Inside Money: How to complain about your 401k

As companies continue to search for ways to save money, your 401(k) plan may be a victim. While companies often say changes to existing plans are for the employees’ benefit, that’s not always the case. If you’re not happy with your plan, you can do something about it. Voice your opinion. Let your boss know. Educate your co-workers and encourage them to complain along with you. Here’s how:

FIND THE DECISION-MAKER
Track down the retirement plan director in your company. It might be the company owner or a board of directors. Maybe the choice is in the hands of a human resources director or benefits coordinator. Whoever it is, you can bet there’s a good chance they don’t know all that much about retirement plans. Let’s face it, even the best CEO or HR rep is not a financial adviser. The individuals who research plans for their companies generally receive a lot of information from financial firms that are trying to make a sale. That doesn’t mean the information is bad or wrong, but it’s unlikely a plan salesman will be objective or point out a plan’s deficiencies. It’s a sales pitch. This means you have to become a salesperson, too, if you want a shot at getting your employer to change your plan.

COLLECT THE EVIDENCE
To make your pitch, you need to understand the guts of your current plan. Learn the fee structure, both for participation (if applicable) and for the individual investments within the plan. Don’t forget to check your plan documents to examine administrative fees, too. Next, get a list of all of the investment choices your plan offers. Visit Morningstar.com or call the company that manages the plan to get historical fund performance data. Ask for year-to-date, 3-year, 5-year and 10-year time frames for performance. Then go back to Morningstar.com and compare each fund offering to others in its class. For example, if you have a small-cap growth fund on the list, make sure to compare it to other small-cap growth funds. If you find a majority of the funds in your plan have subpar returns or higher-than-average expenses, you’ll have an effective analysis to share with the decision-makers in your company. Before you complete your research, visit Brightscope.com. This site offers a ratings directory that compares employer-sponsored plans. If yours is listed, you can see how your plan ranks compared to others tracked by Brightscope in the categories of total plan cost, quality of investment choices and more. You can even compare your plan to those offered by others in your industry.

STATE YOUR CASE
After you complete your reseach, write a letter to the person in charge. Begin by explaining that you know this manager has a lot of responsibilities for the company, and you’re sure they’re very busy. Also, respectfully, say that you understand that analyzing the intricacies of 401(k) plans probably isn’t on this manager’s list of favorite things to do. So you’ve done it for him. Say that you’re grateful that the company offers a plan (and a company match, if it does), but you have some suggestions on ways to make the plan even better, which will improve employee retention and attract new workers.

PRESENT YOUR DATA
If your plan is more expensive than average, say so in plain English and without lingo. Present a couple of fund choices as examples and cite Brightscope data. If your plan’s mutual fund choices have below-average performance, give a few examples. Then refer to your fund comparison chart and your Brightscope data, which you should attach to your letter. Next, bullet-point a list of suggestions for improving the plan, such as offering better performing funds or even a Roth 401(k) option. Offer to be a resource should the manager want to explore different options. Sign off with a message like this: “I’m sure you are depending on the company 401(k) plan to provide a comfortable retirement. Higher fees and lower performance hurt our future financial security. Thank you for considering my suggestions.”

IF THE ANSWER IS NO
Follow up on your letter after a few weeks, and don’t be surprised if you’re told “no,” especially if the changes would cost more money. Share your letter and chart with co-workers and see if any would like to lobby the bosses.

Even if there are no changes, don’t give up on your current plan. Do the best with what you have. Keep contributing. Any plan is better than no plan, and you’ll still benefit from pre-tax contributions, automatic savings and the free dollars of an employer match. Whether or not you like the choices in your plan, consider the overall asset allocation for all of your investment dollars, not just your 401(k). Make sure your overall portfolio is split among the right asset classes for your personal situation.

Remember, there’s always next year. Update your data and consider resending your analysis to the bosses. And if you’re successful, let me know at kmueller@starledger.com.

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