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  • Changing Retirement Plan

    I have a practice with employees that we offer a 401k to through Edward Jones. I would like to roll over all of my money from the 401k into some type of self-directed retirement account. But, I don't want to jeopardize the plan for my employees. Do you have any recommendations? Thanks.
    Last edited by Peds; 04-08-2020, 12:48 PM.

  • #2
    You individually are extremely limited in your options. IRS regulations normally prohibit the in-service rollover of employee deferrals prior to age 59 1/2. IRS regulations allow but do not require a 401k to allow in-service rollovers of vested employer contributions prior to age 59 1/2. In most cases plans restrict even that option. My guess is that Edward Jones would want to keep the assets captive.

    However, under the CARES Act you could rollover up to $100k if you, your spouse or dependent have been confirmed by testing to have SARS-CoV-2, or have experienced adverse financial consequences for an enumerated list of causes in the Act or enlarged by the IRS.

    Why would you possibly have a 401k plan from Edward Jones? I can't think of a worse place to have an employer retirement plan. By it's very definition, in my mind the practice is in clear violation of it's fiduciary duties to the employees. You need to change 401k plan providers ASAP, not just for you, but all employees. That is the real solution to the problem.

    I realize this might seem like being a little harsh to a new member. However, sometimes the truth hurts and WCI forum members need to save even new members from Edward Jones and their ilk. You could say this is one of the purposes of this entire site.



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    Last edited by spiritrider; 04-08-2020, 01:23 PM.

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    • #3
      Originally posted by spiritrider View Post
      You individually are extremely limited in your options. IRS regulations normally prohibit the in-service rollover of employee deferrals prior to age 59 1/2. IRS regulations allow but do not require a 401k to allow in-service rollovers of vested employer contributions prior to age 59 1/2. In most cases plans restrict even that option. My guess is that Edward Jones would want to keep the assets captive.

      However, under the CARES Act you could rollover up to $100k if you, your spouse or dependent have been confirmed by testing to have SARS-CoV-2, or have experienced adverse financial consequences for an enumerated list of causes in the Act or enlarged by the IRS.

      Why you possibly have a 401k plan from Edward Jones? You need to change 401k plan providers ASAP, not just for you, but all employees. That is the real solution to the problem.
      ​​​​​​
      Yep get a better plan for everyone not just yourself..

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      • #4
        Originally posted by chadjohnson74 View Post
        I have a practice with employees that we offer a 401k to through Edward Jones. I would like to roll over all of my money from the 401k into some type of self-directed retirement account. But, I don't want to jeopardize the plan for my employees. Do you have any recommendations? Thanks.
        There are two options that are available with respect to separate accounts: a self-directed brokerage account inside the plan (which is the most common option) and a 'self-directed 401k', which is only really feasible for solo non-ERISA plans because of complexities and compliance issues involved in setting up such an account. You can ask whether EJ offers SDBAs inside retirement plans, they might not. That said, you probably are better off just moving your plan to a low cost platform with index funds and fixed fees/no AUM fees, and this way you don't have to worry about excessive fees and high cost investments that EJ has on their platform. Some record-keepers also give you access to SDBAs (such as TD Ameritrade), but usually they charge more for general administration. With a low cost fund menu you would hardly need an SDBA.
        Kon Litovsky, Principal, Litovsky Asset Management | [email protected] | 401k and Cash Balance plans for solo and group practices, fixed/flat fee, no AUM fees

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        • #5
          Originally posted by litovskyassetmanagement View Post

          There are two options that are available with respect to separate accounts: a self-directed brokerage account inside the plan (which is the most common option) and a 'self-directed 401k', which is only really feasible for solo non-ERISA plans because of complexities and compliance issues involved in setting up such an account. You can ask whether EJ offers SDBAs inside retirement plans, they might not. That said, you probably are better off just moving your plan to a low cost platform with index funds and fixed fees/no AUM fees, and this way you don't have to worry about excessive fees and high cost investments that EJ has on their platform. Some record-keepers also give you access to SDBAs (such as TD Ameritrade), but usually they charge more for general administration. With a low cost fund menu you would hardly need an SDBA.
          Sounds good. What I really want is to 1) pay lower fees, and 2) control my own investing of that money. The fees are the most important but I would like to have control if possible. Do you have any recommendations for low cost platforms?

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          • #6
            Vanguard / Ascensus
            Fidelity
            Employee Fiduciary

            those are 3 providers I would ask for a proposal. Or simply Vanguard / Ascensus and be done with it. Expect to pay about $4-7k per year out of your pocket as the owner for a bundled plan with administration and record keeping. Don’t pass on fees to your employees.

            It’s a fair amount of work to move a plan but well worth it for you and your employees. It will take several months. Now is a good time to start.

            come back with questions.

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            • #7
              Originally posted by jacoavlu View Post
              Vanguard / Ascensus
              Fidelity
              Employee Fiduciary

              those are 3 providers I would ask for a proposal. Or simply Vanguard / Ascensus and be done with it. Expect to pay about $4-7k per year out of your pocket as the owner for a bundled plan with administration and record keeping. Don’t pass on fees to your employees.

