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Guideline now offers New Comparability profit sharing

Home Practice Management Guideline now offers New Comparability profit sharing

  • Avatar jacoavlu 
    Moderator
    Status: Physician, Small Business Owner
    Posts: 2374
    Joined: 03/01/2018

    I don’t know when this started but Guideline now offers a 401k setup with New Comparability profit sharing.

    https://www.guideline.com/401k

    Previously they only offered Pro Rata profit sharing where all eligible employees receive the same percentage of compensation as profit sharing. Not an ideal setup for a small medical or dental practice where owners want to max out a plan while limiting employer contribution costs.

    Their New Comparability plan is $1200 base fee plus $104 per participant per year. That’s very aggressive pricing, about $1k less per year than what my practice pays now, and our plan costs are low.

    Their platform like all these tech startups is very “pretty” and they offer a lineup of low cost Vanguard funds and checks the boxes for 3(16) and 3(38) fiduciary.

    I’d be curious to hear if anyone is using Guideline and particularly their New Comparability offering. I’m in the process of getting a proposal from them now.

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

    #244568 Reply
    Kon Litovsky Kon Litovsky 
    Participant
    Status: Financial Advisor
    Posts: 920
    Joined: 01/09/2016

    I believe I’ve written about Guideline and other companies of the same type extensively, and while this might work for some, there are great many issues with group practice plans to mention that require personal attention from professionals (vs. automated platform with exactly zero advice built in). Specifically for group practice plans, administration and compliance can be a challenge even without automated platforms making it ‘better’:

    How to Have the Best Group Practice Retirement Plan

    For one thing, these platforms usually don’t work with Cash Balance plans, which would require someone to take over plan administration as both 401k and Cash Balance plans work together, and with the document controlled by Guideline, that’s not going to be an option, as trying to coordinate plan documents will be an issue, not to mention finding someone to talk to (which with Guideline may be a challenge beyond the initial sales call given their tiny staff).

    A 3(16) fiduciary service (and I’m surprised they are offering it) is mostly a gimmick, they won’t be doing any compliance work that requires personal attention since their platform is automated, so any compliance issues that happen outside of their ‘platform’ will simply be ignored. For larger groups, majority of compliance issues are not handled by these platforms at all, so you better make sure that you do your own compliance (if you are able).

    Just because they can do the design does not mean it is any good.  It will be done using the ‘auto’ feature, meaning that nobody will actually go over the design with you to make sure it is optimal (or try to optimize the design by doing a design study).  When you have a small practice any change in demographics can result in a significant change in plan design, and some of these can be anticipated by running multiple design illustrations (design studies).  For example, hiring an HCE W2 can increase the cost significantly, but there are many different design options that can be used to come up with an optimal design that require an actual person to evaluate and compare, and this is a must for plans that have staff. There are many variables that are taken into account when doing a plan design, and just having the ability to do cross-tested design does not mean that you will get the optimal design that takes into account your entire situation (and potential future changes). The larger the plan, the more involved this process can be.  Same goes for compliance and everything else.

    What’s interesting is that if you don’t have experience with retirement plans and simply take their word at face value, everything seems fine, but once you get some experience actually running a plan, you’ll quickly realize that a platform that’s ‘automated’ is the last thing anyone needs.  Saving a few bucks here and there is not going to save you much money in the long run if you don’t get quality advice and support, as retirement plans are anything but automated, requiring significant involvement from everyone, including the plan sponsor. Getting a long checklist of things to do is what you’ll end up with, and this will definitely waste your time vs. hiring your own Third Party Administrator who will do everything for you.

    Many such ‘tech’ companies (which is what they are) operate at a loss, so in order for them to make any money, they either cut services, or try to get as many plans on their platform as possible.  Either one of these will result in less/worse service.  Eventually they will reach their maximum capacity, and if they are not making enough money (or adding plans at a rate that’s large enough), they will fold. What will happen to your plan when a service provider goes out of business?  I’ve been through that, and basically you might get several months to leave their platform (and without good support, you’ll be back to square 1 as far as fining the next set of service providers). In any case, it is best to have a set of service providers who will always be there, or at the very least, who are replaceable so that with the loss of one you don’t lose the whole plan (and who are usually not replaced all at once, unless there is a big reason to do so). So if you work with a TPA and a record-keeper, losing the record-keeper or TPA will not make you lose the whole plan, as a new TPA or a record-keeper can be found without having to move plan assets in a pinch. So rather than trying to find rock bottom fees, look for the best service providers given a competitive fee, and rather than trying to shop around for the lowest fee service providers, make sure that yours are doing their job and call it a day.

     

     

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

    #244765 Reply
    Avatar jacoavlu 
    Moderator
    Status: Physician, Small Business Owner
    Posts: 2374
    Joined: 03/01/2018

    For one thing, these platforms usually don’t work with Cash Balance plans

    we don’t have a CBP and have no plans to pursue one anytime soon

    A 3(16) fiduciary service (and I’m surprised they are offering it) is mostly a gimmick, they won’t be doing any compliance work that requires personal attention since their platform is automated, so any compliance issues that happen outside of their ‘platform’ will simply be ignored. For larger groups, majority of compliance issues are not handled by these platforms at all, so you better make sure that you do your own compliance (if you are able).

    with their more expensive New Comparability plan the do promise a “dedicated account manager”

