Why Doesn't My 401(k) Pay Dividends?

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joer1212
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Why Doesn't My 401(k) Pay Dividends?

Post by joer1212 »

Is there any reason why my company 401(k) and 457(b) never pays a dividend?

Now, I already know what your answer is going to be. You're going to tell me that my employee retirement accounts are in a "collective investment trust", which does not throw off dividends directly, but increases the value of my shares.
But, here's the thing. According to the Fund Fact Sheets, it appears that not all of my funds are in collective trusts. Some of them are in other types of wrappers (including one fund by Vanguard, with a ticker symbol) as follows:

Bond Aggregate Index Fund (SSgA Non-Lending Class C) Collective Trust

Large Cap Equity Index Fund (ticker: VIIIX) Custom Plan Investment Option (???)

Small-Mid Cap Equity Index Fund (SSgA small/Mid Cap Non Lending Series K) Custom Plan Investment Option-- Fund of Funds (???)

International Index Fund (SSgA Global All Cap Equity ex. U.S. Index Fund Class K) Collective Trust

So, why, then, do I never see dividends in my quarterly statements for the 2 funds that are not in collective trusts?
I would appreciate if someone could shed some light on this.
Last edited by joer1212 on Thu Jul 06, 2017 3:04 pm, edited 3 times in total.
sschoe2
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Re: Why Doesn't My 401(k) Pay Dividends?

Post by sschoe2 »

I assume any dividends are reinvested back into the funds for growth. 401k's are meant to grow not generate current income.
Last edited by sschoe2 on Thu Jul 06, 2017 3:53 pm, edited 1 time in total.
fposte
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Re: Why Doesn't My 401(k) Pay Dividends?

Post by fposte »

Seconding sschoe2. If you look at your statements, you'll probably see that the funds do throw off dividends but that they're reinvested--your share count has probably risen, which would give you a clue. That's what VIIIX does in my 457b.
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joer1212
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Re: Why Doesn't My 401(k) Pay Dividends?

Post by joer1212 »

fposte wrote:Seconding sschoe2. If you look at your statements, you'll probably see that the funds do throw off dividends but that they're reinvested--your share count has probably risen, which would give you a clue. That's what VIIIX does in my 457b.
I checked my statements prior to posting, and found not even a mention of dividends at all.
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The529guy
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Re: Why Doesn't My 401(k) Pay Dividends?

Post by The529guy »

joer1212 wrote:
fposte wrote:Seconding sschoe2. If you look at your statements, you'll probably see that the funds do throw off dividends but that they're reinvested--your share count has probably risen, which would give you a clue. That's what VIIIX does in my 457b.
I checked my statements prior to posting, and found not even a mention of dividends at all.
Did your share count increase, above and beyond your contributions?
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Phineas J. Whoopee
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Re: Why Doesn't My 401(k) Pay Dividends?

Post by Phineas J. Whoopee »

Your plan seems to include unit investment trusts, which are different from mutual funds and in the US only available in certain types of employer-sponsored retirement accounts. Like many European mutual funds, but unlike any US mutual funds or ETFs, they simply include dividends in the net asset value without paying them out, which is only important for income tax purposes. I'm not saying no UIT anywhere behaves badly, but they're probably fine.

As has been under intense discussion here for a while, dividends on their own are not the whole return story, and can only be understood in context.

PJW
livesoft
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Re: Why Doesn't My 401(k) Pay Dividends?

Post by livesoft »

Collective Investment Trusts are not the only things that wrap investments up so that they don't appear to pay dividends. You have discovered that "Custom Plan Investment" can do the same thing. So can Variable Annuities. There are lots of things that can wrap up funds and change the bookkeeping.
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Re: Why Doesn't My 401(k) Pay Dividends?

Post by lazylarry »

One point to consider is that payment of dividend (and you manually reinvesting) is equivalent to not having a dividend at all. Payment of dividend by investment will result in appropriate reduction of the share price. So as long as the money is in a 401k where you are deciding the asset allocation, it really doesn't matter.
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Re: Why Doesn't My 401(k) Pay Dividends?

Post by Grt2bOutdoors »

Read the Summary Plan Description of 401k plan. You can get this from either your HR dept or the administrator of your plan.
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Re: Why Doesn't My 401(k) Pay Dividends?

