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We're looking at Great West vs Mass Mutual as a 401(k) provider. Any advantages to one vs the other?

Dec 09, 2012 by Mary Ann from Daniels, MD  |  Flag
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9 votes
Herbie Glass Level 18

Mary Ann,

Without knowing anything about your company, your objectives, or your investment experience, it is difficult for me or anyone else to know your service and investment product needs and therefore which company would be better for you and your employees. Furthermore, the service charges, the investment expenses and any other charges quoted by each company is extremely important to understand before you can expect that a wise decision can be made.

I have been a Pension consultant since 1974 and have worked with many 401(k) plan companies since the late 1980s. I have worked with and investigated many insurance companies during that time. Although, I do not know much about Mass Mutual as a 401(k) product provider and record keeper, however I have always known them to be a very fine Life Insurance company. Coincidentally, I just switched my own company's 401(k) plan over to Great West because when I compared them, in many categories, against a number of other companies, I found them to have the best pricing and their investment products, services and service features compared very favorably to all the other companies I received proposals from.

To arrive at a reasonably good decision, I would suggest that you find a good 401(k) plan consultant that is able to first understand your needs, goals and objectives and can also review any current plan you may have and then put together some alternative plan designs for you to review and choose from, he should then make a list of specifications that meet your needs. The next step would be to have your consultant contact a minimum of three companies that he thinks would be a good fit with you and your plan and request proposals from each of them. He should then be able to show you an easy to understand comparison of each companies' pros and cons. Only after going through a comprehensive process such as that, would you have the information that you need to be able to make a decision as to which company you think would be good to select.

I hope the above answer helps you with understanding a prudent process to go through that would help you make the best informed decision you can with respect to this matter.

Good luck with your search.

Herbie Glass

Comment   |  Flag   |  Dec 10, 2012 from Franklin, MI

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6 votes

It's just semantics. The issue today, is less about getting the end provider(s) right and more about getting the middle man/women right. You want to find the right financial advisor....A trusted partner...A liaison that sits right between you and these 800 pound gorillas .

1 Comment   |  Flag   |  Dec 09, 2012 from Port Washington, NY
Alfred F

Mary Ann, I would be asking for the 408(b)2 disclosure from both firms. These fee disclosures will spell out all who is being paid inside and outside of the plan. My history with both firms has not been very good relative to fees in the marketplace. One caveat to this will be the size of your plan and average account balances. Most plans are priced on these factors and therefore if you have a micro-plan (under $1m in assets) and a large employee group, then the use of an insurance company may make sense. Otherwise you will be paying much higher fees then you may need to. Why? The insurance company needs to earn fees, the broker will need to be paid, the record keeper and finally the mutual fund company and maybe an added outside ERISA 3(38) manager. The insurance company is just another middle man directing the fee structure. You can un-bundle these fees and have an outside consultant provide an unbiased plan benchmarking analysis on any of these platforms.

If you go forward on your own then be ready to do some serious digging into the fees. Unfortunately the fee structures are very complex and not matter what is shown to you as the summary cost, do not trust it 100% - make sure you READ the highlight the 408(b)2 disclosure from each firm and compare against the summary they are providing. Many firms will now only show you the costs that are directly related to the plan and any cost that could be "participant directed" (if an ERISA 3(38) manager is offered for additional fees, etc) is not provided to you on the summary page. It is buried in the disclosure. This is a new trend ever since implementation of the new fee disclosure rules on July 1, 2012.

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Flag |  Dec 10, 2012 near Wayne, PA

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6 votes
Don Level 19

Hi Mary Ann, its excellent advice to get a trusted advisor to help you with the decision and to provide ongoing service. I would add that this advisor should be fee-only, independent, and willing to explicitly acknowledge a fiduciary responsibility to the plan sponsor and participants. You don't want to ask someone who is merely required to find a suitable plan for you; you want someone who will find you the best plan. You don't want someone who will be paid a commission based on the plan solution and investment options you select; you want someone who will earn a fee that is independent of the choices you make. Basically, you want a registered investment advisor (RIA) with experience in 401k plans.

I would also add that at the end of the day there is likely going to be little difference between two insurance companies. I strongly encourage you to look at non-insurance based options. You should be looking for a platform that offers a superior range of investment options, including the ability to choose low cost index funds, and transparent pricing. Definitely avoid any annuity-based platforms with their M&E fee adders that offer very little value to a 401k plan participant.

The specific platforms available to you very much depend on the amount of assets in your plan, but there are great options available at all sizes and any respectable fee-only advisor should be able to point you in the right direction.

Best of luck.

Comment   |  Flag   |  Dec 10, 2012 from Middlebury, VT

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5 votes

I would always recommend comparing different types of providers rather than comparing two groups that are similar to each other. Both Great-West and Mass Mutual are insurance companies that offer bundled 401(k) services and neither company will take fiduciary responsibility for its recommendations with every motivation to maximize revenue off your 401(k) plan. Both providers will typically make money off of your 401(k) plan based on asset based fees, which may or may not be an advantage for your 401(k) plan. 401(k) providers in general do a very good job of only explaining to plan sponsor half of the truth to sell additional services to help them make money. Most 401(k) providers won’t explain the whole truth and you could be missing out on plan design, employee/employer services and other 401(k) opportunities to help employees accumulate more wealth for retirement. Most companies, including the largest in the world, hire experts in 401(k) plans to make sure that they don’t miss these opportunities for their employees and to help share in the liability that comes along with offering a retirement plan as a benefit to employees. Conversions are a great time to revamp the entire plan, but if done incorrectly can be very detrimental to employee accounts that will eventually be a burden for the plan sponsor to correct. My advice is to simply make sure you have all of you “i” dotted, “t” crossed and that you have documented how Great-West or Mass Mutual is in the best interest of all you plan participants.

Comment   |  Flag   |  Dec 28, 2012 from North Richland Hills, TX

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4 votes
Marcus Level 17

Hi Mary Ann,

Good to see you are comparing a couple of vendors for your 401k plan. In fact, if you have not done so already, I would encourage you to look even beyond those two vendors. There are many different vendors out there who provide their services via different models (i.e., fee based, commission based, proprietary funds vs. multiple fund family choices, etc.) so whether you do it on your own or utilize the services of a professional, I would lay out your needs/wants/budget ahead of time and then pursue your vendor from there. If you are adverse to hiring an advisor on an ongoing basis, at the very least, (as mentioned in another post) you may want to consider hiring one to help you get set up.

Take care,

Marcus

1 Comment   |  Flag   |  Dec 10, 2012 from Long Beach, CA
Evan M. Levine, ChFC

Nothing beats the power of the right advisor. Multi-Billion dollar insurance companies are not advisors - they are 800 pound gorrillas.

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Flag |  Dec 10, 2012 near Port Washington, NY

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