    Just because they can do the design does not mean it is any good.  It will be done using the ‘auto’ feature, meaning that nobody will actually go over the design with you to make sure it is optimal (or try to optimize the design by doing a design study).  When you have a small practice any change in demographics can result in a significant change in plan design, and some of these can be anticipated by running multiple design illustrations (design studies).  For example, hiring an HCE W2 can increase the cost significantly, but there are many different design options that can be used to come up with an optimal design that require an actual person to evaluate and compare, and this is a must for plans that have staff. There are many variables that are taken into account when doing a plan design, and just having the ability to do cross-tested design does not mean that you will get the optimal design that takes into account your entire situation (and potential future changes). The larger the plan, the more involved this process can be.  Same goes for compliance and everything else.

    for us, a small group, we have stable owners and employees, we’ve had a new Comparability plan in place for several years, and I’ve got proposals from multiple companies including Vanguard/Ascensis, Employee Fiduciary, RPG, RPA, and surprise they all turn out about the same, as far as what’s the best fit for our group (New Comparability), and the resultant optimal contribution percentages. So I know exactly what to expect

    Ascensus and Guideline are the only ones that offer a plan with no AUM fees whatsoever.

    What’s interesting is that if you don’t have experience with retirement plans and simply take their word at face value, everything seems fine, but once you get some experience actually running a plan, you’ll quickly realize that a platform that’s ‘automated’ is the last thing anyone needs.  Saving a few bucks here and there is not going to save you much money in the long run if you don’t get quality advice and support, as retirement plans are anything but automated, requiring significant involvement from everyone, including the plan sponsor. Getting a long checklist of things to do is what you’ll end up with, and this will definitely waste your time vs. hiring your own Third Party Administrator who will do everything for you.

    we already have a TPA and they’re “ok” – we’ve had a few issues which is why we’re exploring our options

    Many such ‘tech’ companies (which is what they are) operate at a loss, so in order for them to make any money, they either cut services, or try to get as many plans on their platform as possible.  Either one of these will result in less/worse service.  Eventually they will reach their maximum capacity, and if they are not making enough money (or adding plans at a rate that’s large enough), they will fold. What will happen to your plan when a service provider goes out of business?  I’ve been through that, and basically you might get several months to leave their platform (and without good support, you’ll be back to square 1 as far as fining the next set of service providers). In any case, it is best to have a set of service providers who will always be there, or at the very least, who are replaceable so that with the loss of one you don’t lose the whole plan (and who are usually not replaced all at once, unless there is a big reason to do so). So if you work with a TPA and a record-keeper, losing the record-keeper or TPA will not make you lose the whole plan, as a new TPA or a record-keeper can be found without having to move plan assets in a pinch. So rather than trying to find rock bottom fees, look for the best service providers given a competitive fee, and rather than trying to shop around for the lowest fee service providers, make sure that yours are doing their job and call it a day.

    Click to expand…

    I think this is the most fair criticism. You’re right there’s no guarantee they won’t fold, or raise prices, or that service will suffer with growth.

    I’ll followup here as I learn more.

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

    #244772 Reply
    Kon Litovsky Kon Litovsky 
    Participant
    Status: Financial Advisor
    Posts: 920
    Joined: 01/09/2016
    Earnest refinancing bonus

    You can’t replace a TPA with an automated platform, that’s not likely to work over the long term.  Given how low service they are, I wouldn’t hold my breath that a platform with hardly any support or advice is going to be better than a TPA.  You very likely to experience problems over time, this is what happens with platforms like Betterment (about which I have some first person information). This is simply inevitable when their entire business model is built on automation of something that one can’t (yet) automate. Just because your group is stable does not mean you don’t need ongoing compliance oversight. And your coordinator will not replace a TPA. When a problem does occur (provided it is caught in time), fixing it is important, and all of these platforms are not exactly staffed by compliance experts, so you’ll just need to hope that they fix everything correctly (again, I wouldn’t be holding my breath, as I doubt that they are going to do voluntary compliance for you as a TPA would). By the way, problems occur even under the watch of a good TPA, but the question is how these problems are handled and how well they are resolved, and this is something a TPA should be much better at than a platform. There is no amount of research that you can do determine the quality of a platform (with very little in terms of history) vs. a TPA, unless you find enough plans to review (which is not going to happen), so your best bet is to try it first (which is not an ideal scenario).  So you’ll save maybe several thousand $ going to them, and I’m still not seeing what the advantage is other than saving relatively small amount of money.

    One thing I constantly see with plans like these is terminated participants who are still in the plan. The DOL does not like it, but these platforms will make you do all of the legwork. Even Ascensus doesn’t do much until you start bugging them.  This is what a TPA is for. These automated platforms mess things up all the time, and it takes a TPA to catch it. Record-keeper is just a website and a place where the assets are held, and they might have one or two TPAs working thousands of plans. In my experience, I would leave all of the compliance and plan administration/oversight to a competent TPA.  So maybe it is worth finding a good one vs. trading something that mostly works for something that only works in theory. It is definitely easier to interview TPAs than trying to evaluate an entire platform without having much data to go on other than their marketing materials.

    And it bears repeating, neither of these entities (TPAs and record-keepers included) are fiduciaries (regardless of how many ‘fiduciary’ services they offer, most of which are just fig leafs because they are not independent service providers, but part of the same platform, so no actual fiduciary oversight is offered other than just another ‘automated’ service). Providers such as Guideline are just selling their platform, not advice. They have thousands of plans, and your plan is not going to get the attention it deserves. This is why it is worth hiring the best service providers for the job who are experienced and who will look out for your best interest and also provide advice and oversight over all of the other service providers.

     

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

    #244782 Reply

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