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How to talk to an employer about your 401(k)

Online financial software has made it possible for retirement investors to compare their 401(k) with other plans in a matter of minutes and, in some cases, at the press of a button, send an email to their company's CEO to show that the plan isn't measuring up to the competition.

Technology, however, is a passive method of communication. In fact, Nevin Adams, director of education for the Employee Benefit Research Institute, said that although emailing a company HR department or CEO is the most frequently dispensed advice from personal finance columnists, he thinks it is an "extraordinarily ineffective way" to get things changed, unless a plan participant has strong existing relationships with the company's officers.

That doesn't mean there aren't good reasons to have a conversation with your company about the retirement plan. From plan fees and diversity of investment offerings to company-match levels, there are several critical issues that go into a 401(k) plan that will go a long way toward making or breaking your retirement nest egg.

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The 401(k) conversation may be the most necessary at small companies that have smaller benefits departments. Unlike large corporations that typically have an HR department and a dedicated representative who oversees retirement offerings exclusively, companies that have 200 employees or less often don't have a benefits-only HR professional, according to Edward Ferrigno, vice president of Washington affairs for the Plan Sponsor Council of America. Many firms with under 50 employees don't have a full-time HR professional, and the "real crunch" is businesses with under 20 employees, Ferrigno said. Retirement plans with fewer than 10 employees account for about 40 percent of all U.S. plans.

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"Think about how much time an average person spends thinking about their next washing machine or car or home," said Dave Blanchett, head of retirement research at Morningstar. "They spend so much time on this, but retirement is the biggest purchase. ... Spend some time on it."

"Most employers feel strongly about their fiduciary responsibility here, so any complaint should be listened to," said Don Hess, head of product development at JP Morgan Retirement Plan Services.

"The medium- and small-sized businesses are where this can make a big difference," said certified financial planner Joel Johnson, founder of Johnson Brunetti Retirement & Investment Specialists, a Connecticut-based RIA.

Here are six things to keep in mind before talking to your employer about your 401(k) plan.

1. Don't let yourself be branded a malcontent.
Hess said that complaints should be listened to, but remember, it depends on how that complaint is voiced.

Based on several decades of working with plan sponsors and HR representatives, Adams said most informed him that complaints (a) generally come from a regular group of "malcontents" and/or (b) individuals who don't know anything about the workings (or costs) of the plan and therefore are pretty routinely discounted (if not discarded).

Entering into a discussion about the retirement plan with an all-or-nothing no-holds-barred attitude isn't likely to get you what you want. Also remember that there is safety and power in numbers—especially if you can coordinate with a few employees who you know are well respected by management.

Morningstar's Blanchett said a company can't do anything about someone being unhappy; they have to know what needs fixing.

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2. Educate yourself; educate your employer.
As Blanchett's comment suggests, one way to make sure you aren't mistaken for a malcontent is to educate yourself before having the conversation. Become a resource to your employer on creating a better retirement plan for all employees. Johnson, founder of a boutique retirement-planning company, told us that he welcomes employees who come to him with an active interest in company benefits and a high level of self-education.

"There is a tremendous amount of power in attitude," Johnson said. "If an employee says, 'Joel, I've been looking at our 401(k) or insurance, and I think we can do better, and I've done some research on my own and here is what I've found,' they are making it easy for the boss." Johnson, who has 16 employees, added, "[At] any company with less than 100 employees, everyone is doing the work of more than one, so you have to offer help or a solution."

Johnson said three or four employees came to him a few years ago after having done research on health insurance options and suggested options for a plan that might be better than the existing one. "I handed it to the comptroller. That was great," Johnson said.

(Read more: 5 ways to prep a small business for a sale)

3. Identify the best person to approach.
Hess said the most common approach is going to a local HR representative, because an employee can sit down directly with "the other side of the coin." Hess said that even an "attention-grabbing email to a CEO" will most likely have the CEO circle back to HR and HR circle back around to the employee. "In my mind, you're better served going straight to HR and then if you're not satisfied, escalate the issue in the corporate hierarchy," Hess said. In fact, all the experts were in agreement that emailing the CEO isn't the best idea as a first point of contact.

Adams suggested finding someone from the finance/treasury department of the company—if it's big enough—who is on the investment committee of the retirement plan and connecting with them. "They're more likely to be intimately familiar with the fee/investment aspect of the plan, and if they are on the 401(k) committee, they have a vested interest in ensuring that the fees and services rendered to the plan are reasonable." He added, "That is not to say that the HR contact won't work—it really depends on them and their role in the plan." Often the HR role administers the plan, but the treasury/finance folks make the investment menu decisions (sometimes they both do), Adams explained.

