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401k plan for small business

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  •  VKJ 
    Participant
    Status: Physician
    Posts: 4
    Joined: 05/16/2018

    Hi,

    We are small business with 20 employees and currently have our 401k with nationwide and fees about 1.5, good variety of fund’s. Looking to switch to a employee fiduciary or guideline for their low costs. Anybody have experience with them and how easy to transition. I don’t want to rock the boat and then mess up with the new provider.
    Thank you.

    #179338 Reply
     jacoavlu 
    Moderator
    Status: Physician
    Posts: 1425
    Joined: 03/01/2018

    I’ve no direct experience with either. EF generally gets good reviews. Guideline is inexpensive but last I knew only offered comp-to-comp and flat dollar amount profit sharing which means the plan is less flexible if the goal is to maximize benefit to the owners while reducing employer contribution costs.

    If a plan is large enough (in the millions) Vanguard / Ascensus is hard to beat given that they offer a bundled plan with no asset based fees.

    Kon Litovsky has written several articles on the blog that you may find helpful. There’s also a wiki page on Bogleheads that would be good to review.

    The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVA

    #179351 Reply
     nwdpath 
    Participant
    Status: Small Business Owner
    Posts: 18
    Joined: 05/10/2017

    I have 2 businesses with EF and they are fantastic.  Low costs, great customer service.  We’ve compared to other plans but all have been more expensive.

    #179356 Reply
     VKJ 
    Participant
    Status: Physician
    Posts: 4
    Joined: 05/16/2018
    Splash Refinancing Bonus

    Thank you @jacoavlu and @nwdpath.  If Guideline did not let us do Profit sharing, that would be a deal breaker. I am just reading Kon Litovsky’s article and his service looks a lot reasonable than what we already have.  @nwdpath..Heard from a few people that EF is a good administrator but does not prove guidance with regards to planning for the employees and advice with maxing your plan.

    #179411 Reply
    DMFA DMFA 
    Moderator
    Status: Physician
    Posts: 2052
    Joined: 06/24/2016

    I’ve bounced a lot of stuff off of Konstantin and his reasoning and modeling seem excellent. That said, I haven’t been in a position to use his services and so can’t evaluate them first-hand or assess the costs to a business…but getting a design specific to your business for optimal costs and choices for a tax-deductible fee should, in most cases, easily justify it.

    "I like money." - Frito Pendejo (Idiocracy)

    [Not a financial professional (yet), lawyer, or employee of The White Coat Investor]

    #179416 Reply
     jacoavlu 
    Moderator
    Status: Physician
    Posts: 1425
    Joined: 03/01/2018

    Guideline can do profit-sharing, but as I said with limited flexibility. No age weighted profit-sharing, no cross tested new comparability plan.

    RPG consultants is another I would talk to and get a quote from.

    The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVA

    #179435 Reply
     VKJ 
    Participant
    Status: Physician
    Posts: 4
    Joined: 05/16/2018
    Earnest refinancing bonus

    It gets a lot complicated as I read these articles.  Now I understand why administrators don’t want to change plans.  I will reach out to Kon and see what he comes up with.  Atleast, he is flat fee based.  Thank you for all the advice.

    #179453 Reply
    openwideguy openwideguy 
    Participant
    Status: Dentist
    Posts: 4
    Joined: 01/11/2016

    I’ve been with EF for about 5 years at the small dental office I own.

    I recommend them wholeheartedly.

    My rep is very fast in replying to questions via email.

    their website is easy to navigate.

    the fees are ridiculous–truly amazing!  i have all Vanguard Funds

    my wife recently bought a private ophthalmology practice and is using EF and is equally happy

    PM me if more information is desired

    #179620 Reply
    Kon Litovsky Kon Litovsky 
    Participant
    Status: Financial Advisor
    Posts: 810
    Joined: 01/09/2016

    Unfortunately I can’t recommend EF as a standalone provider even though I have several plans with them.  They just don’t cut it when it comes to quality of service.  Their reps don’t know very much when it comes to more advanced plans.  My clients complain that EF does not help them with many administrative functions which a typical TPA includes (such as cashing out terminated participants or informing plan sponsor about eligible participants, both of which are very important).

    Low cost in this case is unfortunately low service as well, and unless you do all of the work yourself (if you know what to do and how to do it), I wouldn’t be happy paying a low fee for very ‘low’ service.  That’s why I highly recommend using your own Third Party Administrator, especially if you have a profit sharing plan, because if anything, I wouldn’t expect EF to be able to optimize your employer profit sharing contributions, unless they’ve improved in this regard (which I doubt).

    Also, if you have at least $3M in assets, 8 bps fee starts adding up fast, so at that point I would consider a fixed fee record-keeper.  For a small practice, a pooled 401k plan might be more cost effective vs. participant-directed one.  If you ever have to add a Cash Balance plan, EF is definitely not in a good position to help you optimize your plan or test both plans together (which is what any good TPA should be able to do).

    And if both spouses own practices, I would actually recommend setting up a SINGLE plan with both practices adopting it to cut costs further.  For one thing, this is a controlled group if you live in a community property state or have children (see if EF can tell you whether you have a controlled group and how to handle it from admin standpoint), and you should make sure that both plans are tested together in that case, because if employees of one practice get profit sharing, and employees of the other one do not, that’s a violation that has to be addressed via voluntary compliance (see if EF actually has the capacity to even do voluntary compliance filings). Retirement plans are governed under ERISA and are not DIY unless you are an expert in this.  Unfortunately ‘low cost’ providers like EF are not making this any easier, and any mistakes that are made on your behalf are still your own when it comes to ERISA, and EF is not going to take responsibility for this.

    Doctor/dentist plans are definitely much more complex, often involving profit sharing and Cash Balance plans, so for that reason I recommend that you pick the best (but cost-effective) service providers vs. the cheapest ones.  Getting good advice is going to more than pay for itself, but getting bad or incomplete advice can potentially cost more in the long run.

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

    #179647 Reply

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