A Secret to Share

BY GARY POKRASSA

As a follow-up to Ken Weber’s Checklist, “ Dirty Little Secrets of 401(k) Plan Fees ” (May 07, page 34), I had noticed the expense ratios as disclosed for the fund choices in my company’s 401(k) plan were significantly higher than the expense ratios for the same funds available to the public.

On inquiry, it seems the 401(k) plan was purchasing Class N shares with a higher expense ratio, compared with Class A shares, which the general public would purchase.

When I told the financial adviser the expense ratios were too high, I was told there is nothing that could be done. They were wrong.

I am now in the process of switching my company’s plan to a different financial adviser, who is allowing us to access all Class A shares and have a fee explicitly charged, which, on balance, will net out to a savings of about 40 basis points. I believe we will have better performing funds, in addition.

Please advise the readership to be on the alert for these different share classes with higher expense ratios.

Gary Pokrassa, CPA
Ronkonkoma, N.Y.

 

SPONSORED REPORT

Why cybercriminals are targeting CPAs

This free report expands on the most commonly found scams, why education and specialized IT knowledge help to lessen security vulnerabilities, and why every firm should plan carefully for how it would respond to a breach.

PODCAST

How tax reform — and Excel — are changing the CPA Exam

Mike Decker, the vice president of examinations at the AICPA, discusses changes being made to the exam as a result of tax reform — and about how Excel will now be available for use on the test.