Hope to fire Edward Jones and move my 5304 SIMPLE IRA to Fidelity?

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Perkunas
Posts: 96
Joined: Tue May 10, 2016 7:24 pm

Hope to fire Edward Jones and move my 5304 SIMPLE IRA to Fidelity?

Post by Perkunas » Fri Oct 06, 2017 7:36 pm

My current employer offers a 5304 SIMPLE IRA through Edward Jones. I've participated in this SIMPLE for almost exactly 2 years. I know I can do a direct transfer from Edward Jones SIMPLE to a Fidelity Trad IRA, however, my dream is getting to a position in which my money never ever goes to EJ in the first place. As far as I understand, EJ are taking ~3% of whatever I contribute to my SIMPLE, right off the top. While I could move money from EJ to Fidelity every month or few months in the future via tax-free direct transfers, I believe EJ would still get their cut as soon as my money goes from my employer to EJ. As such, I'm trying to figure out what my options are for moving away from EJ.

I am trying to consolidate retirement accounts at Fidelity, so that is my top choice, although I'll consider Vanguard if they have an option that would not put too much work on my employer's plate. I spoke to Fidelity and they said they would need my employer to setup a SIMPLE with Fidelity (which requires 3 documents [I don't know which 3, just that is what I was told] from my employer to setup) then I could be the lone participant in my company's Fidelity SIMPLE IRA which would come with a cost of $25/year deducted right from my personal SIMPLE IRA account. There would be no other fees to my employer; just the setup paperwork and my $25 expense. Has anyone ever done this/ does anyone know how much paperwork and how much of a PITA this would actually be if I requested my office manager jump through these hoops for me?

I also saw on the Vanguard website that I might be able to personally setup a SIMPLE IRA with them, that would also cost $25/year assuming I only want a single mutual fund. Would this option put less stress on my employer to setup? Or could I personally do most/all of the setup and simply give my employer some new account/routing #s to deposit my paycheck into?

Basically, I want out of EJ. I would love for my paycheck to get sent straight to Vanguard or Fidelity, and save me the 2-3% that EJ takes right off the bat. The rub, however, is that I work for a small company and I don't want to piss off my office manager by putting a bunch of work on her (neither the setup paperwork nor an ongoing paycheck-to-paycheck work in order for my money to go somewhere other than EJ). I have a good work situation and my employer already makes some exceptions for me personally, and I don't want to piss anyone off.

TYVM for any help in firing EJ.

Spirit Rider
Posts: 6176
Joined: Fri Mar 02, 2007 2:39 pm

Re: Hope to fire Edward Jones and move my 5304 SIMPLE IRA to Fidelity?

Post by Spirit Rider » Fri Oct 06, 2017 9:13 pm

  1. The requirement that requires rollovers with no cost or penalty only apply to a 5305 SIMPLE IRA with a Designated Financial Institution (DFI). If your employer has a 5304 SIMPLE IRA, Edward Jones was simply the default Financial Institution (FI). You were and still are entitled to select your own FI. Since this is not a 5305 SIMPLE IRA, there is no right to rollover with no cost or penalty. This means they can charge a reasonable transfer fee for each rollover and can apply any back-end load, surrender, redemption or termination fees of each particular fund.
  2. For direct contributions to a Fidelity Simple IRA: The three documents Fidelity was referring to that your company would have to complete would be a Fidelity SIMPLE IRA—Adoption Agreement
    , Fidelity SIMPLE IRA—Company Profile
    and if they are a corporation, a Fidelity SIMPLE IRA—Corporate Resolution These are not difficult documents to complete at all. It is more complicated to do a one-participant 401k plan and individuals do those all the time.
  3. The option you saw on Vanguard was to open a rollover only personal SIMPLE IRA account (Vanguard calls this a frozen SIMPLE IRA account). This is intended for people with 5305 SIMPLE IRA plans. Fidelity and many other FIs should also have this available. This type of account can only accept rollovers, it can not accept contributions, so this is not a good option for you.
  4. It is your right under a 5304 SIMPLE IRA to select your FI. This is your employee benefit and no one should give you any grief about trying to protect your finance future.
  5. I would select Fidelity. As you have already identified, Fidelity charges you a single $25/year fee. Vanguard charges a separate $25 fee for each fund. Fidelity has a more than adequate list of index funds with expense ratios <= Vanguard for the majority of funds. Vanguard has the greatest selection of index funds, but unless your have a very precise slice and dice portfolio you will not be shortchanged.

Perkunas
Posts: 96
Joined: Tue May 10, 2016 7:24 pm

Re: Hope to fire Edward Jones and move my 5304 SIMPLE IRA to Fidelity?

