Ask Terry Questions Small 401k investment companies fees

Small 401k investment companies fees

By Terry Savage on July 14, 2019 | Investments

After years of no 401K from her employer, one was finally secured January 2018, company called Human Interest, and deductions started Feb 14, 2018. Doing some math, employee contributes 218/month, employer matches 174/month (total 392/month). So, for 33 pay periods (half of the 392), investment so far is 6,468. Looking online at Human Interest , account is valued at 6,671 — is something wrong here? TOTAL earnings are 276 — rate is 5.67 … with the market doing well, are we being used by this Human Interest company? There is a risk setting, and she set it at 3.5 — any opinion or other options at this time?

 

Terry Says

Whew — I don’t know anything about Human Interest, except for what I could find online.  They are a provider of 40l(k) accounts and record keeping for small businesses. Their website says their fees are only 50 basis points, plus mutual fund fees that average only 0.08 percent, which is reasonable.

Your account may not have matched the new highs of “the market” because you were given a more conservative asset allocation — perhaps because you indicated low risk tolerance, or because you are closer to retirement.

BUT this company also charges $4 per month per employee — so that accounts for a bit of the charges. And even worse they say they “may” charge a “set-up” fee of up to $499 per participant!!  And I’m guessing that is why the account shows  only such a small gain!

You should walk into the HR department and tell them they have a FIDUCIARY DUTY to absorb that set-up fee — because it has such a huge impact.  Or they should have negotiated a smaller fee per employee — but not put all that cost on the employee.   If you tell other employees, perhaps you can raise a ruckus.  But since Human Interest appears to be a large company in this space (with more than 10,000 employees covered) you might not get very far with them. I think the real pressure point is the disclosure from your employer.  And if this “set-up” fee was not fully disclosed, then you might have some leverage.  I suspect it was — buried in the “fine print” — just as it is on their website!

I think I’ll just send an email to HumanInterest and point out this blog post!

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