Workers of the world, unite! This could be the rallying call for employees who may need to seize control of their 401(k) plans.
A growing phenomenon in the world of ballooning 401(k) account balances is the employees' sudden interest in the quality of the investments in their plan.
Considering the new research on the wisdom of crowds, we can conclude that the consensus of a group of employees with larger account balances should be the final arbiter of what plan features and investments best serve their fellow associates.
If you are working for a large company, read no further. No single person can have much impact, and recent disclosures indicate that the large mutual funds that dominate that market place always vote shares for management so as not to bite the hand that feeds them. Changes in that environment are next to impossible, and participants can resign themselves to the fact that any plan is better than no plan. Their only hope is better legislation.
For the rest of us, the 70 percent of the American workforce employed by companies with fewer than 100 people, a little activism can go a long way.
In too many cases, a retirement plan is chosen for the convenience of the company's administration who deal with the hassle-factors from day to day.
The promise of a lot of service and assistance prompts some companies to switch plans for reasons that make no sense from an investment standpoint.
The people making the decision can even be relatively new employees whose own accounts in the plan are relatively small.
At the other end of the spectrum, we can have a company owner whose account balance in the plan, while often the largest of all employees, is only a small part of the estate he or she has accumulated.
Real estate, the value of the business itself, and maybe some inherited assets render the retirement plan assets as almost a nuisance.
Their preference is to lean toward whatever promises to be simple and inexpensive for the company.
So, we're left with a handful of long-term employees who have account balances in the six-figure range. For these folks, including owners who care, the quality of the plan is a big issue.
Step one is to band together and lobby to form a plan committee. Then, start shopping. A Web site, www.401kadvisorsusa.com, can be a good place to start. Much of the information with regard to comparisons between different vendors is supplied by research done by Plan Sponsor Magazine.
The key to achieving a quality plan starts with a broad selection of funds coupled with low internal fees. Any plan costs money to operate, but the costs, ideally, should be paid as a tax-deductible business expense on the part of the employer - not as an expense to the plan assets that is paid with money that could otherwise be compounding on a tax deferred basis.
The time spent volunteering to be on the plan committee can pay dividends many times over.
The economics department at Boston College published a report showing that one full percentage point of additional annual gain can generate 20 percent more in retirement benefits by age 65 in a 30-year period.
You can create this additional value, and maybe more, by insisting on a plan with top performing funds in each category.
Hold your vendor's feet to the fire. Insist that they select funds for your plan by starting with a large selection of more than 2,000 funds from 100 or more fund families. Common sense tells us that better selections will result if we start with the widest possible universe. Then, make sure those funds are honestly evaluated and replaced annually if they fall short of expectations relative to their competitors in the same fund type.
Beware of anyone who debunks Morningstar Star ratings when their own funds show poorly in the comparisons of this pre-eminent mutual fund ranking service. Also be concerned if someone is attempting to talk over your head with what appears to be a complicated "analysis" of a fund's performance characteristics when, in fact, it's clear that the fund has underperformed. In the industry, this is just an attempt at more lipstick on the pig. It occurs most often when the starting selection of funds is limited.
Every company has at least a few employees who embody the modern day equivalent of the "barracks lawyer" - if not the mover and shaker of the Phil Silvers Sergeant Bilco genre. These are the people who are equipped by background and temperament to make a difference in recognizing the need of, and lobbying for, 401(k) improvements.
If you see yourself filling this role, rise up today and make a difference.