Recordkeeper Plundering Company 401(k)

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sach1282
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Recordkeeper Plundering Company 401(k)

Post by sach1282 »

Greetings Bogleheads,

I've made a few posts in this forum recently about my company's 401(k). I recently got access to the full plan details and Oh.. My... God... It was worse than I possibly could have imagined. The fees disclosed on the participant end ranged from 0.41%-1.25%. When I got into excel and actually calculated the weighted average of their total fees for assets under management though, it was a staggering 222 basis points. That's right, the entire company has been being charged 2.22% for at least a decade. Just for recordkeeping. The TPA is an entirely separate entity who is paid an additional $3,200 per year directly. When I factored in all the additional fees on top of the 2.22%, I realized the company was paying $45,000/year on a plan balance of $1.6M.

I immediately elevated my concerns to the highest levels. Solicited bids from competitors. Put together an easy-to-read excel comparison. Summarized it all in an email. Then basically said, "let me pull the trigger and get us the [offensive language removed by moderator oldcomputerguy] out of here." I have the attention of the management. I just hope they will act on it sooner rather than later.
phisher4
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Re: Recordkeeper Plundering Company 401(k)

Post by phisher4 »

Beware! This has the smell of management kickback all over it.

Good luck fighting the good fight, and make sure you cover your behind. :sharebeer
Ramjet
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Re: Recordkeeper Plundering Company 401(k)

Post by Ramjet »

You did the right thing, hopefully someone listens and acts
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retired@50
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Re: Recordkeeper Plundering Company 401(k)

Post by retired@50 »

I'm not sure if you've read the related Form 5500 (an annual filing with the Department of Labor) but you could try searching for your company 401k plan to find the most recent version of the document. Sometimes it can be a revealing document.

Search here: https://www.efast.dol.gov/portal/app/di ... ution=e1s1

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
Topic Author
sach1282
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Re: Recordkeeper Plundering Company 401(k)

Post by sach1282 »

retired@50 wrote: Thu Aug 05, 2021 11:38 am I'm not sure if you've read the related Form 5500 (an annual filing with the Department of Labor) but you could try searching for your company 401k plan to find the most recent version of the document. Sometimes it can be a revealing document.

Search here: https://www.efast.dol.gov/portal/app/di ... ution=e1s1

Regards,
I definitely had not seen this. I did not know those were public. I just looked up my company and there is one one 5500 on file from 2009. Does this mean they've been neglecting to file? Or is there some delay or something? I checked the TPA's name and it's not under that either. I tried the name field, administrator field, and searching by EIN, and still only the one came up.
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retired@50
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Re: Recordkeeper Plundering Company 401(k)

Post by retired@50 »

sach1282 wrote: Thu Aug 05, 2021 12:15 pm
retired@50 wrote: Thu Aug 05, 2021 11:38 am I'm not sure if you've read the related Form 5500 (an annual filing with the Department of Labor) but you could try searching for your company 401k plan to find the most recent version of the document. Sometimes it can be a revealing document.

Search here: https://www.efast.dol.gov/portal/app/di ... ution=e1s1

Regards,
I definitely had not seen this. I did not know those were public. I just looked up my company and there is one one 5500 on file from 2009. Does this mean they've been neglecting to file? Or is there some delay or something? I checked the TPA's name and it's not under that either. I tried the name field, administrator field, and searching by EIN, and still only the one came up.
I was under the impression that the Form 5500 was filed each year, so you should see one for every year the plan has existed. There could be a lag, where you'd only see things up to the most recent filing, maybe 2018 or 2019.

I could be wrong, but you might play around with typing in a friend's company, or a spouse's company, and see if you can find more consistent data. If all else fails, you could potentially ask the Department of Labor. I suppose it's possible that your plan hasn't filed the form as needed.

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
dbr
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Re: Recordkeeper Plundering Company 401(k)

Post by dbr »

sach1282 wrote: Thu Aug 05, 2021 11:16 am I have the attention of the management. I just hope they will act on it sooner rather than later.
Management created this in the first place. It will be interesting to see what attention to their own behavior amounts to.

At $1.6M in the plan your boss must also be the highest level of management. Do you not just talk to each other about things like this? What do the other employees think about this?
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MP123
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Re: Recordkeeper Plundering Company 401(k)

Post by MP123 »

sach1282 wrote: Thu Aug 05, 2021 12:15 pm
retired@50 wrote: Thu Aug 05, 2021 11:38 am I'm not sure if you've read the related Form 5500 (an annual filing with the Department of Labor) but you could try searching for your company 401k plan to find the most recent version of the document. Sometimes it can be a revealing document.

