The Financial Coach Show » 401K

401k/Trustee Directed Plans – Excerpt from 02.21.10

scampbell — Mon, 22 Feb 2010 18:31:10 +0000

Bryan and Jim continue discussion about 401k plans and the high fees associated with choice vs. the lower fees of trustee directed plans. For most plans under $6 Million Dollars, the costs of 401k plans can be rather prohibitive, ranging in the 2.5% to 3.5% category when all costs are figured in. In many cases companies are wanting to create a ‘benefit’ for their workers but by selecting an insurance company such as Principal, Lincoln or Mass. Mutual they actually create a liability due to the added insurance cost in the plan. Other 401k plans with multiple mutual funds do no better in lowering the cost. In fact, have many ‘hidden fee’s’ as can be learned about in the articles following. A trustee directed plan allows any company sponsor the ability to cut ‘costs in half’ while providing better investment options for the workers as a whole. More information about trustee directed plans and lower cost 401k plans can be found by calling Blue Ocean Portfolios at 636-530-9393.

401k Fees Employee DOL PDF

401k Report: Key Pages 39 & 40 PDF

High Cost of 401k Plans PDF

WSJ How Much Does Your 401k Really Cost

401K Plans Being Taken To Court For High Fee’s

Bryan Binkholder — Wed, 11 Nov 2009 14:15:57 +0000

401k Plans and Pension Plans are typically some of the highest cost plans in the industry. Most small business owners and pension plan board members are ‘unaware’ of the rules and responsibilities that come with administering a 401k/pension plan. Don’t fall prey to brokerage firms trying to sell their plan designs with mutual funds and other high cost alternatives. Be particularly cautious of the biggest cash cow–the stable value fund. In most cases the stable value fund of a plan will pay anywhere from .75 to 2% LESS THAN the current going market rate. Why? You guessed it–profits for the firms managing the accounts.

Set yourself free from the 401k Trap by having The Financial Coach & Blue Ocean Portfolio’s manage your account while advising your plan participants in a ‘Fiduciary Capacity.’ Call us today to arrange an overview of your current plan and costs along with a comparison of exactly what Blue Ocean Portfolio’s can do for you.

November 10, 2009

Ruling A Boost For 401(k) Fee Lawsuits

(Dow Jones) The tentative settlement of a lawsuit against Caterpillar Inc. over 401(k) fees could signal that this type of litigation will not disappear.

While similar cases have been thrown out, last week’s resolution in the Caterpillar case may be a first big win for 401(k) plan participants. A number of other big U.S. companies still face lawsuits accusing them of overcharging employees participating in the plans.

“I think that it brings a little wind back into the sails of the plaintiffs,” says Greg Ash, an attorney with Spencer Fane Britt & Browne in Kansas City, Mo.

While not involved in the Caterpillar case, Ash often represents companies in similar disputes. He called the settlement “a bit of a surprise.”

“This is at least a partial victory for them. They’ve exacted some money and actions from the plan sponsor,” he noted.

The U.S. District Court in central Illinois still needs to approve the settlement. Among other things, it calls for the construction-equipment maker to pay $16.5 million, which will be distributed to about 80,000 current and former plan participants based on the number of years they maintained account balances.

Plaintiff’s attorney Jerome J. Schlichter of Schlichter Bogard & Denton in St. Louis says Caterpillar also agreed to offer lower-cost institutional mutual funds rather than retail mutual funds for its core investment choices and to have an independent monitor of the plan for at least two years.

Ed Ferrigno, vice president, Washington affairs for the Profit Sharing/401k Council of America, a not-for-profit association of companies that sponsor plans, says: “What we’re seeing is that generally the courts have not supported the fee lawsuits.”

But many of the pending lawsuits against large employers—while each unique—have similarities to the Caterpillar case. “Any victory for the plaintiff is going to energize additional litigation,” says Ash.

November 10, 2009

Ruling A Boost For 401(k) Fee Lawsuits

(Dow Jones) The tentative settlement of a lawsuit against Caterpillar Inc. over 401(k) fees could signal that this type of litigation will not disappear.

“I think that it brings a little wind back into the sails of the plaintiffs,” says Greg Ash, an attorney with Spencer Fane Britt & Browne in Kansas City, Mo.

While not involved in the Caterpillar case, Ash often represents companies in similar disputes. He called the settlement “a bit of a surprise.” ”This is at least a partial victory for them. They’ve exacted some money and actions from the plan sponsor,” he noted.

“We believe we would’ve prevailed, but we made a strategic decision to settle” because the complex litigation would have taken five to seven years, and Caterpillar already has closed its investment management subsidiary, says Jim Dugan, a Caterpillar spokesman. Plaintiff’s attorney Jerome J. Schlichter of Schlichter Bogard & Denton in St. Louis says Caterpillar also agreed to offer lower-cost institutional mutual funds rather than retail mutual funds for its core investment choices and to have an independent monitor of the plan for at least two years. Ed Ferrigno, vice president, Washington affairs for the Profit Sharing/401k Council of America, a not-for-profit association of companies that sponsor plans, says: “What we’re seeing is that generally the courts have not supported the fee lawsuits.”

Who’s Actually Running Your 401k?

Bryan Binkholder — Tue, 10 Nov 2009 13:11:40 +0000

We are called into small businesses at least 1x a week to review 401k plans and help business owners establish new plans that meet the need of their workers in the most efficient manner. What is amazing is that most owners and participants have no clue as to the abuse and scandal within 401k plans. Some include high management fee’s and transaction costs within the plan which equal 1.5% to in one recent case 3.75% being taken off the top by the broker and mutual funds before workers saw dollar one. The second pitfall is that most workers are unaware how to invest and consequently pick out their 401k funds from the ‘past performance data’ that is handed to them by Human Resource. Let’s see, this fund has a 10 year track record of 4.5% and this one has a track record of 12.5%. I think I’ll put my money in the one that has gotten 12.5%. Just remember, as I’ve noted in my “Mutual Fund Dishonesty” & “Mutual Fund Dirty Secrets” funds know this and so do brokers. Accordingly, they create the illusion of success by doing such things as starting new funds in secret (incubator) to then release them if they’ve done well. Better yet, they dissolve poor performers and ‘merge’ them into new funds so the losses are forever gone from statistics!

So before you invest in your 401k or if your a business owner with a 401k, read this article and start questioning the details on your plan. You probably want to then see how much ‘your plan’ is actually costing and The Financial Coach can definitely help you find this information.

http://www.smartmoney.com/personal-finance/retirement/401-k-an-overview/