401k admin fees reduced - never hurts to ask

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tonyclifton
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401k admin fees reduced - never hurts to ask

Post by tonyclifton »

About 6 months ago I asked our 401k administrator (CFO) if he would consider switching from Empower Retirement to Vanguard. I read on Vanguard's website that their admin fee is lower and I am buying Vanguard mutual funds inside the 401k. Empower Retirement currently charges 0.82% of each participants assets as an annual administration fee.

Received a receptive - we review our options once per year and a review was in the near future.

During the review, Empower Retirement (0.82%) was compared to Voya (0.47%) and Vanguard (0.55%).

Empower Ended up dropping their fee to 0.55% to match Vanguard. NICE!

Actionable lesson learned: reduce fees wherever possible
Last edited by tonyclifton on Sun May 02, 2021 8:33 pm, edited 1 time in total.
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Stinky
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Re: 401k admin fees reduced - never hurts to ask

Post by Stinky »

tonyclifton wrote: Sun May 02, 2021 5:26 pm About 6 months ago I asked our 401k administrator (CFO) if he would consider switching from Empower Retirement to Vanguard. I read on Vanguard's website that their admin fee is lower and I am buying Vanguard mutual funds inside the 401k. Empower Retirement currently charges 0.82% of each participants assets as an annual administration fee.

Received a receptive - we review our options once per year and a review was in the near future.

During the review, Empower Retirement (0.82%) was compared to Voya (0.47%) and Vanguard (0.55%).

Empower Ended up drop their fee to 0.55% to match Vanguard. NICE!

Actionable lesson learned: reduce fees wherever possible
Nice win!

Congratulations.
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TallBoy29er
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Re: 401k admin fees reduced - never hurts to ask

Post by TallBoy29er »

Simply put, NICE!!
BrokerageZelda
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Re: 401k admin fees reduced - never hurts to ask

Post by BrokerageZelda »

How big (in terms of # of employees) is your employer? I've seen that small businesses can sometimes have brutal 401(k) fees just because of the lack of economies of scale.
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tonyclifton
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Re: 401k admin fees reduced - never hurts to ask

Post by tonyclifton »

BrokerageZelda wrote: Sun May 02, 2021 7:03 pm How big (in terms of # of employees) is your employer? I've seen that small businesses can sometimes have brutal 401(k) fees just because of the lack of economies of scale.
150 - 200
JBTX
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Re: 401k admin fees reduced - never hurts to ask

Post by JBTX »

tonyclifton wrote: Sun May 02, 2021 8:32 pm
BrokerageZelda wrote: Sun May 02, 2021 7:03 pm How big (in terms of # of employees) is your employer? I've seen that small businesses can sometimes have brutal 401(k) fees just because of the lack of economies of scale.
150 - 200
So I assume they are passing fees on to the 401k participants. That really seems silly. I'm guessing total fees are about $5000. That's not that much to the employer, and the employer would get a tax deduction if they absorbed the fees.
DMoogle
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Re: 401k admin fees reduced - never hurts to ask

Post by DMoogle »

I'm really surprised to hear Vanguard charges so much.

Possibly relevant data point: I work for a tech company between 500-1000 employees, and we have Empower as well. Admin expense is 0.37% for me (0.0925% deducted quarterly).
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tonyclifton
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Re: 401k admin fees reduced - never hurts to ask

Post by tonyclifton »

JBTX wrote: Mon May 03, 2021 11:42 am So I assume they are passing fees on to the 401k participants. That really seems silly. I'm guessing total fees are about $5000. That's not that much to the employer, and the employer would get a tax deduction if they absorbed the fees.
I think it is standard for 401k plans to charge administrative fees to participants based on the amount of assets in the plan. The % is what is at issue.

Do I wish I had zero fees? Yes, but not if it meant switching to a provider that only offered high cost investment choices in their own funds (AXA/Equitable cough cough which I am basing merely on my spouse's choices in her employer's AXA/Equitable administered 457b plan).

And, I have no complaints about Empower Retirement. Our 401k investment choices are good (varied and low-cost) and the website is good enough (and makes it easy to rebalance).
hnd
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Re: 401k admin fees reduced - never hurts to ask

Post by hnd »

We use Human Interest which charges .5 and gives us access to Vanguard and DFA. We are so far pretty happy with it. Its my boglehead anchor (VTSAX/VBTLX/VTIAX+DFSTX)
mc2
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Re: 401k admin fees reduced - never hurts to ask

Post by mc2 »

tonyclifton wrote: Mon May 03, 2021 12:50 pm
JBTX wrote: Mon May 03, 2021 11:42 am So I assume they are passing fees on to the 401k participants. That really seems silly. I'm guessing total fees are about $5000. That's not that much to the employer, and the employer would get a tax deduction if they absorbed the fees.
I think it is standard for 401k plans to charge administrative fees to participants based on the amount of assets in the plan. The % is what is at issue.