4. Understand that a plan is constructed for many participants, not just you.
Hess said that a conversation with HR can often enlighten an employee about the fact that a 401(k) isn't created for you in a vacuum but have to meet the needs of all employees. "A conversation with HR may help employees understand the strategy behind the plan and that it has to appeal to a wide demographic. … That's the challenge faced by employers."

Employers also will sometimes disagree with employee complaints—even reasonable ones—with the goal of protecting you from yourself. "I had one employee who asked for a self-directed brokerage option, and I told him I was not going to do it, because I didn't think it was good for him," Johnson said. "They wanted to buy some Apple stock."

Johnson said if an employee has a good relationship with an HR person and feels like a 10-minute conversation or coffee with HR would be a good chance to show how much they have educated themselves on the 401(k)'s features, the employee still has to remember that choosing a 401(k) provider is a big job—the bigger the company is, the more reluctant they will be to change providers—and you have to give HR "the benefit of the doubt in explaining the data," especially any data from third-party websites that have rated your company's plan poorly.

(Read more: Start-ups take employee perks to new levels)

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5. Remember that fee comparisons aren't created equal.
The two most debated aspects of 401(k) plans are breadth of investment offerings and the fees associated with those offerings. Blanchett said complaints about investment options are on the wane, rightly so. "Most plans are OK there, and to be honest, the things that are missing are the ones people won't realize they are missing."

Fees, though, continue to be a bone of contention in the retirement plan market. There's just one very important thing to remember if an employee does want to discuss fees with their employer: You have to compare the fees on your plan to fees on similarly-sized plans. Sure, in a perfect world it wouldn't matter if you worked for Exxon Mobil or a local grocery store in terms of the competitiveness of plan fees, but the truth is, it makes all the difference in the world: The larger the plan is, the better it can negotiate with vendors for lower-fee investment offerings.

"When someone tells me they think their 401(k) fees are too high, I always ask, 'Compared to what?'" Adams said. When an online financial tool is suggesting that you're paying too high a fee, know what the basis of comparison is. It's not just size. Are there fees or services you have access to in your plan but aren't using?

Remember the wider demographic of the plan: Sometimes you might pay for a certain service that is part of the package and one that is of value to the plan as a whole, Adams said.

"There are legitimate complaints," Johnson said, but he again stressed being an educated complainer. "When I meet with individual clients, my advice to them if they want to have this conversation with the boss is to go in and offer solutions. If you go on BrightScope and it says your plan fees are high compared to the average, then go in and say, 'Hey, here is what Fidelity will come in and offer, and here is what Vanguard will do."

6. Understanding the chess match of the company match.
A company match pegged to an employee contribution is one of the best benefits of a 401(k)—Blanchett said research shows it improves participant behavior—but it is at the discretion of the employer. For many small-business employers, the company match was a feature that became a casualty of the recession. Now that business in America is booming again, have all those rescinded matches come back? The experts say no, and that's one delicate conversation that employees of small firms have every right to seek out with their bosses.

"We're quite a few years removed from the crisis, and if a plan has not added [the match] back, if I'm that person, I would ask: 'It was in here before. Why isn't it back?'" Blanchett said.

"The biggest complaint we get is that there is no match or the company cut down on match. That's No. 1," Johnson said. Even big public companies cut back on the match, and at companies of 50 or less employees, the issue is widespread, he said.

"Five years ago, people didn't know if they would survive and now are a little out of survival mode and asking where does the business invest," Johnson said. "They could invest more in the 401(k), and it's an easy thing to do."

Of course, easier said than done.

"The reality is it's a form of confrontation," Blanchett said. But it's also a negotiation: Even if the employer does not agree to restart the company match, it's possible they could offer an employee a pay raise to make up for it.

Johnson said another potential negotiation is with employers who feel bad about cutting a match, and even if they won't bring it back yet, they might be more willing to listen to employee suggestions for lower-fee 401(k) plans to switch over to. "That's where you have to have a mature conversation and put yourself in the shoes of the other person, sniff out whether the boss is being greedy or really having a hard time keeping the doors open," Johnson said.

He said it is also important to remember that in many cases, employers may have simply lost sight of the match relative to all of the other issues they deal with as business recovers. Sometimes it's not that they are thinking of the cost, it's just that they don't have the time to think about it at all.

"I have the conversation with a lot of bosses who own a dental or medical practice or small manufacturing or sales company—the core of our economy, with 15 to 50 employees—and they are just busy folks and often haven't thought about any of these issues long enough to implement solutions," Johnson said.

By Eric Rosenbaum, CNBC.com

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