401K: Wells Fargo -> Principal. How to assess fees?

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SmokeyAbe
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401K: Wells Fargo -> Principal. How to assess fees?

Post by SmokeyAbe »

Greeting Bogleheads,

My company's 401k recently migrated from Wells Fargo to Principal. I've heard lots of complaints about Principal's high fees so I tried to see how badly I would be hit. They take a "record keeping" fee of $80 per year and each of my Vanguard funds, when trying to learn more, link to the Vanguard website & shows their ER. Is it possible that the only fees Principal is taking is a flat $80/year or are they likely hiding them in a place I've yet to find? Any advice would be greatly appreciated. Thanks!

-Abe
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retired@50
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Re: 401K: Wells Fargo -> Principal. How to assess fees?

Post by retired@50 »

You'll probably need to read the full documentation packet related you your new 401k plan. The Summary Plan Description and anything else you can get your hands on. Between these two vendors, it's hard to say who is worse, but I'd take absolutely nothing on faith if I were a plan participant.

Regards,
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Northern Flicker
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Re: 401K: Wells Fargo -> Principal. How to assess fees?

Post by Northern Flicker »

Both are possible, but the 401K plan should publish the expense ratios of the funds in the plan as offered by the plan. Ask your plan administrative contact at the employer for the info if not readily available.
Last edited by Northern Flicker on Mon May 03, 2021 4:01 pm, edited 1 time in total.
My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
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ruralavalon
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Re: 401K: Wells Fargo -> Principal. How to assess fees?

Post by ruralavalon »

Get copies of the Summary Plan Description and the Plan Document.

It is possible that you have a good plan, and that your employer is picking up the other overhead to operate the plan.
Last edited by ruralavalon on Mon May 03, 2021 3:14 pm, edited 1 time in total.
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ClevrChico
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Re: 401K: Wells Fargo -> Principal. How to assess fees?

Post by ClevrChico »

It might be possible to have a low fee plan if Principal is only acting as the record keeper. You should see any fees taken when viewing the transaction activity of your plan.

https://www.brightscope.com/ is a great tool to assess fees and see form 5500 data, but this change is probably too new to appear.

Hopefully yours is okay. Good luck!
Last edited by ClevrChico on Mon May 03, 2021 3:32 pm, edited 2 times in total.
Topic Author
SmokeyAbe
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Re: 401K: Wells Fargo -> Principal. How to assess fees?

Post by SmokeyAbe »

Northern Flicker wrote: Mon May 03, 2021 3:02 pm Both are possible, but the 401K plan should publish the expense ratios of the funds in the plan as offered by the plan. As your plan administrative contact at the employer for the info if not readily available.
The link on the plan's website shows the Vanguard ERs. Also, I discovered a "Plan Fees" menu item which only shows the $80/year. Thanks!
Topic Author
SmokeyAbe
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Re: 401K: Wells Fargo -> Principal. How to assess fees?

Post by SmokeyAbe »

ClevrChico wrote: Mon May 03, 2021 3:11 pm It might be possible if Principal is only acting as the record keeper. You should see any fees taken when viewing the transaction activity of your plan.

https://www.brightscope.com/ is a great tool to assess fees and see form 5500 data, but this change is probably too new to appear.

The large local employers here use Principal unfortunately, and I haven't see a low fee plan from them yet. (They are bad enough I'd resign if I had to use such a plan.)

Hopefully yours is okay. Good luck!
I found the plan on Brightscope & all of the fees listed under "Expenses" say $0. Is there anywhere else I should be looking? Thanks!
Topic Author
SmokeyAbe
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Re: 401K: Wells Fargo -> Principal. How to assess fees?

Post by SmokeyAbe »

ruralavalon wrote: Mon May 03, 2021 3:11 pm Get copies of the Summary Plan Description and the Plan Document.

It is possible that you have a good plan, and that your employer is picking up the other overhead to operate the plan.
The company is actually pretty great about things like this. Family dental & vision are covered at no cost to the employee.
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ClevrChico
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Re: 401K: Wells Fargo -> Principal. How to assess fees?

Post by ClevrChico »

SmokeyAbe wrote: Mon May 03, 2021 3:14 pm
ClevrChico wrote: Mon May 03, 2021 3:11 pm It might be possible if Principal is only acting as the record keeper. You should see any fees taken when viewing the transaction activity of your plan.

https://www.brightscope.com/ is a great tool to assess fees and see form 5500 data, but this change is probably too new to appear.