Post by livesoft »

And please read this article, too: http://monevator.com/accumulation-funds-dividends/ about accumulation funds which are quite common.
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Re: Why Doesn't My 401(k) Pay Dividends?

Post by triceratop »

Phineas J. Whoopee wrote:Your plan seems to include unit investment trusts, which are different from mutual funds and in the US only available in certain types of employer-sponsored retirement accounts. Like many European mutual funds, but unlike any US mutual funds or ETFs, they simply include dividends in the net asset value without paying them out, which is only important for income tax purposes. I'm not saying no UIT anywhere behaves badly, but they're probably fine.

As has been under intense discussion here for a while, dividends on their own are not the whole return story, and can only be understood in context.

PJW

It is possible for an ETF to be organized as a Unit Investment Trust. In fact that's one of the disadvantages of SPY versus, say, VOO or IVV: SPY must hold its dividends received as cash until distribution while others can immediately reinvest.

Do you mean collective investment fund? Dividends may be reinvested in that case, but that does not occur with UITs, so in this case it is a fairly key distinction.
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Nate79
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Re: Why Doesn't My 401(k) Pay Dividends?

Post by Nate79 »

It doesn't matter in the end.
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Phineas J. Whoopee
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Re: Why Doesn't My 401(k) Pay Dividends?

Post by Phineas J. Whoopee »

triceratop wrote:...

It is possible for an ETF to be organized as a Unit Investment Trust. In fact that's one of the disadvantages of SPY versus, say, VOO or IVV: SPY must hold its dividends received as cash until distribution while others can immediately reinvest.

Do you mean collective investment fund? Dividends may be reinvested in that case, but that does not occur with UITs, so in this case it is a fairly key distinction.
I defer to your clearly superior knowledge on this UIT vs. CIF topic.
PJW
TBillT
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Re: Why Doesn't My 401(k) Pay Dividends?

Post by TBillT »

My 401K allowed me to take dividends on the company stock only, which I did until last year's rollover.
But it is not tax efficient as they are not "qualified" dividends when taken this way.
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joer1212
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Re: Why Doesn't My 401(k) Pay Dividends?

Post by joer1212 »

livesoft wrote:And please read this article, too: http://monevator.com/accumulation-funds-dividends/ about accumulation funds which are quite common.
Thanks for the link.
My issue is not that I'm not getting dividend distributions from my funds (I want them to be reinvested), it's that they are not listed at all in my quarterly statements. I guess what I'm saying is that I would like more transparency from my retirement account.
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joer1212
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Re: Why Doesn't My 401(k) Pay Dividends?

Post by joer1212 »

Grt2bOutdoors wrote:Read the Summary Plan Description of 401k plan. You can get this from either your HR dept or the administrator of your plan.
Will check it out, thanks.
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joer1212
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Re: Why Doesn't My 401(k) Pay Dividends?

Post by joer1212 »

livesoft wrote:Collective Investment Trusts are not the only things that wrap investments up so that they don't appear to pay dividends. You have discovered that "Custom Plan Investment" can do the same thing. So can Variable Annuities. There are lots of things that can wrap up funds and change the bookkeeping.
Hmm. I see. I was under the impression that only Collective Investment Trusts lacked transparency.
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joer1212
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Re: Why Doesn't My 401(k) Pay Dividends?

Post by joer1212 »

Phineas J. Whoopee wrote:Your plan seems to include unit investment trusts, which are different from mutual funds and in the US only available in certain types of employer-sponsored retirement accounts. Like many European mutual funds, but unlike any US mutual funds or ETFs, they simply include dividends in the net asset value without paying them out, which is only important for income tax purposes. I'm not saying no UIT anywhere behaves badly, but they're probably fine.

As has been under intense discussion here for a while, dividends on their own are not the whole return story, and can only be understood in context.

PJW
This is enlightening.
Are there any advantages/disadvantages to a UIT?
Is a UIT sort of a broad wrapper that can contain collective investment trusts, etc? This is a bit confusing.
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joer1212
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Re: Why Doesn't My 401(k) Pay Dividends?

