Company 401k Plans
- TimYounkin
- JenL_3
- JenL_3
- JenL_3
- geezard
- TimYounkin
- geezard
- JenL_3
- TimYounkin
- RandeS
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» TimYounkin - meeting tips
Geezard, It looks like you did your homework looking into the fees and performance of each mutual fund offered to employees. The expense ratios for the mutual funds don't look too bad. I read that the average expense ratio is currently 1.37%. Still we all know of many mutual funds that have expense ratios well below 1%, which means most people still don't look at fees as a major concern otherwise that average expense ratio of 1.37% would be much lower.As for other fees... it seems you still have some researching to do and you better do it before your meeting. Find out exactly what other expense employees have to pay for such as record keeping, mortality expense fee (a.k.a. insurance fee), management fees, etc... If you know the total fees being charged you will be better prepared for the meeting. If you still can't get all the information you need then bring that up at the meeting. Ask, "Why can't I get the prospectus of all the fees being charged to me?" Which I am pretty sure is required by the SEC and the DOL.
As for tips on the meeting... Keep it simple. Have maybe the two articles by Quinn about retirement fees. She says flat out that you should be paying preferably much less than 1% in fees. As a backup I would have a spreadsheet available. If your total fees are 2% then I would show on a spreadsheet how much in fees would be paid by an employee who contributes the maximum for 30 years with a 10% annual investment gain. I would also compare that employee's retirement balance to a plan with lower expenses. You can use my spreadsheet from the web to help you.
I still think you employer had a fiduciary responsibility when selecting a 401(k) vendor. Just because they picked an insurance company doesn't mean they are exempt for those responsibilities. You probably got that idea from reading the DOL report on 401(k) fees. I read some quirky statement that V.A.'s weren't subjected to SEC rules... but if the V.A. is in a 401(k) plan well then you have a right I think to request all prospectuses showing fees that are being skimmed off your investment gains or losses.
As far as your company stock and tax issues, I remember reading a few articles about this. One article suggested rolling over your individual stock portion into a taxable mutual fund and not into an IRA which is usually recommended. You'll get a benefit of the capital gains when tax time comes. If you die you heirs may not even have to pay taxes on the stock at all because of some step up approach. Anyway, if the stock is a good growth stock I wouldn't worry too much about tax issues. If the stock approaches 10% of your retirement portfolio then it may become a risk tolerance of your asset allocation. You'll have to decide that for yourself.
Good luck with the meeting. Keep us informed. Don't sweat, don't be aggresive, keep it simple, and stand your ground with supporting documents.
-- posted by TimYounkin
» JenL_3 - Tim's Quote in Smart Money
In the March 1999 Smart Money magazine there is an article on page 106, The 401(K) Crusaders:Some excerpts from the article:
"Throughout Corporate America employees are rising up and agitating for retirement plans they can really retire on. Should you join their ranks?"
"These employees are risking the ire of their bosses and the wrath of their human-resources departments to do something unheard of in the workplace: agitate for change."
and on page 109..
"And the Internet has provided new amnuition to the cause. Timothy Younkin, a pharmacist from Virginia Beach, VA., whose employer refuses to get rid of the high-fee annuities in its 401(K), put his complaint up on the Web. "BEWARE. Annuities were never intended to be used as 401(K) plans," it announces. The site offers links to more than 100 retirement Web pages in an effort to educate colleagues. "I've got an understanding with my boss," he says. "I don't bug him about our plan. Instead, I focus on educating people in the community."
Bravo Tim!
You've really helped educate us all at Suite 101 about 401(K) plans.
Glad to have you as our resident 401(K) expert......Jen
-- posted by JenL_3
» JenL_3 - Rande's Quote in WSJ
This post copied from the "Bob Brinker MoneyTalk Show Summaries" thread:Author:
JenL_2Date: March 3, 1999 6:19 PM
Subject: Rande's WSJ Quote
In Wed. 3/3/99 The Wall Street Journal page 1 in the Tax Report column:
SUPPORT SWELLS in Washington for liberalizing retirement-savings rules.
Senate Finance Committee Chairman William V. Roth plans to introduce a bill, possibly this week, that includes sweeping changes in retirement savings plans that he proposed in January. The bill would eliminate income restrictions on contributing to tax-deductible IRAs and Roth IRAs, raise the income limits for Roth IRA conversions to $1 million from $100,000, and increase maximum contributions for IRAs and 401(K), 403(b), 457 and SIMPLE plans. It also would permit investors over age 50 to made 50% higher contributions and allow after-tax contributions to 401(K) and 403(b) plans, letting earnings grow tax free.
