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  • msf December 2019
Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

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New Employer 401K Options

edited December 2019 in Fund Discussions
Recently accepted a job with a new employer who offers a matching 401k plan. Employer has around 15 to 20 eligible employees. It's been 22 years since I've had access to a 401k plan. Below are the offerings. I've included the corresponding class A shares for each fund which are not available to plan participants. The disparity in expense ratios is staggering in most cases. I'm not going to turn down free money, but I'll only contribute enough to maximize the company match. The plan's adviser from Raymond James stated that changes are being discussed. Sounds like Target Date Funds are among the discussion and hopefully some Index funds, but I fear what the ER for those funds would end up looking like given this lineup. The plan is through Cuna Mutual, whoever they are. I gathered the ER from M*.


AMF High-Inc R2 RITBX 1.45 AHITX .73
AMF Bond Fund of Amer R2 RBFBX 1.36 ABNDX .60
AMF Interm Bd Fd of Amer R2 RBOBX 1.35 AIBAX .64

Large Cap Stocks

AMF Washington Mutual R2 RWMBX 1.37 AWSHX .59
Calamos Growth C CVGCX 2.04 CVGRX 1.29
Victory Diversified Stock R GRINX 1.34 SRVEX 1.05

International Stocks

AMF Capital World Gr & Inc R2 RWIBX 1.55 CWGIX .76
AMF Europacific Growth R2 RERBX 1.59 AEPGX .83
AMF Smallcap World R2 RSLBX 1.78 SMCWX 1.08

Asset Allocation

AMF Balanced R2 RBABX 1.48 ABALX .57
AMF Capital Income Bldr R2 RIRBX 1.39 CAIBX .58
Calamos Growth & Income C CVTCX 1.85 CVTRX 1.10

Money Market

AMF US Government MMkt R2 RABXX 1.41 AFAXX .38


  • This is not unusual for small company plans. Small companies tend to shift the cost of running the plan onto the participants in the form of higher expense ratios (level loads).

    Companies are going to spend a certain amount of money on each employee. That includes overhead (desk space, etc.), salary, and benefits. They can choose to pay higher salaries and have you pay more for your benefits (i.e. your 401(k) plan administration). Or they can choose to pay lower salaries and then they cover the cost of your plan. Similarly, they can provide matching contributions or pay more in salary. And so on.

    I'm a bit surprised to see a company simultaneously push the cost of administering the plan onto employees and offer matching contributions. If they have money (budget) for matching, companies usually cover the cost of the plans themselves.

    What the company is doing is not all bad. By having the participants pay for the cost of the plan, the company is placing the burden exclusively on those employee who are benefiting from the plan.

    The bigger issue is why in 2019 any plan, even one for a small company, costs so much that the employer isn't willing or able to spring for the costs. Raymond James as intermediary might have something to do with it. Hard to tell with so little info.

    Here's what American Funds says about its R share classes.

    R-2 shares are designed and priced for when "Plan sponsor [employer] wants all or part of recordkeeping costs [i.e. fee paid to CUNA Mutual] to be covered by plan assets [i.e. ERs of funds as opposed to employer paying]". Until you get to R-4 shares, the participants are paying a load (a 12b-1 fee in excess of 0.25%) to cover some of the plan costs.

    P.S. The MMF yielded exactly 0.00% in FY 2015, 2016, and 2017. It achieved that non-negative performance only because it waived some fees for those years. With rates on the way back down, don't expect much better going forward.

    MMF Prospectus.
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