New 401k Plan Provider: Fund Lineup Selection

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Rayandron
Posts: 100
Joined: Fri Jan 17, 2014 4:48 pm

New 401k Plan Provider: Fund Lineup Selection

Post by Rayandron » Tue Dec 26, 2017 10:02 am

I have a newish job in management at company with high 7 figure annual revenues (i.e. fairly small business). I have convinced the owner that the 401k fees we're paying are exorbitant (~1.5% AUM annually across all sources), but unfortunately I was unable to convince him to switch to Employee Fiduciary due to owner's personal relationship with our Merrill Lynch Financial Adviser. As a result, we're now switching custodians from Principal to Mass Mutual and ML has agreed to reduce their advisory fees somewhat, bringing total fees to ~0.75% AUM annually. This is not as big of a cost savings as I was hoping for, but as the new guy I need to limit how much I squawk about something that is generally proceeding in a positive direction.

We're now in the process of selecting funds for the new 401k plan. My question is, would you consider the following menu of funds to be adequate? (FYI: for brevity I am only listing options on our menu with Exp Ratio of 0.50% or less, but the expense ratios below do not include what we are required to pay to Mass Mutual and Merrill Lynch for their "services".)

Vanguard Total Bond Market Index Adm (VBTLX): Exp Ratio 0.05%
American Funds Washington Mutual R6 (RWMGX): Exp Ratio 0.30%
Vanguard 500 Index Admiral (VFIAX): Exp Ratio 0.04%
Vanguard Mid Cap Index Admiral (VIMAX): Exp Ratio 0.06%
Vanguard Small Cap Index Admiral (VSMAX): Exp Ratio 0.06%
American Funds Europacific Growth R6 (RERGX): Exp Ratio 0.50%
Vanguard Total Intl Stock Index Admiral (VTIAX): Exp Ratio 0.11%
DFA Real Estate Securities I (DFREX): Exp Ratio 0.18%
IndexSelect Moderate Retirement Fund 2025 to 2055 (10 year increments): Exp Ratio Range from 0.18% to 0.21%
Invesco Equity and Income R6 (IEIFX): Exp Ratio 0.38%

The IndexSelect Moderate options are the Mass Mutual version of Target Date Funds. I don't love how they're constructed, but don't know that I have any choice in the matter either and at least they're not absurdly expensive.

Thoughts?

Edit: realized I left the VG Small Cap option off the menu
Last edited by Rayandron on Tue Dec 26, 2017 10:59 am, edited 1 time in total.

billfromct
Posts: 643
Joined: Tue Dec 03, 2013 9:05 am

Re: New 401k Plan Provider: Fund Lineup Selection

Post by billfromct » Tue Dec 26, 2017 10:08 am

Does the company pay the .75% AUM fee or does the individual pay the .75% fee?

A Vanguard Total U.S. Stock Market Index Fund would be a nice addition.

bill

Rayandron
Posts: 100
Joined: Fri Jan 17, 2014 4:48 pm

Re: New 401k Plan Provider: Fund Lineup Selection

Post by Rayandron » Tue Dec 26, 2017 10:12 am

billfromct wrote:
Tue Dec 26, 2017 10:08 am
Does the company pay the .75% AUM fee or does the individual pay the .75% fee?

A Vanguard Total U.S. Stock Market Index Fund would be a nice addition.

bill
Individuals pay the fees. Unfortunately VG Total Stock Market Index Fund is not available. VFIAX is the closest thing available and could be augmented by the Mid and Small Cap options to approximate Total Stock Market.

retiredjg
Posts: 32726
Joined: Thu Jan 10, 2008 12:56 pm

Re: New 401k Plan Provider: Fund Lineup Selection

Post by retiredjg » Tue Dec 26, 2017 10:54 am

I think the list is adequate. You only need a couple of decent funds and there are several. Congratulations on making some progress!

sco
Posts: 735
Joined: Thu Sep 24, 2015 2:28 pm

Re: New 401k Plan Provider: Fund Lineup Selection

Post by sco » Tue Dec 26, 2017 11:07 pm

Yes, it is adequate. The .75% is a shame, but you are still better fair off than a many people at less than 1% all in..

Rayandron
Posts: 100
Joined: Fri Jan 17, 2014 4:48 pm

Re: New 401k Plan Provider: Fund Lineup Selection

Post by Rayandron » Wed Dec 27, 2017 9:31 am

sco wrote:
Tue Dec 26, 2017 11:07 pm
Yes, it is adequate. The .75% is a shame, but you are still better fair off than a many people at less than 1% all in..
retiredjg wrote:
Tue Dec 26, 2017 10:54 am
I think the list is adequate. You only need a couple of decent funds and there are several. Congratulations on making some progress!
Thanks for the confirmation. Wish I could have been more persuasive, but shaving off another ~30 or 40 basis points isn't the hill I want to die on.

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