How to request 401k fund changes from employer?

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Ethelred
Posts: 235
Joined: Sun Oct 30, 2016 9:38 am

How to request 401k fund changes from employer?

Post by Ethelred » Mon Oct 30, 2017 4:53 pm

I'm planning to request fund changes in my company's 401k. Does anyone have any good advice on how best to present the request?

Just by chance, it turns out that my first post here asking for portfolio advice (here:viewtopic.php?f=1&t=202308 was exactly a year ago. Since then, our asset allocation has evolved a little, such that it now looks like this:
70% stock
15% Large-cap blend
15% Mid-cap value
15% Small-cap value
15% Total international
5% International small
5% Emerging markets
30% Fixed income
Total bond market in tax-advantaged
Munis in taxable
CD
401a in line with long-term treasuries

The 5% Intl small and 5% EM allocations are currently in my Fidelity 401k, accessed through Brokeragelink, but my employer is unfortunately closing access to Brokeragelink, with no further contributions allowed, and forced sale of any remaining assets in about a year. This will leave the funds listed below. Some are excellent low-fee index funds, but some of the active funds have pretty unpleasant fees, especially the two in italics.

Stock
AF GRTH FUND AMER R6 (RGAGX) ER 0.33% (LCG)
DODGE & COX STOCK (DODGX) 0.52% (LCV)
FID 500 INDEX INST (FXSIX) 0.03% (SP500)
FID TOT MKT IDX PR (FSTVX) 0.035% (TSM)
PRMCP ODYSSEY STOCK (POSKX) 0.69% (LCB)
ARTISAN MID CAP INST (APHMX) 0.95% (MCG)
FID EXT MKT IDX PR (FSEVX) 0.07% (MCB+SCB)
VAUGHAN NEL VAL OP Y (VNVYX) 1.23% (MCV)
DFA US SMALL CAP I (DFSTX) 0.37% (SCV)
FID DIVERSIFD INTL K (FDIKX) 0.92% (Intl LCG)
HARBOR EMRG MKT EQ I (HAEMX) 1.5% (Intl EM)
VANG TOT INTL STK AD (VTIAX) 0.11% (TISM)
FID FREEDOM K 2005 (FFKVX) to 2060 0.44% to 0.64% (target date funds)
FID FREEDOM K INCOME (FFKAX) 0.42%
FID PURITAN K (FPUKX) 0.46% (balanced fund - approx. 60/40 stock/bond)

Bonds
MIP CL 2 0.57%
DODGE & COX INCOME (DODIX) 0.43%
VANG TOT BD MKT ADM (VBTLX) 0.05%

What I'm planning to do is request additional index funds are added as choices, and justify that by using charts from Morningstar to show ongoing underperformance of VNVYX and HAEMX relative to both their respective indexes (US MCV and EM) and suitable Vanguard or Fidelity index funds. Does this make sense, or is there a better approach? And should I mention my employer's fiduciary responsibility to reduce costs?

If that doesn't work out, I expect I'll move it into the Total International fund, but we could alternatively rearrange to use the (active) Vanguard International Value Fund (VTRIX) in my wife's 401k, which has 0.46% ER.

Thanks in advance.

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Duckie
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Joined: Thu Mar 08, 2007 2:55 pm

Re: How to request 401k fund changes from employer?

Post by Duckie » Mon Oct 30, 2017 5:58 pm

Ethelred wrote:I'm planning to request fund changes in my company's 401k. Does anyone have any good advice on how best to present the request?
How to campaign for a better 401(k) plan
Since then, our asset allocation has evolved a little, such that it now looks like this:
It didn't evolve, it exploded. This is unnecessarily complicated.
What I'm planning to do is request additional index funds are added as choices,
You don't need additional choices. The plan already has the basics:
  • FID TOT MKT IDX PR (FSTVX) 0.035% -- Complete US stocks
  • VANG TOT INTL STK AD (VTIAX) 0.11% -- Complete international stocks
  • VANG TOT BD MKT ADM (VBTLX) 0.05% -- US bonds
Plus alternates:
  • FID 500 INDEX INST (FXSIX) 0.03% -- Large caps, 80% of US stocks
  • FID EXT MKT IDX PR (FSEVX) 0.07% -- Mid/small caps, 20% of US stocks
I realize you want the value and emerging markets but if you simplified your AA you wouldn't need them.
I expect I'll move it into the Total International fund, but we could alternatively rearrange to use the (active) Vanguard International Value Fund (VTRIX) in my wife's 401k, which has 0.46% ER.
Why pay 0.46% when you can pay 0.11%?

sco
Posts: 618
Joined: Thu Sep 24, 2015 2:28 pm

Re: How to request 401k fund changes from employer?

Post by sco » Mon Oct 30, 2017 10:44 pm

That is a great plan and has everything you need, although not necessarily everything that you want.....

If you do ask for changes, don't be surprised if it falls on deaf ears.

You have a really good plan already.

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Ethelred
Posts: 235
Joined: Sun Oct 30, 2016 9:38 am

Re: How to request 401k fund changes from employer?

Post by Ethelred » Tue Oct 31, 2017 7:56 am

Duckie wrote:
Mon Oct 30, 2017 5:58 pm
How to campaign for a better 401(k) plan
sco wrote:
Mon Oct 30, 2017 10:44 pm
That is a great plan and has everything you need, although not necessarily everything that you want.....

If you do ask for changes, don't be surprised if it falls on deaf ears. You have a really good plan already.
Thank you to you both. Yes, I completely agree, I have an excellent plan already. The posts here complaining here about 401ks with all funds well over 1% ER may be getting rarer now, but there are still many such plans around. And most likely if I didn't previously have access to almost any fund type I wanted through Brokeragelink, I wouldn't be making the effort to push for relatively minor changes in the available funds. However, if I do want to request changes, the recent removal of Brokeragelink means that now is the right time to do it.

LawyersGunsAndMoney
Posts: 42
Joined: Tue Aug 02, 2016 2:00 pm

Re: How to request 401k fund changes from employer?

Post by LawyersGunsAndMoney » Tue Oct 31, 2017 10:29 am

Honestly, you have what you need - so why not just leave things there? If you want to do something - advocate on behalf of the low-fee index funds to your peers when they enroll.

If you were able to impact change and add better-performing managed funds, you're just adding to the complication of choices other employees will have to navigate. And swapping those funds out with better performing ones might also mean that people who are currently invested in said funds would have to re-allocate.

Additionally, Fidelity may have some rules depending on the size of AUM for your company regarding the number of options and fee tiers - so making changes might be more complicated than just adding or swapping on the platform.

We switched to Fidelity a earlier this year from a notorious John Hancock Small Biz plan with absurd ERs over 1.0 for every fund - and because of our relatively small AUM *under $2MM) we were capped at including only 5 super low cost index funds in the menu (and I believe as part of the deal for access to these index funds we had to pick the Fidelity target date funds we also had to include the Fidelity actively managed target date funds (Advisor Freedom) as our "target date option"

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