Prudential 401K FEES

[just wondering]

Has anyone ever researched the Fees Prudential charges for the 401k? Are they considered high or low? Reasonable? We pay an annual fee, Investment fee, custody fee (accrued daily), and now I see a "3rd party fee" on my last paper statement. Just looking for some feedback as fees drastically affect performance.

 

[upschuck]

I consider them low. I had .002% in the 4th quarter taken out for fees(including 3rd party). I'll take that any day.

 

[Jones]

They're way lower than anything you'll be able to find on the open market.

 

[Catatonic]

Keep in mind that there may be additional fees within the funds offered within the 401k.
Index funds are almost always the lowest.
Mutual funds usually have fees and costs that are disclosed and other costs that are not disclosed.
Actively managed mutual funds usually have the highest total costs and the highest undisclosed costs.

 

[upschuck]

I believe UPS pays some of the administrative cost for the plan which is why the low fees.

 

[Catatonic]

I believe UPS pays some of the administrative cost for the plan which is why the low fees.

Must be in the contract ... they stopped doing that for management years ago.

 

[Jones]

Keep in mind that there may be additional fees within the funds offered within the 401k.
Index funds are almost always the lowest.
Mutual funds usually have fees and costs that are disclosed and other costs that are not disclosed.
Actively managed mutual funds usually have the highest total costs and the highest undisclosed costs.

On your statement they have to show all the deductions, they can't deduct money from your account and not reveal it.
I just generated a custom statement for the last year and total deductions were approximately .0116% of my ending account value (ie they were probably slightly more if calculated quarterly.) That's pretty damn good. FYI I'm entirely in index funds.

 

[Catatonic]

I believe UPS pays some of the administrative cost for the plan which is why the low fees.

Must be in the contract ... they stopped doing that for management years ago.

 

[Catatonic]

On your statement they have to show all the deductions, they can't deduct money from your account and not reveal it.
I just generated a custom statement for the last year and total deductions were approximately .0116% of my ending account value (ie they were probably slightly more if calculated quarterly.) That's pretty damn good. FYI I'm entirely in index funds.

You are in Index funds which typically 5 to 10 basis points or an expense ratio of .005 to .01 so that seems right.
Granted that I am not familiar with the Teamster's 401k and what Mutual Funds or stocks you can invest in.
In the UPS Management 401k we can invest in the standard BH Funds and another 15 or so. Management can also invest in anything listed on the NYSE and NASDAQ.
Many funds are listed on those two markets and you can invest in them via ETFs which is what I did.
I had a fee-only financial adviser show me how many of the actively managed funds have expenses that are deducted during the transactions. For instance, a stock in that fund may be traded and when it is a "hidden" cost never shows up anywhere that you can see nor does the SEC require it to be disclosed.
Example - Stock purchased at 100 and 6 months later sells for 112 with commission and sale costs of 8 dollars.
That 8 dollars never is disclosed as part of the fund "Expense Ratio". Your statements look like you made a 4% gain but it was actually 12%.
This is pretty much true for any fund but Index Funds are not actively traded so these costs are fairly negligible.
A study in 2007 by Ricahrd Kopcke of the top 100 funds contained within 401ks showed these hidden costs ranging for the funds that averaged from 0.11% of assets annually in the lowest costs funds, to 1.99% of assets with the highest costs, with a median of 0.66%. Other studies have found these hidden costs ranging from 0.14 to 2.96 % with an average of 1.44%.

In 2007, one of the BH funds for UPS management had these hidden management fees around 1%.

These hidden costs are the reason so many independent financial advisers, that cannot and will not manage your investments (buy and sell), advise investors to buy Index Funds.

 

[Jones]

I understand what you're saying and I knew that funds were not required to include the costs of trades as part of the expense ratio or administrative fees in the prospectus, however I was sure that if they deducted money from your account for any reason they would have to reveal it in a yearly or quarterly statement after the fact. If I'm wrong about that it's a huge loophole.

 

[Catatonic]

I understand what you're saying and I knew that funds were not required to include the costs of trades as part of the expense ratio or administrative fees in the prospectus, however I was sure that if they deducted money from your account for any reason they would have to reveal it in a yearly or quarterly statement after the fact. If I'm wrong about that it's a huge loophole.

It never gets in your account. In my example the $104 is put in your account, not the $112.

The SEC has talked year after year about this but can never get any traction to create visibility, primarily due to the complexity, which leaves the fund companies in disagreement about exactly how to calculate those costs. Trying to quantify a fund's trading expenses can be about as easy as performing brain surgery according to some investor pundits.
In addition, there are other hidden costs as well in more actively managed funds, especially hedge funds.

I guess it all comes down to what was it at the beginning and what was it at the end and just go with that.