Employer plan at Ed Jones

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Topic Author
Mm8719
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Employer plan at Ed Jones

Post by Mm8719 »

About a year ago I left my prior employer (very large corporation) to join a small family run organization. The switch has been a blessing for me and my family, although there is one issue that is a bit of a negative. My new employer has a Simple IRA plan through Edward Jones.

When I left my prior employer, I rolled over my traditional and Roth into Vanguard (after reading up on here). However, since my employer offers a 3 % match (no max) through the employer sponsored plan at EJ, of course I want to take advantage of that. I've been investing exactly 3% just to get the match. When I switched over I had a few long conversations with the advisor at Edward Jones. He recommended about 5 funds, mostly American Funds from large caps to smalls caps and a small amount in a bond fund. Of course they all have higher expense ratios, but from what I can tell they don't have front load fees. He claims these are the best options for me at my age (32). I let him know that id really prefer to be in a Vanguard fund. He said the only fund they had access to for Vanguard was the S&P 500 ETF, but there was a $5k minimum. Of course since I was just opening the account (and did not want to rollover anything due to their 1.25% managing fee) I didn't have that minimum amount. So I told him I'd give him a year with his recommendations and then most likely switch once my account was over that 5k minimum. There's now over 10k in that account (even though his options have shown a negative return) and it's been a year, so I'll be calling him this week.

Before I make the call I wanted to get some advice from you guys. First, do you guys know if I have the option of having my employer match into an account of my choosing? It is our understanding that since the simple is set at EJ, I have to invest there in order to get the match, but I just want to make sure I'm not missing anything? And since it appears I most likely do have to stay there, what would you guys recommend I tell the advisor to invest in? I asked for a list of all funds they have, but he told me it was too many to send. He said I could narrow it down and he'd send me a list. Of course like I said above, I ended up just telling me I'd go with his recommendation for a year so I never pushed any further for a list. At that time I was starting a new job, just had a new baby, I didn't have time to keep going back and forth with him. The only option I know they definitely have is the Vanguard S&P 500 ETF. Would it be wise to just go 100 percent in that for now? Surely thatd be better than his high expense American funds ?

Sorry for the long post, but any advice you guys can give me would be appreciated. Thanks
sport
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Re: Employer plan at Ed Jones

Post by sport »

Is there an ability to transfer money from your simple IRA to another IRA of your choice, perhaps once a year? If so, you could just use the least expensive fund, and it would never have too much in it.
krow36
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Re: Employer plan at Ed Jones

Post by krow36 »

A SIMPLE IRA does have options for using a financial institution (FI) other than that chosen by your employer. If the employer is using a Form 5304 SIMPLE IRA, you are allowed to choose your own FI. Your employer would establish an account with Vanguard for instance, and the contributions would go directly to Vanguard.

If on the other hand your employer is using a Form 5305, you are allowed to set up a "transfer" account (also called a "frozen" account by Vanguard). You would then be able to make trustee to trustee transfers of your money from your EJ SIMPLE to your frozen SIMPLE at Vanguard. Two years after your first EJ contribution, you can transfer out to a traditional IRA rather than to the transfer SIMPLE account. If you search "transfer" or "frozen" SIMPLE IRA, you'll find lots of threads on this. Also check out the BH Wiki.
retiredjg
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Re: Employer plan at Ed Jones

Post by retiredjg »

The answer to your questions will depend on what type of SIMPLE IRA you have. Is it a 5304 or a 5305? This is the first thing you need to know and it will determine what you do from here. Your employer may be clueless and your Edward Jones rep may be clueless as well, but keep hammering away til you find this out. It could even be on your plan paperwork which your employer is required to give you each year.

Regardless of which one it is, once your SIMPLE is 2 years old, you can transfer it out to an IRA of your choice. But again, how that happens depend on whether it is s 5304 or 5305 plan.
livesoft
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Re: Employer plan at Ed Jones

Post by livesoft »

Mm8719 wrote: Sat Jan 12, 2019 1:48 pmThere's now over 10k in that account (even though his options have shown a negative return) and it's been a year, so I'll be calling him this week.
A couple things:

1. Everything had a negative return in 2018, so that's not necessarily a way to make a comparison. I think if you try to use that as an excuse, then ....

2. Be careful with multiple funds in this account since EJ seems to charge an exit fee for each fund when you want to leave. It would be best to pick a single fund and adjust the AA of your other accounts to get your portfolio to your overall AA. Move all your EJ funds into one single fund soonest.
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acunn
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Re: Employer plan at Ed Jones

Post by acunn »

The above posters helped me with this exact situation a few years back. (Thank you all again by the way!!!). 5304 used by this very small company that allowed me to open up the Simple at Vanguard for the company and be responsible for sending the deposits in on their behalf. Checks are made out to Vanguard directly of course. I was the only employee interested in managing my own funds while the rest are happy to let the EJ rep direct them. Opening was very easy so if they are using 5304 Simple you are allowed to choose. If the person keeping the books is hesitant due to the work load then offer to help. If I can do it, you can.

