclined to let it slide. Otherwise I'd do the IRA.
That's the conclusion I'm coming to as well.

Events are occurring in real time. The prospectuses (prospecti?) are not yet posted to the online account portal, but I'm now able to see that the Index 20XX Retirement Solution funds and ER's range from 7 to 8 bps. That makes me feel much better. I'm sure I can find the AA if I keep digging.

cherijoh
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Re: y 401k plan was completely overhauled - and I don't like it

Post by cherijoh » Mon Mar 13, 2017 6:59 am

bironology wrote:
dad2000 wrote:I'm sure that if you dig a little, you can figure out the AAs of the SSGA Target date funds.

My decision to continue the rollover would be primarily based on the ERs of the new funds. As long as they're 20bp or less, I'd be inclined to let it slide. Otherwise I'd do the IRA.
That's the conclusion I'm coming to as well.

Events are occurring in real time. The prospectuses (prospecti?) are not yet posted to the online account portal, but I'm now able to see that the Index 20XX Retirement Solution funds and ER's range from 7 to 8 bps. That makes me feel much better. I'm sure I can find the AA if I keep digging.

Check out this. It is as of end of 2015, but page 10 shows AA for their target date funds.

bironology
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Re: y 401k plan was completely overhauled - and I don't like it

Post by bironology » Mon Mar 13, 2017 9:18 am

cherijoh wrote:
Check out this. It is as of end of 2015, but page 10 shows AA for their target date funds.
Yup, so the plot thickens a bit. Aon Hewitt puts the target funds together, using underlying funds from SSgA.

Why in the world there are so many parties in involved (VG as plan admin, Aon Hewitt as target fund designer, SSgA as index fund provider) I have no idea.

But I was able to find the full offering document which verified the AA is exactly what the SSgA target funds are.

A bit heavier on non-US than I would like, but I can balance it across my other accounts. I'll try to remind myself that these target funds are convenient, and I'm at least glad to see the very low ERs.

dbr
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Re: y 401k plan was completely overhauled - and I don't like it

Post by dbr » Mon Mar 13, 2017 9:37 am

Are you sure Vanguard is still the plan administrator? That in fact is the business Aon Hewitt is in, so it would be really odd.

SSgA is a well known supplier of institutional or even collective investment trust funds to 401k's. You should expect lower ERs than available from Vanguard. Are they? For awhile my plan had an SSgA S&P 500 fund charging 0.01%.

I think TR funds are a trend in 401k design to meet demands for fiduciary responsibility. The result is less chance of participants formulating their own off the wall asset allocations, among other things. That was a major change that happened in my plan. I ended up holding everything in a directed brokerage link. Is one available in the new plan?

I would certainly not jump the gun on rolling over to an IRA.

Rupert
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Re: y 401k plan was completely overhauled - and I don't like it

Post by Rupert » Mon Mar 13, 2017 10:05 am

bironology wrote:
cherijoh wrote:
Check out this. It is as of end of 2015, but page 10 shows AA for their target date funds.
Yup, so the plot thickens a bit. Aon Hewitt puts the target funds together, using underlying funds from SSgA.

Why in the world there are so many parties in involved (VG as plan admin, Aon Hewitt as target fund designer, SSgA as index fund provider) I have no idea.

But I was able to find the full offering document which verified the AA is exactly what the SSgA target funds are.

A bit heavier on non-US than I would like, but I can balance it across my other accounts. I'll try to remind myself that these target funds are convenient, and I'm at least glad to see the very low ERs.
Sounds like they've switched to an open architecture platform. That usually involves three parties: a custodian, a plan administrator, and an adviser. Double check that Vanguard is still involved.

clutchied
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Re: y 401k plan was completely overhauled - and I don't like it

Post by clutchied » Mon Mar 13, 2017 11:45 am

jazman12 wrote:roll over to personal IRA. Keep proceeds separate so after tax can be deposited into Roth account. You can have Vanguard direct the proceeds on your behalf by calling CS and asking for IRA specialist.
I agree with this.

The issue may be a blessing in disguise.

cherijoh
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Re: y 401k plan was completely overhauled - and I don't like it

Post by cherijoh » Mon Mar 13, 2017 2:38 pm

jazman12 wrote:roll over to personal IRA. Keep proceeds separate so after tax can be deposited into Roth account. You can have Vanguard direct the proceeds on your behalf by calling CS and asking for IRA specialist.
I don't believe that you understand how the taxes on Roth conversions work. Putting the money in a separate IRA does not help!

