Investment question - 401k - Any finance nerds?

[dartsndeacs]

So we currently have a 401k with mass mutual. The contract was signed 30 years ago, and they have a "floor" rate on their guaranteed return funds. From my understanding is the credit risk is only if mass mutual were to go default.

We can potentially save costs/get a better return with a different plan. MM is expensive. However, the alternatives are "stable value funds" They invest in bonds and whatnot. The brokers are trying to tell me or lead me to the fact that these are perfectly safe from a credit risk standpoint, but in general, bonds tend to default more than insurance companies.

So in trying to parse through the broker bullshit, what is my actual risk differential here?

For example we're looking at the "metLife Stable Value Fund Series 25053- class 0" as an alternative.

 

[ImTheCaptain]

If only there was some kind of advisory job in the finance sector for you to hire

 

[RubbinsRacin]

If only there was some kind of advisory job in the finance sector for you to hire

Yes because they are known for their honesty and fiduciary qualities. Good point!

 

[06deacon]

It's a stable value fund, it's what retirees get to make sure they don't lose their shirt. Looks like that fund invests in high quality bond funds and also insurance to ensure price stability. It'll be fine. Plus if credit risk is the concern, wouldn't you be spreading it across thousands of companies here instead of the credit risk of a single insurance co?

http://www.pentegra.com/upload/MetLife%20Factsheet%2012312015%20Class%200.pdf

Disclosure: not finance nerd but can google a fund name

 

[dartsndeacs]

If only there was some kind of advisory job in the finance sector for you to hire

Yes because they are known for their honesty and fiduciary qualities. Good point!

No shit. They're all trying to get me to change our 401k company and become the advisor. They're all going to say its the same level of risk. Need advice from someone not trying to get a commission.

 

[deacphan]

As bmoney's experience shows where he's doing something completely different than he was doing, and as my experience shows with being an HR director, if you're smart you can learn new things.

I'm already at the point where I know more than most all of the benefit brokers I speak to. Makes me want to change jobs. Put me in a room with any owner or controller vs all the people I've interviewed and I'll be #winning donaldross style every time. Cause they're all Arizona state grads and believe it or not IRL I'm incredibly good at sounding smarter and more prepared than anyone else they'll meet. And I've been at it 5 months .


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[dartsndeacs]

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Only been at the 401k analysis for 2 days, muchacho. Have had 2 months with the other benefits. Got good at the latter by asking quesitons, taking in opinions of 4-5 different brokers and/or googling.

 

[dartsndeacs]

401k administration though is especially confusing because all the vendors make their disclosures as confusing as possible so you can't get a sense of who is making what.

 

[DeacInVermont]

Just sent you a tl/dr PM. If you don't feel like reading it all (and you should), here are the cliffs:

As to your question about the Stable Value fund, I’d recommend not losing the forest for the trees. It is fine to have a stable value investment option, but whether it’s Mass Mutual, Transamerica, John Hancock or whichever- they’re all basically investing in the same thing. Your plan should not have much of its assets in that investment option anyway. Assuming your plan is participant-directed, as long as you are offering a fixed income option (or options) that has (have) reasonable diversification, performance, and low expenses, you will be fine.

Having a floor on the interest credit is attractive, but not at the expense of all the other investment options in the plan that may be more important to your participant base.

 

[dartsndeacs]

Just sent you a tl/dr PM. If you don't feel like reading it all (and you should), here are the cliffs:

As to your question about the Stable Value fund, I’d recommend not losing the forest for the trees. It is fine to have a stable value investment option, but whether it’s Mass Mutual, Transamerica, John Hancock or whichever- they’re all basically investing in the same thing. Your plan should not have much of its assets in that investment option anyway. Assuming your plan is participant-directed, as long as you are offering a fixed income option (or options) that has (have) reasonable diversification, performance, and low expenses, you will be fine.

Having a floor on the interest credit is attractive, but not at the expense of all the other investment options in the plan that may be more important to your participant base.

Our participant base has a high level of 65+ and roughly 1/3rd of the funds and 100% of the owners funds are in the stable value. So it is the sticking point for the decision makers.

Responded to the PM w/ more deets

 

[TownieDeac]

"believe it or not IRL I'm incredibly good at sounding smarter and more prepared than anyone else they'll meet"

preparation includes, but not limited to, starting threads on OGBoards

 

[DeacInVermont]

"believe it or not IRL I'm incredibly good at sounding smarter and more prepared than anyone else they'll meet"

preparation includes, but not limited to, starting threads on OGBoards

There's a brilliant simplicity to crowd-sourcing your expertise.

 

[dartsndeacs]

There's a brilliant simplicity to crowd-sourcing your expertise.

For example, I've spoken to 5 different LA benefits brokers. The guy who was in 2nd place called me today. Didn't know an employer can contribute to an HSA. The 5th dude gave up after the first email exchange where it was clear he didn't know the small business limit went from 50 to 100 2 years ago and we could no longer get composite rates. Another gave up after giving me a web presentation in font none of us could read. All 5 have had typos and errors galore in their proposals.