Google's 401k-the BrightScope rating.

A few days ago, DIY Investor posted the YouTube talk (found at Biz of Life's site) given by the irrepressible Suze Orman to Google employees. DIY Investor found Ms. Orman's talk filled with  essential information, especially for young people in the business world. Now Michael Zhuang at Investment Fiduciary has posted the talk which will get it out to more people. Thanks Michael. Michael has actually worked with Google employees and points out how good the Google 401k plan is, as did Ms. Orman in her talk.

This popped the question into DIY Investor's head as to how good the Google Plan actually is and sent him scampering to the site that rates plans relative to their peers:  BrightScope.

As you can see, BrightScope gives a top peer group rating to the Google Plan:

Source: www.brightscope.com

CLICK TO ENLARGE Suffice it to say that receiving the highest rating in the peer group is not easy.


The component ratings provide greater insight into the Google Plan:
 CLICK TO ENLARGE

Source: www.brightscope.com

The dark green scores are in the best 15% of their peer group. Thus, Google's 401k fees are in the lowest 15% compared to fees, participation rate is in the top 15%, etc. The two components below the absolute top are account balances ( I see Ms. Orman's eyebrows going up) which maybe is not surprising. There is a hint in the talk that Google employees may be a bit challenged in terms of taking on a bit much debt and may not be contributing as much as they should to their retirement. Also, employees may be a bit younger compared to their peer group companies.

The one component that stands out is the "investment menu quality" rating at "below average."  Since Vanguard is their provider, this isn't likely a matter of investment choices--although possibly some fund choices may have underperformed in recent periods. It may reflect the choices made by employees. As of 12/31/2009, the top holding was the Vanguard Wellesley Income fund at 25% of total holdings. With hindsight, we know that wasn't a good choice. Are the employees really that conservative?

In the comment section on the BrightScope page, a commenter recognizes the generosity of Google's 50% match for both the traditional and the Roth plans.