Do I wish I had zero fees? Yes, but not if it meant switching to a provider that only offered high cost investment choices in their own funds (AXA/Equitable cough cough which I am basing merely on my spouse's choices in her employer's AXA/Equitable administered 457b plan).

And, I have no complaints about Empower Retirement. Our 401k investment choices are good (varied and low-cost) and the website is good enough (and makes it easy to rebalance).
Honestly, I can't see why there needs to be fees based on the number of employees. Really, there's a setup fee, but beyond that, do we really think these people are pouring over their mutual fund research, ensuring every fund has a unique purpose for being there?
I don't-I think it's a cookie cutter approach. Add some funds with the handshake deal, enroll the company and let the fees roll in!

I'm waiting to hear from our employer about any fee reduction, so I appreciate that this provides yet another data point.
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tonyclifton
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Re: 401k admin fees reduced - never hurts to ask

Post by tonyclifton »

mc2 wrote: Mon May 03, 2021 1:05 pm Honestly, I can't see why there needs to be fees based on the number of employees. Really, there's a setup fee, but beyond that, do we really think these people are pouring over their mutual fund research, ensuring every fund has a unique purpose for being there?
I don't-I think it's a cookie cutter approach.
Our plan administrator says that part of the fee covers record keeping requirements. We also receive the services of a financial planner (who for that few years has been really good). That being said, I am never happy seeing the "sell" transaction each quarter end where shares are sold to pay the fees.
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beyou
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Re: 401k admin fees reduced - never hurts to ask

Post by beyou »

All collective investment vehicles have fixed and variable costs to run them. So the typical fee structure is tiered so the lowest tier (highest er) pays the fixed costs, then at higher assets they can charge lower fees since incremental cost of more participants is lower after those fixed fees are covered. One may simply charge a blended fee that takes these fixed and variable costs into account with some assumptions as to plan size. Know number of employees, at least assuming most participate, hence easy to convert a blended tiered fee to a fixed fee. Larger will absolutely get lower er.
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Stinky
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Re: 401k admin fees reduced - never hurts to ask

Post by Stinky »

tonyclifton wrote: Mon May 03, 2021 1:43 pm
mc2 wrote: Mon May 03, 2021 1:05 pm Honestly, I can't see why there needs to be fees based on the number of employees. Really, there's a setup fee, but beyond that, do we really think these people are pouring over their mutual fund research, ensuring every fund has a unique purpose for being there?
I don't-I think it's a cookie cutter approach.
Our plan administrator says that part of the fee covers record keeping requirements. We also receive the services of a financial planner (who for that few years has been really good). That being said, I am never happy seeing the "sell" transaction each quarter end where shares are sold to pay the fees.
You’ve been successful in getting the fees to the plan cut. That’s excellent.

Now, your next assignment will be to see if your employer will pony up some additional money to support the admin cost of the plan. That could be a tougher sell …..
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LukeHeinz57
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Re: 401k admin fees reduced - never hurts to ask

Post by LukeHeinz57 »

My employer covers the administrative costs of the plan, so it is possible, doesn't hurt to ask!
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JBTX
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Re: 401k admin fees reduced - never hurts to ask

Post by JBTX »

tonyclifton wrote: Mon May 03, 2021 12:50 pm
JBTX wrote: Mon May 03, 2021 11:42 am So I assume they are passing fees on to the 401k participants. That really seems silly. I'm guessing total fees are about $5000. That's not that much to the employer, and the employer would get a tax deduction if they absorbed the fees.
I think it is standard for 401k plans to charge administrative fees to participants based on the amount of assets in the plan. The % is what is at issue.

Do I wish I had zero fees? Yes, but not if it meant switching to a provider that only offered high cost investment choices in their own funds (AXA/Equitable cough cough which I am basing merely on my spouse's choices in her employer's AXA/Equitable administered 457b plan).

And, I have no complaints about Empower Retirement. Our 401k investment choices are good (varied and low-cost) and the website is good enough (and makes it easy to rebalance).
You are correct it is typical. But it doesn't have to be that way. I helped a small company put in a plan and the owner foots the fees, such that it is tax deductible at the top tax bracket. The only fees for participants are base fund fees. I suspect most people selling the 401k don't even present that option.
shepherd
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Re: 401k admin fees reduced - never hurts to ask

Post by shepherd »

You should also ask about a zero revenue model. By doing this the fees are paid by the employee based on the cost to provide, not the assets. So as your account value rises, your fees stay constant. I did this for my company and we have saved hundreds of thousands of dollars since implementation. Our plan has 2,500 people though.

https://www.shrm.org/resourcesandtools/ ... rorev.aspx
retiredjg
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Re: 401k admin fees reduced - never hurts to ask

Post by retiredjg »

tonyclifton wrote: Sun May 02, 2021 5:26 pm Empower Ended up dropping their fee to 0.55% to match Vanguard. NICE!

