401K costs

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Time2Quit
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401K costs

Post by Time2Quit » Wed Jan 09, 2019 2:52 pm

Just curious if it is typical with most 401K plans to charge fees for AUM, and mark up the ER of funds they offer?

For example my plans offers Vangurd Institutional funds. Thhe funds offered have an ER of 0.02 according to Vanguard.

In reading the 401K plan documents, there appears to be a management fee of .11% and other fees for a total ER of close to 0.3% ER for an index.

Is this typical with most 401K’s that are not run through a go govt agency? Would you keep your balances in this 401K plan?

Thanks
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02nz
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Re: 401K costs

Post by 02nz » Wed Jan 09, 2019 3:06 pm

Not sure what you mean about a "go govt agency" - no 401k plans are run by government. (Federal employees have the Thrift Savings Plan, which is similar to a 401k.) Anyway, every plan has administrative costs, which some employers absorb and others pass on to employees. Larger employers will also have more economy of scale. 0.3% is really not too bad, it wouldn't prevent me from putting money there. There are a lot of threads here about plans where the only choices are funds with ERs over 1%, or where index funds have ERs above 0.5%.

Jack FFR1846
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Re: 401K costs

Post by Jack FFR1846 » Wed Jan 09, 2019 3:12 pm

Every plan is different and costs are paid differently.

My last job: Medium cost plan, Mass Mutual. Lowest ER fund was 0.41%. Fee to roll over. All fees paid by employees.

Current job: Cheap plan, Fidelity. Lowest ER fund S&P 500 index at 0.015%. No other fees. I assume my employer is paying some fee. I will note that this is the only low cost index fund available. All others are much higher ER and perhaps those pay for the 401k fees....I don't know.
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Lou354
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Re: 401K costs

Post by Lou354 » Wed Jan 09, 2019 3:46 pm

Yes, this is common in 401k plans. I wish my 401k had an ER as low as 0.3%.

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Time2Quit
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Re: 401K costs

Post by Time2Quit » Wed Jan 09, 2019 5:07 pm

02nz wrote:
Wed Jan 09, 2019 3:06 pm
Not sure what you mean about a "go govt agency" - no 401k plans are run by government. (Federal employees have the Thrift Savings Plan, which is similar to a 401k.)
To clarify, DW works for a state agency and she has no fees in her 410k except the funds posted ER’s. That is what I meant govt agency. I should have been more clear.

I suspect based on the answers given some employers pick up the fund administrator fees and some do not.
"It is not the man who has too little, but the man who craves more, that is poor." --Seneca

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Earl Lemongrab
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Re: 401K costs

Post by Earl Lemongrab » Thu Jan 10, 2019 2:00 pm

That's how Megacorp does it. There's a base fund ER, and then an add-on for recordkeeping and such. The total ERs are still low, for instance the S&P 500 is .03%. The highest is probably the stable-value fund (certainly of the ones I use) that comes in at .29%.

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