Post by Perkunas » Fri Oct 06, 2017 9:27 pm

Spirit Rider wrote:
Fri Oct 06, 2017 9:13 pm
  1. The requirement that requires rollovers with no cost or penalty only apply to a 5305 SIMPLE IRA with a Designated Financial Institution (DFI). If your employer has a 5304 SIMPLE IRA, Edward Jones was simply the default Financial Institution (FI). You were and still are entitled to select your own FI. Since this is not a 5305 SIMPLE IRA, there is no right to rollover with no cost or penalty. This means they can charge a reasonable transfer fee for each rollover and can apply any back-end load, surrender, redemption or termination fees of each particular fund.
  2. For direct contributions to a Fidelity Simple IRA: The three documents Fidelity was referring to that your company would have to complete would be a Fidelity SIMPLE IRA—Adoption Agreement
    , Fidelity SIMPLE IRA—Company Profile
    and if they are a corporation, a Fidelity SIMPLE IRA—Corporate Resolution These are not difficult documents to complete at all. It is more complicated to do a one-participant 401k plan and individuals do those all the time.
  3. The option you saw on Vanguard was to open a rollover only personal SIMPLE IRA account (Vanguard calls this a frozen SIMPLE IRA account). This is intended for people with 5305 SIMPLE IRA plans. Fidelity and many other FIs should also have this available. This type of account can only accept rollovers, it can not accept contributions, so this is not a good option for you.
  4. It is your right under a 5304 SIMPLE IRA to select your FI. This is your employee benefit and no one should give you any grief about trying to protect your finance future.
  5. I would select Fidelity. As you have already identified, Fidelity charges you a single $25/year fee. Vanguard charges a separate $25 fee for each fund. Fidelity has a more than adequate list of index funds with expense ratios <= Vanguard for the majority of funds. Vanguard has the greatest selection of index funds, but unless your have a very precise slice and dice portfolio you will not be shortchanged.
Spirit Rider: you have responded to a couple of my posts over the past week or two and I just want to extend an huge thank you for your input and wisdom. I truly appreciate your help and clarification. While I enjoy learning and researching (and I hope to gain some level of competence and perhaps even understanding in the future), it is really nice to have access to this message board and folks like yourself that are willing and able to contribute such a high level of advice with no cost and no strings attached. Cheers to you and Bogleheads.

jcerickson
Posts: 21
Joined: Sat Aug 13, 2016 11:08 am

Re: Hope to fire Edward Jones and move my 5304 SIMPLE IRA to Fidelity?

Post by jcerickson » Sat Oct 07, 2017 5:50 pm

Perkunas wrote:
Fri Oct 06, 2017 7:36 pm
I also saw on the Vanguard website that I might be able to personally setup a SIMPLE IRA with them, that would also cost $25/year assuming I only want a single mutual fund.
If you chose a single, multi-asset class fund at Vanguard for your SIMPLE IRA (eg... their Balanced Index, a Target Retirement or a LifeStrategy fund), your $25 fee would be the same as at Fidelity. Once your total assets at Vanguard exceed $50,000, you would no longer be charged the $25 per fund fee and could branch out to a 3 Fund Portfolio. The $50,000 threshold would consider any other investments you have with them, such as a Taxable or Roll-Over IRA.

However, I believe you will only have access to Vanguard's Investor funds, and not their Admiral funds. At least that is how it worked when I had my "Frozen" SIMPLE IRA active (from trustee transfers out of Merrill Lynch) at Vanguard.

krow36
Posts: 1315
Joined: Fri Jan 30, 2015 6:05 pm
Location: WA

Re: Hope to fire Edward Jones and move my 5304 SIMPLE IRA to Fidelity?

Post by krow36 » Sat Oct 07, 2017 7:10 pm

motovirus96 was also dealing with a 5304 SIMPLE IRA with EJ and was trying to escape the high fees EJ was about to charge with their new Guided Solutions program. On Jan 29, he mentioned the only form he had was an “EJ 5304”, which implies EJ may not be using the IRS form? viewtopic.php?f=1&t=204277&start=50
Is that the same form you were given? Does it mention that you may select the FI you want to use? The IRS Form 5304 SIMPLE on page 3 covers the Employee Selection of Financial Institution. https://www.irs.gov/pub/irs-pdf/f5304sim.pdf
If you received an “EJ 5304”, did it have a section for Employee Selection of Financial Institution? If it did not, that seems to me to be a very serious error on EJ’s part. I think you every right to select your own FI, and your HR has no choice but to fill out the required forms.

For what it’s worth, I believe Vanguard requires the employer to fill out only one form, their Plan Authorization form. I helped a relative establish their Vanguard small business SIMPLE several years ago. You would fill a New Account form.

acunn
Posts: 131
Joined: Tue Mar 10, 2015 4:29 pm

Re: Hope to fire Edward Jones and move my 5304 SIMPLE IRA to Fidelity?