Post by joer1212 »

The529guy wrote:
joer1212 wrote:
fposte wrote:Seconding sschoe2. If you look at your statements, you'll probably see that the funds do throw off dividends but that they're reinvested--your share count has probably risen, which would give you a clue. That's what VIIIX does in my 457b.
I checked my statements prior to posting, and found not even a mention of dividends at all.
Did your share count increase, above and beyond your contributions?
I haven't done that calculation yet.
dbr
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Re: Why Doesn't My 401(k) Pay Dividends?

Post by dbr »

joer1212 wrote:
Phineas J. Whoopee wrote:Your plan seems to include unit investment trusts, which are different from mutual funds and in the US only available in certain types of employer-sponsored retirement accounts. Like many European mutual funds, but unlike any US mutual funds or ETFs, they simply include dividends in the net asset value without paying them out, which is only important for income tax purposes. I'm not saying no UIT anywhere behaves badly, but they're probably fine.

As has been under intense discussion here for a while, dividends on their own are not the whole return story, and can only be understood in context.

PJW
This is enlightening.
Are there any advantages/disadvantages to a UIT?
Is a UIT sort of a broad wrapper that can contain collective investment trusts, etc? This is a bit confusing.
This structure is sometimes the lowest cost route to providing an investment to a 401K plan, thus good for the investor. A problem can be finding a really complete description of the investment due to lack of a prospectus and there is no way to track the investment in public quotes from the market.
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joer1212
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Re: Why Doesn't My 401(k) Pay Dividends?

Post by joer1212 »

dbr wrote:A problem can be finding a really complete description of the investment due to lack of a prospectus and there is no way to track the investment in public quotes from the market.
One of my funds within the UIT is Vanguard, and it has a ticker symbol (VIIIX). How is this?
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dm200
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Re: Why Doesn't My 401(k) Pay Dividends?

Post by dm200 »

1. IF the holdings in the 401k are actual Mutual Funds, then these funds would, probably, pay dividends. You could tell this from the identification ticker symbols. If you do not see dividends being reinvested, then I suspect that the costs that your 401k provider imposes on you equal or exceed the amount of the dividends.

2. IF the holdings are not actual mutual funds but investments intended specifically for 401k plans, then the amount od dividends just accrues into the NAV per share.
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Re: Why Doesn't My 401(k) Pay Dividends?

Post by Grt2bOutdoors »

joer1212 wrote:
dbr wrote:A problem can be finding a really complete description of the investment due to lack of a prospectus and there is no way to track the investment in public quotes from the market.
One of my funds within the UIT is Vanguard, and it has a ticker symbol (VIIIX). How is this?
That fund is the institutional class of Vanguard 500 index fund, it's not a UIT.
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joer1212
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Re: Why Doesn't My 401(k) Pay Dividends?

Post by joer1212 »

dm200 wrote:1. IF the holdings in the 401k are actual Mutual Funds, then these funds would, probably, pay dividends. You could tell this from the identification ticker symbols. If you do not see dividends being reinvested, then I suspect that the costs that your 401k provider imposes on you equal or exceed the amount of the dividends.

2. IF the holdings are not actual mutual funds but investments intended specifically for 401k plans, then the amount od dividends just accrues into the NAV per share.
The only fund in my 401(k) and 457(b) that has a ticker symbol is VIIIX. Yet, I have never received a statement that shows a dividend being thrown off and reinvested. It's just not mentioned at all. This is exactly what's mystifying me right now.
Last edited by joer1212 on Sat Jul 08, 2017 10:34 am, edited 1 time in total.
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joer1212
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Re: Why Doesn't My 401(k) Pay Dividends?

Post by joer1212 »

Grt2bOutdoors wrote:
joer1212 wrote:
dbr wrote:A problem can be finding a really complete description of the investment due to lack of a prospectus and there is no way to track the investment in public quotes from the market.
One of my funds within the UIT is Vanguard, and it has a ticker symbol (VIIIX). How is this?
That fund is the institutional class of Vanguard 500 index fund, it's not a UIT.
Then, why am I not seeing dividends listed in any of my statements?
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Re: Why Doesn't My 401(k) Pay Dividends?

