Get new articles by email:

Oblivious Investor offers a free newsletter providing tips on low-maintenance investing, tax planning, and retirement planning.

Join over 20,000 email subscribers:

Articles are published every Monday. You can unsubscribe at any time.

Getting Changes in Your 401(k)

Monday’s request for feedback about lobbying for a better 401(k) plan drew lots of responses. It was great to hear from people in a wide variety of circumstances — investors with success (and un-success) stories, people who work in HR departments and who are in charge of making plan decisions, small business owners with similar responsibilities, and investment advisors who provide plan-related services to employers.

Given the volume of replies, rather than sharing them all with you, I’ve tried to synthesize the group’s input into a handful of useful action steps below.

Figure Out What You Want

Step #1, naturally, is to figure out precisely what you want to request. Do you simply want to request the addition of 2-3 low-cost funds to your plan (e.g., a bond index fund and a stock index fund)? Or are you requesting an entirely new plan?

Based on reader input, it appears to be a heck of a lot easier to get funds added to an existing plan than to get your employer to change plan providers completely. This makes sense. It’s easier for management to add a new fund or two than to research new providers, choose one, and move everything over to them. In addition, there’s nobody who has a huge interest in fighting back against the addition of a few new funds, whereas, when trying to switch providers, the representative from the current provider will of course fight tooth and nail to convince management not to switch.

That said, if your plan has high administrative fees (that is, costs in addition to the expense ratios of the funds), switching plans is going to have a bigger impact than simply adding a few low-cost funds.

A third option, if your plan administrator allows it, is to request that your employer add an option to invest outside of the normal fund choices. For example, Fidelity’s BrokerageLink and Schwab’s Personal Choice Retirement Account both allow employees to pick their own funds.

Make Your Request in Writing

Next, write a respectful email to the plan fiduciary (or fiduciaries, if it’s a committee rather than a single person) clearly explaining the change you’re seeking and your reasons for the request.

If all you’re requesting is the addition of another fund or two, this email doesn’t have to be a big deal. You may be successful with the following approach:

  • Provide a source of information that speaks to the importance of low-cost options — reference a few studies or perhaps provide a link to the recent PBS documentary.
  • Briefly highlight the key points of the above-mentioned studies.
  • Specify which funds you would like to see added. It can be helpful to provide multiple options. For example, if you want a low-cost international fund, suggest 2-3 different choices (ideally, one of which is run by a fund family who already has some funds in the plan).

If you’re requesting an entirely new plan, you’ll probably want to include more information in your letter. (The Bogleheads wiki article on campaigning for a better 401(k) has a sample letter you may want to look at.) For example, in addition to providing references to applicable research, you may want to:

  • Briefly mention that the plan fiduciary has a legal obligation under the Employee Retirement Income Security Act (ERISA) to ensure that the cost of services provided to the plan is reasonable, and that a breach of such fiduciary duties can result in liability for the fiduciary.
  • Provide a total of all the costs that plan participants are paying (e.g., average fund expense ratio, plan fees, advisory fees, sales loads if applicable).
  • Suggest a meeting to discuss your request and to respond to any concerns they might have.

Again, providing multiple choices (e.g., Employee Fiduciary or Vanguard) can be a good idea to prevent the possibility of coming across as biased in favor of some specific company.

If your request does not get a response, don’t be afraid to follow up.

Get on the Investment Committee

If your employer has an investment committee that makes decisions for the retirement plan, you will want to see if you can attend the next meeting. Or, even better, see if you can take a role on the committee. (This was a very common refrain among readers who were successful at getting changes implemented.)

Get Help

Naturally, the more employees there are requesting a change, the more motivation management will have to make a change. So if you can find other people who are also interested in lower-cost investment options, so much the better.

Tips for Small Business Employees

In the 401(k) industry, more assets means more bargaining power. So if you work for a business that has added many employees over the last several years, it’s possible that your employer would now have access to lower-cost providers who were not available when the plan was initially created. Be sure to mention this to the plan fiduciary.

In many cases, the plans that are very expensive to employees are very inexpensive to the employer. But in the case of a business with few employees, the business owner is likely one of the largest participants in the plan. So he/she may come out ahead with a switch to a plan that is less expensive to plan participants. Be sure to bring this up.

If, like many small businesses, your employer offers a SIMPLE IRA instead of a 401(k), you may not want to bother with lobbying for changes, because you can roll the money out of the SIMPLE and into a regular traditional IRA at a brokerage firm of your choice (without having to leave your employer) as long as you have had the SIMPLE IRA account for at least two years.

Maintaining Perspective

Throughout this process, it’s ideal to avoid criticizing your plan fiduciary’s decisions — and when you do have to criticize to do so in as tactful a way as possible. You don’t want the decision-maker(s) getting defensive, because then it will be impossible to change their mind on the matter. In addition, it’s important to remember that, from the employer’s perspective, a 401(k) is an employee benefit — they don’t have to offer it at all.

New to Investing? See My Related Book:


Investing Made Simple: Investing in Index Funds Explained in 100 Pages or Less

Topics Covered in the Book:
  • Asset Allocation: Why it's so important, and how to determine your own,
  • How to to pick winning mutual funds,
  • Roth IRA vs. traditional IRA vs. 401(k),
  • Click here to see the full list.

A Testimonial:

"A wonderful book that tells its readers, with simple logical explanations, our Boglehead Philosophy for successful investing." - Taylor Larimore, author of The Bogleheads' Guide to Investing
Disclaimer: By using this site, you explicitly agree to its Terms of Use and agree not to hold Simple Subjects, LLC or any of its members liable in any way for damages arising from decisions you make based on the information made available on this site. The information on this site is for informational and entertainment purposes only and does not constitute financial advice.

Copyright 2023 Simple Subjects, LLC - All rights reserved. To be clear: This means that, aside from small quotations, the material on this site may not be republished elsewhere without my express permission. Terms of Use and Privacy Policy

My Social Security calculator: Open Social Security