Search here: https://www.efast.dol.gov/portal/app/di ... ution=e1s1

Regards,
I definitely had not seen this. I did not know those were public. I just looked up my company and there is one one 5500 on file from 2009. Does this mean they've been neglecting to file? Or is there some delay or something? I checked the TPA's name and it's not under that either. I tried the name field, administrator field, and searching by EIN, and still only the one came up.
5500-EZ or 5500-SF need to be filed for any year when the 401k plan's assets are over $250k. If your plan is not eligible to file -EZ or -SF and needs to file the full 5500 I don't believe there is any exemption based on plan assets.

The penalty for not filing a required 5500 series form is $250/day, up to $150,000 for each missing year. Yes, that's one hundred fifty thousand dollars per missing return.

It might be worth looking into. There's a penalty abatement program for the 5500-EZ, but I don't believe it applies to the regular 5500.
Doctor Rhythm
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Re: Recordkeeper Plundering Company 401(k)

Post by Doctor Rhythm »

This is really interesting, and perhaps not too surprising that a small company can easily get bilked into a bad, expensive plan. John Oliver did a segment on this a few years ago (nsfw language warning).

That said, is it your job to help your company select and monitor its 401k? If not, please exercise caution and even paranoia when you rock the boat or decide to be the squeaky wheel. Whinging on Bogleheads anonymously is not the same as corporate politics. There may be repercussions for expressing strong negative emotions, bypassing the chain of command, and directly/indirectly accusing a coworker of incompetence or malfeasance.
fortunefavored
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Re: Recordkeeper Plundering Company 401(k)

Post by fortunefavored »

I've tilted this windmill at several small companies. Nearly all were eating between 2 and 3.5%, so your scenario is not unusual at all.

No changes were ever made despite showing the math and how easy it was to switch plans.

Reasons were varied from "Bob is a friend/uncle/cousin of mine" and "I like that they handle everything and I never think about it" and "Oh, that is part of are overall benefits package we get.. if we remove that we have to figure out X Y Z benefits too" - I think most companies who are in these plans are fine with it, and if they wanted to change it, they would have done it already.

Please do report back if you manage to actually get them to change their plan and what actually convinced them, because I've yet to find the magic combination.
aristotelian
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Re: Recordkeeper Plundering Company 401(k)

Post by aristotelian »

Is the company paying those fees or the employees?
hnd
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Re: Recordkeeper Plundering Company 401(k)

Post by hnd »

i'm at a relatively small company and when we realized, that our old 401k was atrocious and costing us at least 2% and the fund choices were so terrible it was unbelievable. what is funny was when we had the initial discussion about starting it in 2007, one of our developers who we generally roll our eyes at, i can still remember to this day was like "WE SHOULD NOT BE DOING THIS WE SHOULD BE PUTTING OUR MONEY IN INDEX FUNDS"

fast forward to 2012, and i'm looking at my balance between my retirement and my roth and am I getting screwed here? well my boss and the owners right hand man left the company abruptly which kind of put that by the wayside, promotions, and what not, i was like whatever. in 2017 the owners son and I after another attempt by the advisors managing our 401k trying to sell us whole life insurance at our annual review had enough. We built the spreadsheets as to what it was costing all of us (a large chunk of owners money was tied up in this program) and displayed the alternatives. Owner was in. who wasn't? his wife who managed hr and accounting. we finally switched to Captain401k or Human Interest in 2018 and haven't looked back. we also shortly discovered we were getting hosed on health insurance as well and switched that too. She isn't lazy she isn't stupid. She just didn't know and doing all that work is just that....a lot of work outside her normal duties.

So i imagine the reason they won't do anything (if they don't) regardless of all the work you poured into it isn't because of nefarious backdoor dealings but out of sheer ignorance and additional work required.
dbr
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Re: Recordkeeper Plundering Company 401(k)

Post by dbr »

The one change I would make to the title is that it is not the recordkeeper plundering the company 401k. It is the company management sabotaging the 401k and guilty of dereliction of duty concerning their employees. A immediate question to ask is in how many other ways are they operating against the interests of their employees. Of course before assuming malevolence we can assume stupidity.
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retired@50
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Re: Recordkeeper Plundering Company 401(k)

Post by retired@50 »

dbr wrote: Fri Aug 06, 2021 10:26 am Of course before assuming malevolence we can assume stupidity.
See Hanlon's Razor link below.
"never attribute to malice that which is adequately explained by stupidity"
https://en.wikipedia.org/wiki/Hanlon's_razor

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
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Steelersfan
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Re: Recordkeeper Plundering Company 401(k)

Post by Steelersfan »

Some smaller companies do this to fund the company's expense (real or imaged) to run the plans. I'm not sure how the money get remitted back to the company, but I'm sure there are ways.
Normchad
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Re: Recordkeeper Plundering Company 401(k)

Post by Normchad »

Our company hires an independent company every 3 years to bench mark our plan. It’s money well spent.