Post by Grt2bOutdoors »

joer1212 wrote:
Grt2bOutdoors wrote:
joer1212 wrote:
dbr wrote:A problem can be finding a really complete description of the investment due to lack of a prospectus and there is no way to track the investment in public quotes from the market.
One of my funds within the UIT is Vanguard, and it has a ticker symbol (VIIIX). How is this?
That fund is the institutional class of Vanguard 500 index fund, it's not a UIT.
Then, why am I not seeing dividends listed in any of my statements?
Let me ask you a question? Have you picked up the phone or walked down the hall to HR and ask them the same questions you've been asking us? What did they say? Unless you either post verbatim what the Summary Plan Description says on your post or you call up your 401K administrator/HR department that handles benefits to ask them the question, do you really think the forum will have an answer to your question that could have multiple answers?

The most likely answer is: the value of the dividends per share is being reinvested in the fund, you are realizing the value of those dividends in the increased net asset value price of the fund when it is shown on your statement. If you want more transparency, take that up with your HR department, my feeling is your going to be told what is the difference so long as you are not paying any administrative costs for running the plan and you are realizing the increase in the NAV price of the fund.
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dbr
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Re: Why Doesn't My 401(k) Pay Dividends?

Post by dbr »

joer1212 wrote:
dbr wrote:A problem can be finding a really complete description of the investment due to lack of a prospectus and there is no way to track the investment in public quotes from the market.
One of my funds within the UIT is Vanguard, and it has a ticker symbol (VIIIX). How is this?
The UIT holds funds, one of which is VIIIX apparently, but the accounting you get is the performance of the UIT which seemingly does not show dividends to you. The UIT may not have a prospectus such as a mutual fund must have. You should assemble and read all the information that is provided by your plan about the UIT.

You can look here: https://en.wikipedia.org/wiki/Unit_investment_trust or here: https://www.ici.org/pdf/bro_g2uits_p.pdf and compare to what your plan is telling you about the trust.
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The529guy
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Re: Why Doesn't My 401(k) Pay Dividends?

Post by The529guy »

Grt2bOutdoors wrote:
joer1212 wrote:
Grt2bOutdoors wrote:
joer1212 wrote:
dbr wrote:A problem can be finding a really complete description of the investment due to lack of a prospectus and there is no way to track the investment in public quotes from the market.
One of my funds within the UIT is Vanguard, and it has a ticker symbol (VIIIX). How is this?
That fund is the institutional class of Vanguard 500 index fund, it's not a UIT.
Then, why am I not seeing dividends listed in any of my statements?
Let me ask you a question? Have you picked up the phone or walked down the hall to HR and ask them the same questions you've been asking us? What did they say? Unless you either post verbatim what the Summary Plan Description says on your post or you call up your 401K administrator/HR department that handles benefits to ask them the question, do you really think the forum will have an answer to your question that could have multiple answers?

The most likely answer is: the value of the dividends per share is being reinvested in the fund, you are realizing the value of those dividends in the increased net asset value price of the fund when it is shown on your statement. If you want more transparency, take that up with your HR department, my feeling is your going to be told what is the difference so long as you are not paying any administrative costs for running the plan and you are realizing the increase in the NAV price of the fund.
I second this idea.
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Oicuryy
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Re: Why Doesn't My 401(k) Pay Dividends?

Post by Oicuryy »

It is because of the convoluted U.S. tax laws.

Mutual funds are subject to U.S. corporate income tax. But a loophole allows funds to avoid income tax if they distribute substantially all of their income to their shareholders each year. So they do. The dividends and interest the funds receive from the stocks and bonds they own are paid out to shareholders. That distribution is taxable to the shareholders.

But the tax loopholes for retirement plans are different. They can avoid taxes even if they do not distribute their income to plan participants each year. So they don't. The dividends and interest the plans receive from the stocks, bonds and mutual funds they own are not paid out to plan participants. They are kept by the plan and increase the plan's assets and increase the value of each participant's share of the plan.

Retirement plan participants will eventually pay taxes on their distributions from the plan according to the tax rules for their type of plan.

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joer1212
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Re: Why Doesn't My 401(k) Pay Dividends?

Post by joer1212 »

Grt2bOutdoors wrote:Let me ask you a question? Have you picked up the phone or walked down the hall to HR and ask them the same questions you've been asking us? What did they say? Unless you either post verbatim what the Summary Plan Description says on your post or you call up your 401K administrator/HR department that handles benefits to ask them the question, do you really think the forum will have an answer to your question that could have multiple answers?