              It’s a fair amount of work to move a plan but well worth it for you and your employees. It will take several months. Now is a good time to start.

              come back with questions.
              I wish it was that easy. First, none of these record-keepers are fiduciaries, so they would want to sell you their platform regardless of what your actual need was (for example, a plan might already use a reasonably priced record-keeper, and might benefit from hiring an independent TPA to improve design and/or ERISA 3(38) fiduciary to overhaul investments, in which case you don't want to simply dump the existing record-keeper and go with another record-keeper if there is no need for that). Going in, one would have to know exactly what they need/want, what everything costs, whether you need custom plan design (for which you will need to hire your own independent TPA), whether you need to bring in an ERISA 3(38) fiduciary or not, etc., and there is a very small minority of plan sponsors who have the knowledge to navigate this all on their own, most wouldn't know where to start.

              For example, I would never use Fidelity because their pricing involves lots of revenue sharing and they try to keep everything in-house, which discourages open architecture approach which is the best approach for medical practices as this allows them to pick the best service providers cost-effectively. Also, Fidelity would always recommend their most expensive funds, unless of course the plan sponsor knows better than that (and Fidelity never accepts fiduciary responsibility, which makes sense since they try to sell you their high cost funds). Also Fidelity charges AUM fees for record-keeping, not fixed fees, so this can be an issue as well. EF is so barebones that they are nowhere near the level that even Ascensus is at. And Ascensus is quite ineffective without having good advice provided to the plan sponsor, since many medical plans are rather complex and require a top-down review which Ascensus is not going to provide. So if there is an existing plan I always recommend hiring your own TPA who can fix any potential issues and figure out how to redesign the plan to better fit your needs (Ascensus is not your TPA, they'll tell you that if you ask). The benefit is more than worth the cost, especially because TPAs are experts at compliance, which Ascensus does not even do for you except in the most basic/automated way.

              The biggest issue is that vast majority of plan sponsors don't really know that much about retirement plans to be confident that a record-keeper that does not provide comprehensive advice (and doesn't act in their best interest) is going to come up with the best solution for the practice. There is always going to be issues that a record-keeper can't advise on such as optimal/customized plan design, self-directed brokerage accounts, controlled/affiliated service groups, how to set up investment menu for the plan, potential addition of a Cash Balance plan, assisting partners with multiple sources of income, etc, and these are issues that are quite common. A small practice can easily outgrow their current plan as it adds more partners/staff and the needs of the practice often change. Having access to good advice is probably the most important aspect of running a retirement plan, just like it is important to use a good high quality CPA/attorney who can provide tax/legal advice. So the first step is to find good plan level advisers including a TPA/actuary and possibly ERISA 3(38) fiduciary, while record-keeper selection is secondary (though important to keep the costs low and to make sure that all of the features you are looking for can be found with the record-keeper of your choice).
              Kon Litovsky, Principal, Litovsky Asset Management | [email protected] | 401k and Cash Balance plans for solo and group practices, fixed/flat fee, no AUM fees

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              • #8
                fair enough Kon.

                sometimes perfection is the enemy of good. currently the OP has what is almost certainly a terrible, high cost plan with exorbitant fees and poor advisory services.

                I gave the OP actual steps they could take.

                Ascensus / Vanguard can provide a bundled plan with TPA plus record keeping services

                EF can as well and I’m pretty sure they offer a fiduciary service. You may say it’s not adequate but a plan with EF is reasonably priced and sure to offer excellent low cost fund choices and not a bunch of fees piled on participants

                Fidelity’s offering I only know through my own revamping of our practice plan. They would have provided an excellent open architecture platform for us at a very reasonable cost. We already had a TPA so I don’t know about their TPA services.

                We ended up going with Vanguard / Ascensus

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                • #9
                  Originally posted by jacoavlu View Post
                  fair enough Kon.

                  sometimes perfection is the enemy of good. currently the OP has what is almost certainly a terrible, high cost plan with exorbitant fees and poor advisory services.

                  I gave the OP actual steps they could take.

                  Ascensus / Vanguard can provide a bundled plan with TPA plus record keeping services

                  EF can as well and I’m pretty sure they offer a fiduciary service. You may say it’s not adequate but a plan with EF is reasonably priced and sure to offer excellent low cost fund choices and not a bunch of fees piled on participants

                  Fidelity’s offering I only know through my own revamping of our practice plan. They would have provided an excellent open architecture platform for us at a very reasonable cost. We already had a TPA so I don’t know about their TPA services.

                  We ended up going with Vanguard / Ascensus
                  Well, that's the thing, you had a TPA, but OP does not, so that would be one of the first steps before looking for a record-keeper. Without a TPA they will not be able to make good decisions on plan design/improvements. This is not about good enough but about getting minimum level of service necessary to have a good plan. What one would be looking for are independent service providers that work for the plan sponsor (and not for the record-keeper), as this would ensure checks and balances (as well as quality). As long as you get reasonable fixed/flat fee, price is not as important with practice retirement plans as advice and quality of service, because ultimately you are saving your own time and effort that otherwise would be spent doing many things you can easily outsource. Not everyone wants to be dealing with retirement plan issues and spending a lot of time on it, so some plan sponsors are looking for full service so that they can go on and do other things.

                  Kon Litovsky, Principal, Litovsky Asset Management | [email protected] | 401k and Cash Balance plans for solo and group practices, fixed/flat fee, no AUM fees

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                  • #10
                    I also use Vanguard/Ascensus. Their customer service is meh so it's a self-service option IMO. Their admin fees and fund expenses are pretty **** good though.

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