How to avoid sales fees on Employer-sponsored IRA

[beanie4me]

My employer, which is a small-medium business, offers a SIMPLE IRA plan, which comes with a company match. Recently, the financial advisor who setup our plan moved from AXA, which offered it's own no-load funds, to a 3rd-party company that offers only Oppenheimer funds which carry a 5.75% sales charges. The management of our company decided to move with him, and so setup a SIMPLE IRA with the new 3rd-party company.

I am not happy about this move. I looked over the Oppenheimer funds offered - when you factor in the sales charges - they are regularly outperformed by similar no-load Vanguard funds. I don't want to pay sales fees to a financial advisor who just threw me under the bus for his own financial gain. However, I felt I had no choice if I wanted to retain my employer's match, so I signed up.

My question: Do I have any recourse? Is there any way I can avoid being charged this 5.75% sales load in our company's SIMPLE IRA, but still get my employer match?

[LMA]

Correct me if I am wrong but probably not. Your employer chooses the administrator of the fund so i you want to partake in their program those would be the rules. You can get an IRA anyhwere it is offered but to get the employer match I am pretty sure you would have to play by their rules.

[disneysteve]

There is no way to avoid the loads but I would certainly make your thoughts known in writing to your employer and plan administrator. Using load funds is financially irresponsible. Your employer has a fiduciary duty to its employees and I'd argue that this violates that duty.

Contribute just enough to get the full company match because even with the loads, you'd be stupid not to. Then put the rest of your retirement savings elsewhere.

[creditcardfree]

Well, I did a little looking around to refresh my memory. There are at least two types of SIMPLE plans.

5304 - Each individual decides where to invest
5305 - Plan specifies financial institution where all employees must invest

If your employer has the 5305 plan there are no penalties keeping you from rolling your money to a SIMPLE at another financial institution. It appears this can be done as frequently as you prefer. This would be tax free and fee free assuming the new institution doesn't charge a load.

Here's the link to the IRS Simple 5305 plan form. Page two shows the provision I refer to.

So...while you may still be charged the load on the fund, you get the match, but then can roll your funds to any SIMPLE IRA at any other institution you prefer.

If your company chose the 5304 plan...then you don't pay a load at all because you will pick the company without a load!! I hope this is what you have!

Good luck.

[creditcardfree]

Must add that the rollover must take place after 2 years if it is the 5305 plan! Just make sure to read all the plan documents and forms that you have filled out. Also talk to the financial advisor directly to get clear on what loads you are paying.