Small Company Retirement Plan Options

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happysteward
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Small Company Retirement Plan Options

Post by happysteward » Fri May 05, 2017 8:56 pm

DW has a small company, 3 employees currently, she provides them with a standard 401(k) plan (~$1MM in assets currently) but it is very expensive (160 bps for the Advisor and record keeper) and she would like to simplify. Are there other retirement options for a company of this size ? Would love to know how other small business owners provide their employees with retirement benefits.
"How much money is enough?", John Rockefeller responded, "...just a little bit more." | "He who loves money will not be satisfied with money..." Ecclesiastes 5:10

yosh99
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Joined: Thu Apr 19, 2012 8:44 pm

Re: Small Company Retirement Plan Options

Post by yosh99 » Fri May 05, 2017 9:52 pm

I have four employees and contribute to all of our SEP IRA's each year. It's expensive, in that they have to get the same percentage I give myself, but they are worth it. It's simple and costs me nothing in management fees.

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brother7
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Re: Small Company Retirement Plan Options

Post by brother7 » Fri May 05, 2017 10:02 pm

I'm researching 401k options for my brother's company with 5 participants.
One company that caught my eye was Guideline. In particular, take a look at Guideline's fund menu and you'll see why... loaded with Vanguard funds with a few DFA funds to boot. :D

EDIT: Link to Guideline's fees. Incredibly reasonable!

Spirit Rider
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Re: Small Company Retirement Plan Options

Post by Spirit Rider » Sat May 06, 2017 1:24 am

The problem isn't the type of retirement plan. It is the outrageous fees. 160bps of $1M is $16,000 which is a ridiculous amount. I hate to think what the investment options are in that plan.

There is no reason why DW can't find a plan administrator who can provide a 401k plan for no more than a few thousand.

Another poster mentioned Guideline, which seems very inexpensive, but we have no real history on Bogleheads to be able to recommend them yet.

Another well recommended low cost administrator is Employee Fiduciary. There would be a one time cost of $1,000 to convert the plan, $1,500/year administrative fee and and AUM fee of 0.08% (1/20th of that 160 basis points).

daum
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Joined: Mon Jul 20, 2015 10:54 am

Re: Small Company Retirement Plan Options

Post by daum » Sat May 06, 2017 7:37 am

We use Acensus (Vanguard's small biz admins). No AUM fee just, I think it's around ~$3,400/year for up to 15 employees. I am pretty sure that if you take non-admiral level funds you can also get credits towards the annual fee if you want. I didn't look into that much but another friend who runs a company said they elected to do that.

jcerickson
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Location: Tampa, FL

Re: Small Company Retirement Plan Options

Post by jcerickson » Sat May 06, 2017 12:46 pm

happysteward wrote:Are there other retirement options for a company of this size ? Would love to know how other small business owners provide their employees with retirement benefits.
I would suggest taking a look at a SIMPLE IRA, which you can set up at Vanguard, amongst other firms. No IRS reporting and no high fees for the company. Our company uses Merrill Lynch, which includes their Merrill Edge platform, and has chosen the option to match up to the maximum 3%. At Vanguard, the employee's fees of $25/yr per fund are waived once they have $50k invested (that $50k can include their personal funds).

However, the employee contribution limits are lower than a 401k ($12.5k vs $18k).

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