Actionable lesson learned: reduce fees wherever possible
Good job!
Topic Author
tonyclifton
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Re: 401k admin fees reduced - never hurts to ask

Post by tonyclifton »

Stinky wrote: Mon May 03, 2021 1:56 pm Now, your next assignment will be to see if your employer will pony up some additional money to support the admin cost of the plan. That could be a tougher sell …..
Where this journey all started was me musing to our CFO that our company match was being reduced by the admin fees. I told our CFO that what was being called a company match was actually just a pass-through payment back to the plan. Doesn't have quite as much positive impact on morale when viewed that way.

Where I work getting the company to pay for the admin cost would probably take the form of increasing the employer match - which could use some improvement :)
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tonyclifton
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Re: 401k admin fees reduced - never hurts to ask

Post by tonyclifton »

LukeHeinz57 wrote: Mon May 03, 2021 1:59 pm My employer covers the administrative costs of the plan, so it is possible, doesn't hurt to ask!
How does this work at your employer? On your plan summary form, does it list 0% or $0 as the admin fee? On my "Notice of Investment Returns & Fee Comparison" under the section titled "General Administrative Services Expenses" it lists an asset based charge. This seems like a standard document. What does your plan say?
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Re: 401k admin fees reduced - never hurts to ask

Post by jeffyscott »

DMoogle wrote: Mon May 03, 2021 12:17 pm I'm really surprised to hear Vanguard charges so much.
Me too, especially since I had just happened to see a link to this place, that apparently does it for 0.08% plus a small flat fee:
https://www.employeefiduciary.com/401k-plan-pricing
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LukeHeinz57
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Re: 401k admin fees reduced - never hurts to ask

Post by LukeHeinz57 »

tonyclifton wrote: Mon May 03, 2021 3:57 pm
LukeHeinz57 wrote: Mon May 03, 2021 1:59 pm My employer covers the administrative costs of the plan, so it is possible, doesn't hurt to ask!
How does this work at your employer? On your plan summary form, does it list 0% or $0 as the admin fee? On my "Notice of Investment Returns & Fee Comparison" under the section titled "General Administrative Services Expenses" it lists an asset based charge. This seems like a standard document. What does your plan say?
My participant plan summary shows $0 in expenses.

When I made my initial post I should have been more forthright...I'm actually on the 401k fiduciary committee at my company that made the decision with the owners approval to have the company pay the expenses for the administration of the plan. I certainly pushed for that and made the argument as to why we should from an HR and employee recruitment and retention perspective. When we had the plan summary updated at year end to reflect the change, our advisors to the plan were not shocked, but said we were definitely in a small minority of plans that do this. (At the time, maybe 10-12 years ago?) he said no more than 10% maybe 15% of their plans did this. Something like that anyway...

Even better than that change was when I pushed to dump all of the high expense ratio funds and get a solid lineup of Vanguard funds to replace them. :D

I was fortunate in that when I was added to the committee, no one on it had a real vested interest in who our provider was or what funds were used. Coming off of 2008-2009 everyone was pretty open to changes too. If I remember correctly I was still able to reduce the overall cost of the plan to the company even with it picking up the administrative costs due to changing plan advisors...
"Contentment", the only thing you ever truly need more of!
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tonyclifton
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Re: 401k admin fees reduced - never hurts to ask

Post by tonyclifton »

LukeHeinz57 wrote: Tue May 04, 2021 7:10 am I'm actually on the 401k fiduciary committee at my company that made the decision with the owners approval to have the company pay the expenses for the administration of the plan. I certainly pushed for that and made the argument as to why we should from an HR and employee recruitment and retention perspective.
Nice! Hopefully your coworkers at least gave you a pat on the back. You saved them thousands and thousands of dollars in fees.
CascadiaSoonish
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Re: 401k admin fees reduced - never hurts to ask

Post by CascadiaSoonish »

Relevant: I administer our small business 401k plan at Guideline. Yesterday they announced they were doubling our base monthly fee (the company-paid one) and are imposing a new annual fee of .08% on participant accounts. They say they are removing transaction fees in return, but since people would rarely (if ever) incur those fees I don't see that as a benefit. It's not enough to get us to change providers (and I'm sure they're aware of that) but it is an annoyance.
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