While some initiatives would pinch revenue, "it's a trade-off," says Rande Spiegelman, a manager at KPMG, San Francisco. "People will more easily take diminished Social Security benefits if they have more chances to save. "Bipartasan support is gathering around many moves to liberalize retirement savings, particularly by raising the $2,000 IRA contribution limit.
If the limit had been indexed for inflation, it would be about $5,350 today.
Rande is also quoted in the Friday 2/26/99 Investors Business Daily, but they were all out at my newstand. If anyone has the IBD article, please post an excerpt of the article here.
Congratulations Rande, that's Star Power!<img SRC=" http://www.geocities.com/WallStreet/Dist...">
....Jen
-- posted by JenL_3
» JenL_3 - Sep-IRA
Someone at the BB site has a question about setting up a Sep-IRA so am going to refer them here:First on Kirk's Financial Links page
is this link: IRS Forms and Information
from there go to: Tax Regs in Plain English
You can do a Search Here for Sep IRA.
Some of the best links were:
How Much Can be Contributed to a Sep-IRA on My Behalf?
Retirement Plans for Small Businesses
Hope this helps....Jen
-- posted by JenL_3
» geezard - holdover
It seems that I have searched many documents trying to find out for sure if a Bill has been passed disallowing an employer or plan trustee to hold employee's contribution up to 90 days before depositing in their individual account. The document I read(I believe DOL testimony script) seemed to hem and haw around the question (kinda like Bill Clinton does) and I'm still not sure what the answer is. Does anyone know the answer to this one? Also, why can I put up to 20% in my 401(k) plan and other folks only up to 17%. My company matches in company stock but only 1.25% or .25% up to the first 5% of my contribution. Is it because of the company match not being in cash?-- posted by geezard
» TimYounkin - deposit time limits & contribution limits
See this web page for deposit time limits.Employers sponsoring SIMPLE 401(k) plans must comply with the timeframe established last year by the Department in a regulation that applies more generally to participant contributions withheld by an employer for deposit in an employee benefit plan trust. In that regulation, the Department generally requires such assets to be deposited on the earliest date on which such contributions can reasonably be segregated from the employer's general assets, but no later than the 15th business day of the month following the month in which the participant contribution amounts are withheld from employee paychecks.
The 20% vs 17% contribution question may have something to do with how your companies plan document is written. It may also be correlated with an employees salary. The limit for employee contribution for 1999 is $10,000 (same as 1998). So if an employee makes $58,823.53 as their salary they may be limited to only contributing 17%. If thats the case I think your plan document was written poorly, but some employers may include that just so they know nobody will contribute more than the maximum without paying taxes. Some vendors allow you contribute more than the maximum but then those will be after tax dollars.
I wrote this earlier on Jan 18, but here it is again on contribution limits...
Here is a little more on the 401(k) plan contribution limits. The cap is tied to the consumer price index. Then a 1994 law decreed that the limit would rise only in $500 increments. So when inflation is low, the limit may remain the same for two years (1996,1997). Prior limits were 1987-$7,000,1988- $7,313, 1989-$7627, 1990-$7979, 1991-$8,475, 1992-$8728, 1993-$8994, 1994-$9,240, 1995-$9,240, 1996&1997 $9,500, and 1998 was $10,000.
For many employees, a more important limitation is the one imposed by the ADP, or actual deferral percentage test. This test, which is typically called a "nondiscrimination test," is mandated by the government to determine that the plan is not unfairly favoring its higher-paid workers-defined under the 1996 tax act as those who earn more than $80,000 a year. To comply with government rules, every 401(k) plan must pass the test for each plan year.
Here's how the test works:Contributions made by employees earning less than $80,000 for 1997-the number is indexed-are tossed into a pool to determine the average percentage of salaries they contribute to the 401(k). These are the non-highly compensated employees-or non-HCEs in regulatory jargon. Then the average salary contribution is calculated for people who earn more than $80,000. The spread between the two groups is regulated: In most cases, it is limited to 2 percentage points. If the lower paid group contributes 4 percent of salary on average, the higher paid group can contribute no more than 6 percent on average.
