Question about "Gross Expense Ratio" and "Net Asset Fee" in 401k

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Ricchan
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Question about "Gross Expense Ratio" and "Net Asset Fee" in 401k

Post by Ricchan » Thu Nov 14, 2019 6:48 pm

My 401k lists investment options in a table that includes columns for "Gross Expense Ratio" and "Net Asset Fee." That table includes, for example, the following:

Code: Select all

Fund Name                                            Gross Expense Ratio     Net Asset Fee
Vanguard Total Stock Market Index Fund (VTSAX)       0.04                    0.80
PIMCO StocksPLUS® Long Duration Instl (PSLDX)        1.11                    0.80
[More]                                               [Various]               0.80
Am I correct to read this as the total fee for both funds is 0.80%? So, basically:
  • For VTSAX, the 401k provider charges a net 0.80% fee, essentially a 0.76% fee on top of Vanguard's 0.04% fee?
  • For PSLDX, the 401k provider charges a net 0.80% fee, so basically a 0.31% discount on PIMCO's 1.11% fee?
The references I've looked up seem to indicate this is the case. I just find it a bit hard to believe that a flat Net Asset Fee like this would be applied to all funds in a 401k plan, regardless of the Gross Expense Ratio charged by that fund, which seems to be the case here.

retired@50
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Re: Question about "Gross Expense Ratio" and "Net Asset Fee" in 401k

Post by retired@50 » Thu Nov 14, 2019 7:24 pm

The fees *might* be additive, so instead of a total of .80% it would actually be .84%

I'd urge you to check with the 401k custodian and ask for an explanation and/or any fee disclosure documents you're entitled to as a 401k plan participant.

Regards,
Last edited by retired@50 on Fri Nov 15, 2019 11:46 am, edited 1 time in total.

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Ricchan
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Re: Question about "Gross Expense Ratio" and "Net Asset Fee" in 401k

Post by Ricchan » Fri Nov 15, 2019 12:45 am

retired@50 wrote:
Thu Nov 14, 2019 7:24 pm
The fees *might* be additive, so instead of a total of .80% it would actually .84%

I'd urge you to check with the 401k custodian and ask for an explanation and/or any fee disclosure documents you're entitled to as a 401k plan participant.

Regards,
After digging around their website some more, I found their Fee Disclosure which states the "Annual Operating Expense" is a sum of the "Gross Expense Ratio" and "Net Asset Fee," so your suspicion was correct. Thanks for the suggestion.

Dude2
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Re: Question about "Gross Expense Ratio" and "Net Asset Fee" in 401k

Post by Dude2 » Fri Nov 15, 2019 12:52 am

I work for a megacorp, so it isn't as if it is some fly-by-night company without any scrutiny. They use Fidelity to manage their 401k. Anyway, not quite the same as your example, but, despite the funds I can invest in saying xx expense ratio, in addition I get hit with mysterious quarterly fees that just come out of nowhere, i.e. $14.95 account maintenance fee quarterly. Not much to me and can just write it off as part of the matching the company provides, but imagine $14.95 quarterly times 50,000 employees. I have read prior posts that chock these fees up to the expense of managing the accounts, i.e it offloads the expense from the mother company onto the 401k management company. Still, I doubt there is much incentive by anybody (other than employees) to optimize these fees away.

lakpr
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Re: Question about "Gross Expense Ratio" and "Net Asset Fee" in 401k

Post by lakpr » Fri Nov 15, 2019 8:21 am

Dude2, you and I might be working for the same company 😀 My MegaCorp also imposes $14.95 quarterly. But if you are maxing out your 401k, it is really less than 0.3% fee the first year, 0.15% fee the second year and decreases gradually into insignificance. If you roll in external 401k funds or IRAs, the fee barely registers. If your plan also offers after tax 401k to Roth (MBR), this fee is a tiny price to pay.

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