If OP rolls his 401k into a TIRA then the entire balance across ALL tIRA (including SEP IRA) are included in one big pot which is used to determine the pro rata tax on the conversion. This essentially guts the Back door Roth if he has substantial money in the 401k that you are suggesting rolling over into an IRA.
clutchied wrote:
jazman12 wrote:roll over to personal IRA. Keep proceeds separate so after tax can be deposited into Roth account. You can have Vanguard direct the proceeds on your behalf by calling CS and asking for IRA specialist.
I agree with this.

The issue may be a blessing in disguise.
Apparently you don't understand how Roth Conversions work either. OP indicated that he is not eligible to make a direct Roth contribution. So it would be unlikely to be viewed by the OP as a blessing in disguise.

bironology
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Re: y 401k plan was completely overhauled - and I don't like it

Post by bironology » Mon Mar 13, 2017 3:42 pm

dbr wrote:Are you sure Vanguard is still the plan administrator? That in fact is the business Aon Hewitt is in, so it would be really odd.

SSgA is a well known supplier of institutional or even collective investment trust funds to 401k's. You should expect lower ERs than available from Vanguard. Are they? For awhile my plan had an SSgA S&P 500 fund charging 0.01%.
Company FAQ says "After an extensive review process, the Investment Committee hired Aon Hewitt Investment Consulting, Inc. (AHIC) for their expertise in designing the new funds for our 401(k) plans. Leveraging their research team, AHIC hires and monitors experienced investment managers who have long track records. AHIC is the investment consulting division of AON Hewitt and is an SEC-registered investment advisor. "

And I'm still logging into Vanguard to view and manage my contributions, so… I guess AHIC is a "fund designer"?
dbr wrote: I think TR funds are a trend in 401k design to meet demands for fiduciary responsibility. The result is less chance of participants formulating their own off the wall asset allocations, among other things. That was a major change that happened in my plan. I ended up holding everything in a directed brokerage link. Is one available in the new plan?

I would certainly not jump the gun on rolling over to an IRA.
Unfortunately only Target Date funds are available, I cannot direct through a linked brokerage, nor can I invest in specific funds such as SSgA S&P 500 Index fund.

bironology
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Re: y 401k plan was completely overhauled - and I don't like it

Post by bironology » Mon Mar 13, 2017 3:45 pm

cherijoh wrote: Apparently you don't understand how Roth Conversions work either. OP indicated that he is not eligible to make a direct Roth contribution. So it would be unlikely to be viewed by the OP as a blessing in disguise.
Certainly not a blessing, as your surmised. I do not want to hold an IRA with pre-tax contribs because I'm planning on backdoor Roth contributions. As of now, I have a clean slate w.r.t. IRAs and I'd like to keep it that way. I have a pair of empty ones, a traditional and a Roth, for executing backdoor contribs of $5,500 per year.

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jmndu99
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Re: y 401k plan was completely overhauled - and I don't like it

Post by jmndu99 » Mon Mar 13, 2017 8:57 pm

Hello OP,

I am sorry I'm not much help to your situation, and cannot answer your questions.

However, I do have a question. If Vanguard is the Admin of the Plan, is there a feature in your plan named brokerage window?

If so, could you still contribute to the Plan, directing contributions to the brokerage window to buy VG funds that way?

Best wishes,
J

bironology
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Re: y 401k plan was completely overhauled - and I don't like it

Post by bironology » Sat Mar 18, 2017 6:02 am

jmndu99 wrote:Hello OP,
If Vanguard is the Admin of the Plan, is there a feature in your plan named brokerage window?

If so, could you still contribute to the Plan, directing contributions to the brokerage window to buy VG funds that way?

Best wishes,
J
Good idea, but the "brokerage option fund", as it had been described, was explicitly eliminated. I literally have only target retirement funds created by Hewitt to choose from,

I've come to terms with this though, as the target date funds are pretty good and have rock bottom fees. I merely tweaked to my personal preference by pretending to be a little younger than I am so the mix matches my personal allocation preferences and not the plain-vanilla one based on my actual age and expected retirement.

dbr
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Re: y 401k plan was completely overhauled - and I don't like it

Post by dbr » Sat Mar 18, 2017 10:16 am

bironology wrote: I merely tweaked to my personal preference by pretending to be a little younger than I am so the mix matches my personal allocation preferences and not the plain-vanilla one based on my actual age and expected retirement.
Which is exactly what you should do. Even Vanguard miss-markets these funds and offers financial advice they have no business giving by suggesting in the marketing material that people should accept their asset allocations based on retirement year. In addition to the AA one should also attend to the glide slope as time goes on.

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