Post by acunn » Sat Oct 07, 2017 8:30 pm

I was in the EXACT same situation. My manager was not willing to do the paperwork (though you have every right to pick your provider with 5304) but allowed me to set it all up and she writes Vanguard a check every month (and lists my contribution and emp 3%) and hands it to me. The paperwork couldn't have been simpler since the Simple was already in place. I was allowed to designate myself as the "representative". I have the passwords and mail the check after going online and printing out that months deposit information.

It would be even easier for her to submit electronically however that was more than she wanted to handle and really for 10 minutes of my time and a stamp I am so grateful to avoid the new AUM fees they were forcing me into at EJ.

Good luck! If it is as easy at Fidelity as it was Vanguard then you really should pursue it!!


Edited to add:
and to clarify one more thing- you setting up a personal Simple IRA at Vanguard as you state in your post won't help unless you want to continue to transfer out periodically from EJ. You need to set up the employer Simple IRA account for which you can be the representative if they will allow you. Call and ask specifically which of these pages need to be filled out. Not all of them apply since the Simple is already in place.

https://personal.vanguard.com/pdf/s194.pdf?2210092784

I am sure it would be similar at Fidelity but I have no experience or info to help with them. Good luck!

krow36
Posts: 1315
Joined: Fri Jan 30, 2015 6:05 pm
Location: WA

Re: Hope to fire Edward Jones and move my 5304 SIMPLE IRA to Fidelity?

Post by krow36 » Sun Oct 08, 2017 12:42 am

Acunn, thanks for the detailed explanation of how you’ve done your FI work-around! In Vanguard’s SIMPLE IRA Plan Authorization Form, in Section 5., you are the “Plan contact without access to banking information”, is that correct?
acunn wrote:
Sat Oct 07, 2017 8:30 pm
Edited to add:
and to clarify one more thing- you setting up a personal Simple IRA at Vanguard as you state in your post won't help unless you want to continue to transfer out periodically from EJ. You need to set up the employer Simple IRA account for which you can be the representative if they will allow you. Call and ask specifically which of these pages need to be filled out. Not all of them apply since the Simple is already in place.
When you refer to a “personal Simple IRA”, don't you mean a frozen Simple IRA? He would need to fill out the SIMPLE New Account Form but in 2. Plan Information, he would choose “New SIMPLE IRA Plan”, not “New frozen account”.

acunn
Posts: 131
Joined: Tue Mar 10, 2015 4:29 pm

Re: Hope to fire Edward Jones and move my 5304 SIMPLE IRA to Fidelity?

Post by acunn » Sun Oct 08, 2017 8:47 am

krow36 wrote:
Sun Oct 08, 2017 12:42 am
Acunn, thanks for the detailed explanation of how you’ve done your FI work-around! In Vanguard’s SIMPLE IRA Plan Authorization Form, in Section 5., you are the “Plan contact without access to banking information”, is that correct?
acunn wrote:
Sat Oct 07, 2017 8:30 pm
Edited to add:
and to clarify one more thing- you setting up a personal Simple IRA at Vanguard as you state in your post won't help unless you want to continue to transfer out periodically from EJ. You need to set up the employer Simple IRA account for which you can be the representative if they will allow you. Call and ask specifically which of these pages need to be filled out. Not all of them apply since the Simple is already in place.
When you refer to a “personal Simple IRA”, don't you mean a frozen Simple IRA? He would need to fill out the SIMPLE New Account Form but in 2. Plan Information, he would choose “New SIMPLE IRA Plan”, not “New frozen account”.

Both of these are correct. He will need the personal simple IRA established on the receiving end- not frozen. Thanks Krow

krow36
Posts: 1315
Joined: Fri Jan 30, 2015 6:05 pm
Location: WA

Re: Hope to fire Edward Jones and move my 5304 SIMPLE IRA to Fidelity?

Post by krow36 » Tue Oct 10, 2017 12:23 am

OP, if you look over the forms for an employer establishing a SIMPLE IRA with Fidelity (2) or Vanguard (1), I think you will see that they are not difficult. After looking them over, you might even volunteer to help your HR person? I think it’s likely that the greater obstacle might be her reluctance to use the additional software program that allows electronic transmission to Fidelity or Vanguard. Vanguard has a tour of an example of their program:
http://www.vanguard.com/flash/SBS_Tour/ ... omain=true
Perkunas wrote:
Fri Oct 06, 2017 7:36 pm
As far as I understand, EJ are taking ~3% of whatever I contribute to my SIMPLE, right off the top.
If you decide not to push for the FI of your choosing, you could use EJ's low cost Vanguard ETFs. If you kept your balance below 9.6k, the minimum fee would be $10/monsth or $120/yr. By doing an asset transfer to either Fidelity or Vanguard once or twice a year, you avoid the 1.24% AUM fee which applies if your fees exceed $120/yr. I believe this is what Millennialfalcon was able to do in this thread: viewtopic.php?f=1&t=204277&start=50

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