Suppose a company discovers that its highly paid group is contributing an average on 7 percent and its lower paid group only 4 percent. It must then return some money-which is taxable income-to the higher paid group. A 1997 tax change says that the company must return the money first to those in this group who contributed the most actual dollars. So it is unlikely that participants in the highly compensated group would be permitted to contribute the full $10,000. However, the employer would be delighted if an employee earning $79,995 contributed the full $10,000-or 13 percent of his salary-because that would boost the average for the non-highly compensated group.
The salary deferral limit is only one of the stipulations you face when putting money into your 401(k) plan, though. Section 415 of the Internal Revenue Code imposes a limit on the total contribution made by and for an employee to a 401(k) plan. This includes the deferral limits just discussed as well as profit-sharing contributions. The combination of all these contributions may not exceed the lesser of 25 percent of the participant's compensation or $30,000.
FYI: I'll be away on vacation for about a week or two. When I come back I gotta get my computer fixed. It keeps crashing probably because I only have 150 megs of free space on my hard drive. LoL. I'll check this thread again in about 2 weeks.
-- posted by TimYounkin
» geezard - My meeting with Management
Tim, thanks for all the great info and have a wonderful vacation - you deserve it! Also, kudos on your article. You are helping bunches of people! I wanted to briefly update you on my meeting regarding my company's 401(k) plan which came earlier than expected. I wasn't totally prepared. I did manage to bring in the two Quinn articles you suggested but not able to ascertain fees other than expense ratios per fund yet. I was told how wonderful the new funds were compared to last year and allbeit somewhat better, my research did not warrant the star ratings they propose them to be nor the history of each, but I honestly think these guys are doing the best with what they have to work with. No problem here! The BIGGER problem is the underlying trust to our plan where the costs are incurred. I still don't have that information. I was told Vanguard wasn't interested in giving us a bid. I suspect because we have too many people (high record keeping volume) versus amount of $$ in assets to invest. I am not convinced they really searched the market all that much as bundled is cheaper to them and administration is passed along to employees. I don't think much care or diligence is going into the implementation of our plan since higher paid executives have the second plan. I will continue to research and do know a lot of the others are concerned about their low returns and the possible fees. At least we have people looking into their own situations and checking their statements. I'll continue to work on this, keep you posted, and any suggestions from all will be greatly appreciated. This is one tough nut to crack. Thanks for this great message board and the opportunity to vent concerns!-- posted by geezard
» JenL_3 - Maximum Retirement Account Contribution
These posts copied from the BB thread:Author: DennisL
Date: March 14, 1999 11:49 AM
Subject: Maximum Retirement Account Contribution
From Rande: Best scenario is to take advantage of employer plan (401k, etc.) and then put after-tax dollars into the Roth (currently $2000 per year, but Congress is talking about raising all retirement contribution limits).
Whenever Congress last raised the maximum 403(b) contribution limit from $9,500 to $10,000, my employer's benefits department failed to inform us, so last year, thinking the limit was still $9,500, I lost out on contributing the last $500.
Whenever Congress acts again to raise the contribution limit, what is the best way to find out about it quickly?
Author: RandeS
Date: March 14, 1999 12:10 PM
Subject: Dennis,
Dennis,
The increase from $9500 to $10000 was an inflation adjustment. These increases usually make it into the financial press here and there (WSJ, etc.), but are easily missed. An annual check of the IRS website
http://www.irs.ustreas.gov should give the answer.
I was referring more to the recent legislation introduced by Senator Roth that would raise the IRA limits to $5000 (should be a little more than that, based on inflation from original amount), and possible increases to company plan contribution limits as well as easing of limitations on ceilings and phaseouts, etc. Stay tuned.
Rande Spiegelman
-- posted by JenL_3
» TimYounkin - Simple investing steps
I would like to add to Randles comments. If your jobs retirement plan has a matching contribution then I would at least contribute the minimum about to get the employers maximum matching contribution. That's where I would place my first investing dollars. Don't pass up free money. Then I would max out my Roth IRA ($2,000). Then if my job has a good retirement plan with reasonable fees, I would max out my retirement plan. Then I probably would invest any excess dollars in no load index funds or in stocks. If you already maxed out your retirement plan and Roth IRA's and started investing early, you will probably be very well off in your retirement years.Basically, I wouldn't max out a retirement plan without first maxing out the Roth IRA.
-- posted by TimYounkin
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