401k fees
Posted: 16 September 2009 03:11 PM   [ Ignore ]
Total Posts:  10
Joined  2008-07-10

I am looking to change my 401k provider.  I have a new benefits broker and they are recommending the change.  However I have concerns that the new 401k provider is charging the employee’s higher fees.  The new investments are currently performing better then the current investment, so for right now the employee should benefit.  My concern is that investment perfomance today is not what it will be in the future and because of the higher fees, it will cost my employees.  I not sure if I am doing my due diligence of operating the plan to the best benefit of my employees by switching to a plan that charge higher fees.  I have seen a lot of law suits regarding fees and lack of due diligence and I am kind of worry. Should I be?

Posted: 18 September 2009 10:06 AM   [ Ignore ]   [ # 1 ]
Total Posts:  17
Joined  2008-03-04

Yes, we do have to look at fees when we choose or change a 401k plan for our employees and yes you should be concerned because it is a huge responsibility to manage the funds that belong to someone else.

I look at the fees, the performace of the stocks, the longevity and performance of the company and references for the new company and the broker.

I changed about 5 years ago. I had 3 different companies come and show me thier presentations and leave portfolios. I listened to all of them , I checked out the portfolios. I chose the one that had the best stability and the most constant performance along with reasonable fees. I then called references on My 1st choice. Well I got an unfavorable reference so I called on my 2nd choice and it was much more favorable. They had been in business a little less time, but still enough time to build a stable base.  I chose the 2nd choice and they have done well for us for the last 5 years.

One thing to look for when considering the fees is are they published in the open where the employees can see what they are paying for fees? If not do not go with that company. This is a big item and it is one that you must made happen. The employees must be able to see what the fees are they are being charged and what the fees are for.

The company should have a good website that the employees have access to and can go in and look at their choices. We allow ours to go on and change their portfolios as they wish. You do not have to allow this but they must be allowed to change it at least twice a year and better if they can change it quarterly.

Each year I go over every stock we offer with my broker and we put lower performing ones on a watch list. If they are on the watch list 3 times they are replaced with better stocks. If they are really underperforming they are replaced sooner. We look at managerial changes in the stocks we are offering and the five year look back. We also look at fees charged when picking the different stocks.

Another item to check is diversity. You should have a large selection for the employees to choose from along with some portfolios that they can choose if they are not stock savvy. We have U.S. , Foreign, Large Cap, small Cap, growth, equity, index, money market , real estate and precious metals.  We also offer portfolios to our employees through our plan where they can choose low risk, Medium risk, High Risk, and agressive portfolios that are managed for them. We offer rebalancing automatic twice a year.

We do training sessions at least twice a year and more often if we need to . Our broker will come out whenever we ask to do training or to speak to our employees. This is another due dilligence item.

Do you have to pick the company with the lowest rates? No! Do you have to pick the one with the highest performace? No!

What you need to do is pick the company that is stable consistently with reasonable fees and good management. They also should have great references.


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