Evaluating changing 401k offerings/brokers for private company

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rshocka
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Joined: Thu Oct 24, 2019 12:54 pm

Evaluating changing 401k offerings/brokers for private company

Post by rshocka » Fri Feb 14, 2020 1:51 pm

Hi everyone,

I apologize if this isn't in the correct forum, but I wasn't sure where to post.

I work for a smaller, privately held company (~38 employees). I'm on leadership team, but I'm not in HR or Operations. Because our 401k options are so awful (see below), I lobbied to have us re-evaluate the offerings. Now by default, I'm on the team that is investigating that and going to make a recommendation to our CEO/Founder.

In short, what I'm learning is that we've been operating under the same model since we were a very early stage startup. While not significant, now we are a $11+M revenue company, and the employees have $2M+ in our 401k portfolio. I don't feel great about the guy who's been the current 401k administrator and broker since no one has helped revamp our offerings in years, and I have to expect we're paying much higher fees with less offerings than if we shopped out our 401k to someone else.

Does anyone have any recommendations for who to use or how to get some rough quotes/options for us to be able compare what else is out there?

Thanks for your help!!

If you need any additional proof to why I'm not thrilled, take a look at the current 401k fund options:


INVESTMENT OPTION / TICKER / GROSS/NET
American Funds US Govt Money Market R2E RBEXX 1.15 / 1.15
Amer Funds Moderate G/I Portfolio R2E RBBEX 1.23 / 1.23
American Funds Europacific Growth R2E REEBX 1.30 / 1.30
American Funds 2010 Trgt Date Retire R2E RBEAX 1.13 / 1.13
American Funds Corporate Bond Fund R2ERCBGX 1.30 / 1.26
American Funds 2015 Trgt Date Retire R2E RBEJX 1.13 / 1.13
American Funds 2020 Trgt Date Retire R2E RBEHX 1.14 / 1.14
American Funds 2025 Trgt Date Retire R2E RBEDX 1.16 / 1.16
American Funds 2030 Trgt Date Retire R2E RBEEX 1.18 / 1.18
American Funds 2035 Trgt Date Retire R2E RBEFX 1.19 / 1.19
American Funds Global Growth Port R2E REBGX 1.26 / 1.26
American Funds 2040 Trgt Date Retire R2E RBEKX 1.20 / 1.20
American Funds 2045 Trgt Date Retire R2E RBHHX 1.20 / 1.20
Amer Funds Conserv G/I Portfolio R2E RNBEX 1.16 / 1.16
American Funds 2050 Trgt Date Retire R2E RBHEX 1.21 / 1.21
American Funds 2055 Trgt Date Retire R2E RBEMX 1.21 / 1.21
American Funds 2060 Target Date Ret R2E RBENX 1.24 / 1.24
American Funds Gr and Inc Port R2E RBEGX 1.15 / 1.15
American Funds Inflation Linked Bd R2E RILGX 1.19 / 1.19
American Funds Invmt Co of Amer R2E RIBEX 1.09 / 1.09
American Funds New Perspective R2E RPEBX 1.25 / 1.25
American Funds Washington Mutual R2E RWEBX 1.07 / 1.07
American Funds Mortgage R2E RMBEX 1.21 / 1.12
American Funds New World R2E RNEBX 1.44 / 1.44
AllianzGI NFJ Mid-Cap Value R PRNRX 1.46 / 1.24
Columbia Overseas Value R COVUX 1.54 / 1.47
Federated Max-Cap Index R FMXKX 1.18 / 1.11
Federated Kaufmann Small Cap Fund R FKKSX 1.72 / 1.37
PIMCO Income R PONRX 1.70 / 1.70
Lord Abbett High Yield R2 LHYQX 1.30 / 1.30
MFS International Growth R2 MGRQX 1.35 / 1.35
T. Rowe Price Blue Chip Gr R RRBGX 1.23 / 1.23

niceguy7376
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Location: Metro ATL

