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Best 401k for small business

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  • Avatar cutis 
    Participant
    Status: Physician
    Posts: 4
    Joined: 02/05/2017

    Hello! I have a very small medical practice. We’ve been open for 8 months now and I am wanting to set up a 401k for myself and my employees. It looks like Vanguard only offers a SIMPLE IRA (which would mess up my backdoor roth, right?). What are other good choices for small business 401k plans?

    Thanks!

    #214317 Reply
    Avatar jacoavlu 
    Moderator
    Status: Physician, Small Business Owner
    Posts: 1848
    Joined: 03/01/2018

    there are many prior forum topics with similar questions, and blog posts too. Kon Litovsky has written valuable posts. Vanguard does offer a small business 401k with Ascensus as TPA. Employee Fiduciary is commonly recommended. Guideline has a super simple and affordable plan if you don’t need custom options. Sometimes you’ll get the best pricing and excellent service from a local provider. You should ask colleagues and knowledgeable CPAs in the area for recommendations.

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

    #214336 Reply
    Craigy Craigy 
    Participant
    Status: Spouse
    Posts: 1866
    Joined: 09/16/2016

    Vanguard Ascensus does small business 401ks.  A number of years ago this was not the case.

    At my urging, my firm changed to Vanguard Ascensus.  It was shopped fairly heavily and, at the time, was the best option.

    LEVEL 1 WCI FORUM MEMBER.

    #214345 Reply
    Avatar dentoid 
    Participant
    Status: Dentist
    Posts: 76
    Joined: 02/08/2016

    been happy with america’s best 401k

    #214356 Reply
    triad triad 
    Participant
    Status: Dentist, Small Business Owner
    Posts: 219
    Joined: 04/29/2016

    I use guideline.  i’ve yet to see anyone come close to their fees (maybe employee fiduciary until you have a larger balance since they have an AUM).  guideline has limitations.  there is no true-up with the match so you shouldn’t frontload the 401k.  also the profit sharing options are extremely limited.  If you are just planning on safe harbor i think its fine.

    #214359 Reply
    Kon Litovsky Kon Litovsky 
    Participant
    Status: Financial Advisor
    Posts: 881
    Joined: 01/09/2016

    Hello! I have a very small medical practice. We’ve been open for 8 months now and I am wanting to set up a 401k for myself and my employees. It looks like Vanguard only offers a SIMPLE IRA (which would mess up my backdoor roth, right?). What are other good choices for small business 401k plans?

    Thanks!

    Click to expand…

    There are definitely many platforms available.  I currently work with Vanguard/Ascensus, plain Ascensus, Employee Fiduciary and many others.  Pretty much all bundled platforms are what one would call a ‘record-keeper’, and it is important to pick the right one for the job.  The question is not which platform is the best (there are pluses and minuses with each one), but which specific plan design you need and what service providers your plan will benefit from.

    First thing, SIMPLE IRA can often be a good start up plan vs. a 401k:

    The Ideal Retirement Plan for Your Practice

    In all of my plans I prefer to use an independent/standalone TPA, as that provides better quality of service and better results when it comes to plan design and compliance.  Record-keeper choice depends on the size of the plan. For smaller plans, Ascensus is too expensive.  There are other record-keepers that are very competitively priced that can be used for small plans.

    First, you need to understand whether a 401k or a SIMPLE will be the plan for you in the near future.  I tend to send away plenty of docs with startups to Vanguard to open a SIMPLE IRA.  To pick a 401k over SIMPLE, the following should happen:

    1) You should have the capacity to max out the 401k contribution.

    2) Your staff demographics should be favorable so that the cost justifies the benefit in terms of employer contribution vs. what you can put into the plan.

    So the first thing that has to happen is a design illustration (which hardly any of the big service providers will do for a small plan).  Only then can you decide whether a 401k will be worth it.  Also, you don’t necessarily have to open a participant-directed 401k if you don’t have to:

    http://www.dentaltown.com/Dentaltown/Article.aspx?i=393&aid=5411

    This can save some money as well as decrease complexity, and this can work as a startup plan which can later be converted to a participant-directed plan without any issues.  Some practices might also open Cash Balance plans later on, so this should be kept in mind when setting up your 401k plan, as not all service providers have the capability to handle CB plans.

    I prefer to build custom-designed plans that address each specific situation rather than use all-in-one service providers where the quality is difficult to monitor advice level is minimal. Smaller practices tend to have the most moving parts, so picking your service providers wisely is always a good idea.

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

    #214512 Reply

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