Many times a couple has to decide the best place to make their retirement fund contributions - in the husband's or wife's 401k or an IRA? And the answer depends on the quality of the plans, company matches, etc. To help answer this question, BrightScope provides an online 401k rating service as described in this Yahoo! article: "How Good Is Your Company's 401(k ) Plan?" by Carla Fried. BrightScope examines fund costs, investment choices, company generosity as well as other key features relative to a peer group. For each peer group, it shows a comparison relative to the best, worst, and average plans.
Generally, a couple will first want to make contributions to take advantage of the company match. After that, they may consider, if feasible, contributing to IRAs and taking advantage of low-cost index funds. Finally, they can max out on the better 401k plan, etc.
It should be stressed that it is easy to get a plan rated. Plan administrators just need to get readily available documents to BrightScope. Carla Fried lists the steps a plan can take to improve their plan and what participants can do in the meantime.
The plan of my new company isn't in Brightscope, but I know the fees are higher than they should be and they don't have enough index type of choices.
ReplyDeleteTypically it is easy to get rated. BrightScope needs recent form 5500, plan summary document, and list of assets.
ReplyDeleteOnce plan is rated with metrics versus peers the administrator can take steps to improve plan. DOL loves this.
Administrators sometimes don't know it but they have a fiduciary responsibility. DOL likes to see plan improvement steps in carrying out this fiduciary responsibility.