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Hi everyone - this is my first post!

I'm 23, make 50K, and became eligible for my company's 401k a little over a year ago. 6 months ago, they finally set up a meeting with our financial advisor, a guy from Merrill Lynch to explain our options. I noticed immediately that there was no index fund, nothing had an expense ratio lower than 1.8% (most were over 2%), and all funds had 12b1 fees. We had 10 choices and they were all Blackstone or Merrill Lynch funds. The financial advisor recommended that I put a large chunk of my money in bonds and money market and when I asked about index funds, he essentially pretended not to hear but upon persisting, advised that I could "mimic the investment approach of index funds" with our current options. This seemed suspect to me.

So, I petitioned my company (of 9 employees) to change plans and advisors. They agreed fairly easily when I told them about the advisor's bad advice and said they would research our options as a small company and a new plan would begin Jan 1 2008. I thought, Yay! We don't have an HR person on staff, it is mostly the President and CEO (2 people) that make these decisions. Unfortunately, while they are very good at PR, they are financially clueless. Neither of them knew what an index fund was and sometimes when I ask them how finding a new 401k is coming I feel like I'm talking to a wall. I've even volunteered to do all of the research myself but they say no.

Just yesterday they came back to me with a report about their 401k findings. They said that after doing some research (which they wrote consisted of talking to our Merrill Lynch broker/advisor and talking to the sales rep from Paychex that we use), they think moving to an open-architecture system where we will have "over 4,000 fund choices" is what they want to do. Now, I don't know what an open-architecture plan is and they didn't say in their report who they wanted to administer it.

So, I have 3 questions about how to deal with this.

1. What is an open-architecture plan, is it a good option, and who can we get to administer this best as a small company? My bosses are great people and will absorb higher costs to get a better 401k for their employees...they are just clueless about it.

2. If an open-architecture plan is not the best option, what is?

3. Because this will clearly not happen by Jan 1 2008 as promised, and I don't want to put my money into the current 401k we have, what should I do about the employer contribution (3% flat) I should have recieved in both 06 when I was eligible and all of 07? Should I just ask for a check for the amounts I should have been given and put it in my Roth while I wait?


I'm operating under these assumptions. Please correct me if I am wrong! I may very well be...

1. That my bosses need to investigate Vanguard, Fidelity, Schwab, and other 401k options more comprehesively to see what they offer.

2. That we only need 20 or so good options, which include at least 1 index fund, some socially-responsible funds (we are a company that works largely in non-profit PR), and 4 and 5 star funds both foreign and domestic. All with no 12b1 fees, loads, and lowest possible expense ratios. As long as we have that, we don't need 4,000 options.

3. We should not be working with an advisor who is paid on commission, as the Merrill Lynch guy was.

4. That a small company can offer a good 401k.

5. That because my bosses are also invested in the 401k, they should show a little more hustle! Their money is at stake too!


I know that was incredibly long, and if you made it through, I would really appreciate any advice : )
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