- I don't personally have access to a 401(k) (Berkeley offers a 403(b) and a 457(b) instead, the latter of which I'm contributing to), and
- I haven't written a comprehensive article on 401(k) plans.
As a general note, the AHS Wiki has a lot of information on topics that I haven't yet published articles on. I use it as a low-pressure drafting space to make my research immediately accessible to other people. Some pages are just a link collection, while others are in an advanced state of development. Feel free to create an account and contribute!
A Bad Plan Can Cost You A LotLately I've written about how states like CA and PA are divesting from overpriced, underperforming actively-managed mutual funds in their state pensions. As I've repeated endlessly (and upon which John Bogle has written many books), index mutual funds are the best way to keep your fees down and get your fair share of financial market returns.
A 2014 study by Bloomberg classified some of the best and worst 401(k)s in the business, but they primarily focused on company matching, not cost. Investment cost—the annual fee, or 'expense ratio', that you pay to hold a stock, plus any other management fees—is extremely important too: a high-priced 401(k) plan could cost you $100,000 over your lifetime.
What if your company only offers high-priced garbage?
Maybe your company isn't big enough to attract Jerry Schlichter's attention to start a lawsuit. How can you talk to your boss about improving the retirement plan?
Campaigning For Improvement
The Bogleheads, an online forum for investing enthusiasts, have prepared an article addressing this topic. The punchline is that, under the Employee Retirement Income Security Act (ERISA), your company has a legal obligation (called "fiduciary duty") to make retirement account decisions that benefit employees. This duty includes "paying only reasonable expenses of administering the plan and investing its assets" and "diversifying plan investments". If your plan lacks low-cost index fund options, it fails both of these criteria!
So: carefully document this noncompliance, draft a friendly letter to your company's fiduciary (listed in your 401(k) Summary Plan Document), express your concerns for employee welfare and the potential for corporate liability under ERISA (Mr. Schlichter...), quote some Warren Buffett, and you have a shot!
Have you or anyone you know ever tried this? Were they successful? I'd love to hear about it!