You might also want to checkout brightscope.com they use the publicly available filings, I believe, but then assign a score to your plan. You can also look around to see how other companies stack up.
mc2
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Re: Recordkeeper Plundering Company 401(k)

Post by mc2 »

For these reasons-among others-I wish all retirement plans were like IRAs, (trad or roth) with equivalent limits as an IRA + 401k.

WIth so much chit chat in this world surrounding advocacy, individuality, transparency, etc., the financial world seems to be it's own planet.
Mike Scott
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Re: Recordkeeper Plundering Company 401(k)

Post by Mike Scott »

One of my kids is in such a plan with a small company. I believe the reason is that the outside 401k fund handles everything at 0 cost and effort to the company. As it happens, they have a pretty generous match so it still works. The 401k has dozens of 2%+ managed funds and a few target date index funds around 1% total cost.
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illumination
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Re: Recordkeeper Plundering Company 401(k)

Post by illumination »

mc2 wrote: Fri Aug 06, 2021 12:00 pm For these reasons-among others-I wish all retirement plans were like IRAs, (trad or roth) with equivalent limits as an IRA + 401k.

WIth so much chit chat in this world surrounding advocacy, individuality, transparency, etc., the financial world seems to be it's own planet.
Agreed, I would think everyone having a portable "Individual 401k" would be an easy, bipartisan consensus to make happen. My Solo 401k plan is like any other brokerage account or IRA. I pay zero fees and have access to everything.

I would love to know why any policy maker would have a problem with such a plan for W2 workers. My only guess is the people that make a lot of money managing these plans like the status quo? But they could still make money for people that wanted it to be managed.

I know so many people, especially at smaller operations, that are sort of screwed because they either don't have a 401k plan or have one that is getting pillaged with fees and it's their only option. Plans like Simple IRA's just don't have high enough limits. Something like an "Individual 401k" would be a no brainer. Especially since people jump from job to job all the time.
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Re: Recordkeeper Plundering Company 401(k)

Post by dratkinson »

retired@50 wrote: Fri Aug 06, 2021 10:31 am
dbr wrote: Fri Aug 06, 2021 10:26 am Of course before assuming malevolence we can assume stupidity.
See Hanlon's Razor link below.
"never attribute to malice that which is adequately explained by stupidity"
https://en.wikipedia.org/wiki/Hanlon's_razor

Regards,
"Never ascribe to malice that which is adequately explained by incompetence." --Napoleon Bonaparte

In the case of high fees from a plan provided, I don't think stupidity or incompetence is at work here.

But for a business owner to accept the high fees, that, or something else, is going on.
d.r.a., not dr.a. | I'm a novice investor; you are forewarned.
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dratkinson
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Re: Recordkeeper Plundering Company 401(k)

Post by dratkinson »

retired@50 wrote: Fri Aug 06, 2021 10:31 am
dbr wrote: Fri Aug 06, 2021 10:26 am Of course before assuming malevolence we can assume stupidity.
See Hanlon's Razor link below.
"never attribute to malice that which is adequately explained by stupidity"
https://en.wikipedia.org/wiki/Hanlon's_razor

Regards,
"Never ascribe to malice that which is adequately explained by incompetence." --Napoleon Bonaparte

In the case of high fees from a plan provided, I don't think stupidity or incompetence is at work here.

But for a business owner to accept the high fees, that, or something else, is going on.
d.r.a., not dr.a. | I'm a novice investor; you are forewarned.
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retired@50
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Re: Recordkeeper Plundering Company 401(k)

Post by retired@50 »

dratkinson wrote: Fri Aug 06, 2021 4:42 pm "Never ascribe to malice that which is adequately explained by incompetence." --Napoleon Bonaparte
According to the link I provided on Wikipedia (shown above) you might be interested in footnote number 11.

From the Hanlon's razor Wikipedia page:
A similar quote is also misattributed to Napoleon.[11]
Link to footnote 11: https://militaryhistorynow.com/2014/07/ ... ally-said/

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
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