Re: Evaluating changing 401k offerings/brokers for private company

Post by niceguy7376 » Fri Feb 14, 2020 4:19 pm

Number of total employee count?
How many of those are participating?
Does employer give a match?
Is it safe harbor plan?
Who does the payroll?
How is the payroll / 401k currently integrated? is it all automatic? I assume so based on 11M + revenue.

jacoavlu
Posts: 852
Joined: Sun Jan 06, 2013 12:06 pm

Re: Evaluating changing 401k offerings/brokers for private company

Post by jacoavlu » Fri Feb 14, 2020 4:29 pm

It will take work for someone but you should absolutely change that plan. Get several proposals. Off the top of my head I would talk to Vanguard / Ascensus, Fidelity, Employee Fiduciary, Guideline. Proposals require submitting employee demographic data, compensation etc in a spreadsheet format. I would contact those vendors and try to figure out a spreadsheet format with all the data that you can simply submit to each vendor.

All of those providers can provide a bundled plan to include third party administration, custodial services, and recordkeeping.

Right now it's the employees that are bearing the brunt of the plan costs, through those terribly expensive funds. Much better to have admin and recordkeeping fees paid for by the business (owners) while minimizing or eliminating costs to the participants outside of fund expenses.

Topic Author
rshocka
Posts: 10
Joined: Thu Oct 24, 2019 12:54 pm

Re: Evaluating changing 401k offerings/brokers for private company

Post by rshocka » Sat Feb 15, 2020 4:10 pm

Thank you!
niceguy7376 wrote:
Fri Feb 14, 2020 4:19 pm
Number of total employee count?
** 38 **
How many of those are participating?
** Unsure exact # but most. 30+

Does employer give a match?
** Employer does not do a guaranteed match. We had one year where profits were strong enough and the employer did a 1:1 match. Traditionally though, no match is in place **

Is it safe harbor plan?
** Unsure**

Who does the payroll?
** What do you mean by who does the payroll? **

How is the payroll / 401k currently integrated? is it all automatic? I assume so based on 11M + revenue.
** Yes, our payroll person asks what we would like to contribute at the beginning of the year and then I believe that is all set in our payroll system to automatically pull. If bonuses are awarded, she will ask again what %, if any, we want contributed to the 401k.

Topic Author
rshocka
Posts: 10
Joined: Thu Oct 24, 2019 12:54 pm

Re: Evaluating changing 401k offerings/brokers for private company

Post by rshocka » Sat Feb 15, 2020 4:26 pm

jacoavlu wrote:
Fri Feb 14, 2020 4:29 pm
It will take work for someone but you should absolutely change that plan. Get several proposals. Off the top of my head I would talk to Vanguard / Ascensus, Fidelity, Employee Fiduciary, Guideline. Proposals require submitting employee demographic data, compensation etc in a spreadsheet format. I would contact those vendors and try to figure out a spreadsheet format with all the data that you can simply submit to each vendor.

All of those providers can provide a bundled plan to include third party administration, custodial services, and recordkeeping.

Right now it's the employees that are bearing the brunt of the plan costs, through those terribly expensive funds. Much better to have admin and recordkeeping fees paid for by the business (owners) while minimizing or eliminating costs to the participants outside of fund expenses.
** Thank you for all of this information. This is very helpful. I'll reach out to these providers to try and gather some more general information.

HomeStretch
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Joined: Thu Dec 27, 2018 3:06 pm

Re: Evaluating changing 401k offerings/brokers for private company

Post by HomeStretch » Sat Feb 15, 2020 4:28 pm

+1 to jacoavlu’s post.

While $2 million in plan assets is a small plan, you should be able to get a new plan with lower-ER funds.

Based on your current plan’s ERs, it sounds like the plan’s administrative costs are being passed on to employees as part of the ERs. One option is for the employer to pay some or all of the administrative costs.

If you haven’t already, be sure to read the contract with the current 401k provider to see if there are any back-end loads (% of plan assets) or exit costs if you change providers. It used to be common in order to “lock in” small companies.

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