The most likely answer is: the value of the dividends per share is being reinvested in the fund, you are realizing the value of those dividends in the increased net asset value price of the fund when it is shown on your statement. If you want more transparency, take that up with your HR department, my feeling is your going to be told what is the difference so long as you are not paying any administrative costs for running the plan and you are realizing the increase in the NAV price of the fund.
No, I have not yet called them. That's a last resort for me, especially since there are investors here at Bogleheads who have more insight into these matters than the average phone rep would. I've had virtually all my questions regarding money/investing answered on this forum.

Secondly, I understand quite well the concept of dividends being reflected in the increased value price of my funds. What I don't understand is why would one of my funds (VIIIX), then, have a ticker symbol? This suggests that's it's simply an index fund, and index funds will show a dividend being thrown off and reinvested in my periodic statements, unless I'm missing something here, in which case, please feel free to enlighten me, since you have not done so already.
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joer1212
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Re: Why Doesn't My 401(k) Pay Dividends?

Post by joer1212 »

joer1212 wrote:
Grt2bOutdoors wrote:Let me ask you a question? Have you picked up the phone or walked down the hall to HR and ask them the same questions you've been asking us? What did they say? Unless you either post verbatim what the Summary Plan Description says on your post or you call up your 401K administrator/HR department that handles benefits to ask them the question, do you really think the forum will have an answer to your question that could have multiple answers?

The most likely answer is: the value of the dividends per share is being reinvested in the fund, you are realizing the value of those dividends in the increased net asset value price of the fund when it is shown on your statement. If you want more transparency, take that up with your HR department, my feeling is your going to be told what is the difference so long as you are not paying any administrative costs for running the plan and you are realizing the increase in the NAV price of the fund.
No, I have not yet called them. That's a last resort for me, especially since there are investors here at Bogleheads who have more insight into these matters than the average phone rep would. I've had virtually all my questions regarding money/investing answered on this forum.

Secondly, I understand quite well the concept of dividends being reflected in the increased value price of my funds. What I don't understand is why would one of my funds (VIIIX), then, have a ticker symbol? This suggests that's it's simply an index fund, and index funds will show a dividend being thrown off and reinvested in my periodic statements, unless I'm missing something here, in which case, please feel free to enlighten me.

P.S. I've already looked at the Fund Fact Sheet, but there's no mention of this besides providing the ticker symbol for the fund.
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joer1212
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Re: Why Doesn't My 401(k) Pay Dividends?

Post by joer1212 »

dbr wrote:
joer1212 wrote:
dbr wrote:A problem can be finding a really complete description of the investment due to lack of a prospectus and there is no way to track the investment in public quotes from the market.
One of my funds within the UIT is Vanguard, and it has a ticker symbol (VIIIX). How is this?
The UIT holds funds, one of which is VIIIX apparently, but the accounting you get is the performance of the UIT which seemingly does not show dividends to you. The UIT may not have a prospectus such as a mutual fund must have. You should assemble and read all the information that is provided by your plan about the UIT.

You can look here: https://en.wikipedia.org/wiki/Unit_investment_trust or here: https://www.ici.org/pdf/bro_g2uits_p.pdf and compare to what your plan is telling you about the trust.
Yes, I suspected this was the case. I guess the individual funds, including VIIIX, all fall under the UIT umbrella.
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Re: Why Doesn't My 401(k) Pay Dividends?

Post by z3r0c00l »

Same issue here, they no doubt secretly and without any transparency reinvest dividends and I just have to trust that they are doing it right. The funds only exist for 401ks, and no information can be found about them from a third party. This includes international which produces large dividends and bonds that mostly only produce dividends. There is no way to find the amounts and even figuring out expenses and fees can be pretty difficult (about 10X greater than Vanguard expenses). The lovely world of 401Ks as selected by our companies...
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joer1212
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Re: Why Doesn't My 401(k) Pay Dividends?

Post by joer1212 »

z3r0c00l wrote:Same issue here, they no doubt secretly and without any transparency reinvest dividends and I just have to trust that they are doing it right. The funds only exist for 401ks, and no information can be found about them from a third party. This includes international which produces large dividends and bonds that mostly only produce dividends. There is no way to find the amounts and even figuring out expenses and fees can be pretty difficult (about 10X greater than Vanguard expenses). The lovely world of 401Ks as selected by our companies...
Yes, exactly. Call me crazy, but I prefer transparency when you're dealing with my hard-earned money.
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