The large local employers here use Principal unfortunately, and I haven't see a low fee plan from them yet. (They are bad enough I'd resign if I had to use such a plan.)

Hopefully yours is okay. Good luck!
I found the plan on Brightscope & all of the fees listed under "Expenses" say $0. Is there anywhere else I should be looking? Thanks!
If you pull up form 5500, check the direct and indirect compensation sections. (I'm not an expert in this, but I think that will tell you how the plan is getting paid.) Pay attention to any fees on based value of plan assets.
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SmokeyAbe
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Re: 401K: Wells Fargo -> Principal. How to assess fees?

Post by SmokeyAbe »

I found a document labeled ERISA 404 Participant Fee Disclosure. Outside of the $80/year, it listed the following:

• Distribution fee: $40.00
• Distribution in-kind fee: $40.00
• Installment fee: $2.00
• Loan setup fee: $75.00
• Fee for overnight mailing a check: $20.00
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ruralavalon
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Re: 401K: Wells Fargo -> Principal. How to assess fees?

Post by ruralavalon »

SmokeyAbe wrote: Mon May 03, 2021 5:30 pm I found a document labeled ERISA 404 Participant Fee Disclosure. Outside of the $80/year, it listed the following:

• Distribution fee: $40.00
• Distribution in-kind fee: $40.00
• Installment fee: $2.00
• Loan setup fee: $75.00
• Fee for overnight mailing a check: $20.00
Looks reasonable to me, you don't want to be taking loans or distribution before retirement anyway.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Topic Author
SmokeyAbe
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Re: 401K: Wells Fargo -> Principal. How to assess fees?

Post by SmokeyAbe »

I don’t think I’ve ever heard of a flat fee for 401(k) servicing. Is this something common in the industry? I thought it was always based off of a certain percentage of peoples accounts. Even Vanguard I think charges .55%.
Northern Flicker
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Re: 401K: Wells Fargo -> Principal. How to assess fees?

Post by Northern Flicker »

I think it is common when the employer is paying it.
My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
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ClevrChico
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Re: 401K: Wells Fargo -> Principal. How to assess fees?

Post by ClevrChico »

SmokeyAbe wrote: Mon May 03, 2021 5:55 pm I don’t think I’ve ever heard of a flat fee for 401(k) servicing. Is this something common in the industry? I thought it was always based off of a certain percentage of peoples accounts. Even Vanguard I think charges .55%.
I pay a flat record keeping fee of around $125/year at my megacorp and that's it. That also gives me access to institutional index funds. I'm obviously very happy with that.

Paying fees based on assets should be avoided if possible. Ideally, one is rolling previous employer 401k money into their next 401k. That let's you do a backdoor roth, and allows you to take withdrawals at age 55 penalty free. (If you're paying asset based fees, that's going to get expensive.)
alex_686
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Re: 401K: Wells Fargo -> Principal. How to assess fees?

Post by alex_686 »

SmokeyAbe wrote: Mon May 03, 2021 5:55 pm I don’t think I’ve ever heard of a flat fee for 401(k) servicing. Is this something common in the industry? I thought it was always based off of a certain percentage of peoples accounts. Even Vanguard I think charges .55%.
It costs $X to run a 401(k) plan. There are 3 options. 1, the employer picks up the cost. 2. Costs are charged by Assets under management, so as a percentage of assets. 3., costs are charged by employee. So $X / # of employees.

In aggregate it does not make any difference between 2 and 3. Total fees collected should be about the same. Of course, it does matter to you.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
HomeStretch
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Re: 401K: Wells Fargo -> Principal. How to assess fees?

Post by HomeStretch »

SmokeyAbe wrote: Mon May 03, 2021 5:30 pm I found a document labeled ERISA 404 Participant Fee Disclosure. Outside of the $80/year, it listed the following:

• Distribution fee: $40.00
• Distribution in-kind fee: $40.00
• Installment fee: $2.00
• Loan setup fee: $75.00
• Fee for overnight mailing a check: $20.00
This is the correct plan document to review to determine fees/ERs. The 401k plan is required to provide it to new participants and to all participants on an annual basis. If you have online delivery of account documents, the custodian will send you a link to the annual fee disclosure.
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