Prior to successfully opening the Vanguard account I was making transfers into my established Vanguard Rollover IRA. This worked for a while since the account met the required 2 years for transfers. Then the EJ guy told me I could no longer do that with the "new rules" when they changed to the guided solutions. That prompted me to force the issue of choosing my own vendor and it has been such a relief.

Good luck! If you choose Vanguard here is the link I hope to the Simple IRA Employer kit:

https://personal.vanguard.com/pdf/s194.pdf?2210092784
krow36
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Re: Employer plan at Ed Jones

Post by krow36 »

Mm8719 wrote: Sat Jan 12, 2019 1:48 pm The only option I know they definitely have is the Vanguard S&P 500 ETF. Would it be wise to just go 100 percent in that for now? Surely thatd be better than his high expense American funds ?
If you are staying at EJ at least for the time being, then yes I think the Vanguard S&P 500 ETF would be a better choice than the 5 expensive AF funds. Do you and your wife contribute to IRAs at a low-cost provider? It would be a good idea if possible to do so after contributing the 3% to your SIMPLE IRA. Then if further retirement contributions are possible, max out the SIMPLE IRA. Most of us here (but not all) believe that your asset allocation (stock/bond ratio) should include at least 20% bonds. You could put your bond funds in your IRAs. What is EJ using for your asset allocation?
Topic Author
Mm8719
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Re: Employer plan at Ed Jones

Post by Mm8719 »

Thanks so much for the replies. I reached out to my advisor and also spoke with my employer about this. My advisor had to do some research, but finally we spoke yesterday. He gave me great news, the plan uses the form 5304.

Realizing now that I'm not happy with the fees, and that I am free to move to another FI, my advisor talked to me about other options at Ed Jones. He is now saying that I am eligible to go into their select plan rather than the guided solutions. This would mean no yearly fee of 1.35%. However other fees such as front end loads and sales commissions could apply. He's going to get me some com rere numbers but from what he's telling me over the phone, to purchase ETFs or index funds would be a 2% up front commission. That sucks.

However, for the mutual funds we already have me in invested in, they could be converted to class A shares for no fee. And if we stick with American Funds products, they would not charge any front loads or other fees, just the regular expense ratios that each fund has. So obviously this is a lot better than the plan he currently has me in. BUT, from what I can tell American Funds class A shares have higher expense ratios than what products Vanguard offers. Of course my advisor is trying to sell me on the fact that they are actively managed and I have the luxury of talking with him whenever I want...

We agreed to talk further next week. He knows I am keeping my options open and may switch. At this point I have to make up my mind...do I want to just go ahead and switch everything to Vanguard, go the 3 fund type route...or could it be worth exploring staying with him, investing in the actively managed American Funds such as AF New World, AF growth fund, AF world small cap. They seem to have good track record, but again, higher expense ratios. If they were still charging the front loads it would be a no-brainer to leave, but since they are not charging those it has made the decision more difficult. BTW, I'm in my early 30s so obviously we are more focused on growth for now.

Anyone have thoughts on which route I should go? Also, if I do decide to switch to Vanguard, how much of a pain in the butt is that going to be for me and my office who handles the payroll?

Thanks
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rob
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Re: Employer plan at Ed Jones

Post by rob »

Mm8719 wrote: Sat Feb 02, 2019 11:41 am ...do I want to just go ahead and switch everything to Vanguard, go the 3 fund type route...or could it be worth exploring staying with him
Yes and No. Amazing that he has some options now you have some options... I assume he is switching everyone over to the cheaper option?
| Rob | Its a dangerous business going out your front door. - J.R.R.Tolkien
Topic Author
Mm8719
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Re: Employer plan at Ed Jones

Post by Mm8719 »

Not sure, all I know is after I talked to my boss and told him I hadn't heard back on my email to EJ, my boss sent out a mass email saying to expect a call from the advisor to discuss our plan and the fees. 5 mins later the advisor was calling. So I assume everyone will at least be presented the option.

It seems that y'alls advise of checking on 5304 vs 5305 has shaken things up a bit...
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ICMoney
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Re: Employer plan at Ed Jones

Post by ICMoney »

I personally see no reason to stay with EJ, can you think of any reason not to go with Vanguard other than the (possibly minor) paperwork burden? EJ will be (significantly?) more expensive than Vanguard, right?
acunn
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Re: Employer plan at Ed Jones

Post by acunn »

if you like the American funds he has you in then changing back to the old way will save you the 1.35% annually. The expense ratios are higher than Vanguard however it will be much better than paying another load or 1.35% on top of the ER that you are doing now. I would start all future contributions to a Vanguard Simple and then decide what you want to do with the already invested American funds. There will be a fee to close the EJ account if you decide to do that. I was happy to pay that money and even happier that I only let him put me in one fund from the very start so less closing fees. Good luck and good job investigating your options!!
retiredjg
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Re: Employer plan at Ed Jones

Post by retiredjg »

I think, not sure, you may have to live with this poor plan till the end of the year. But next October/November, you need to insist that your employer set your account up at the custodian of your choice.

Read this form carefully. All of it. It will give you a good start on understanding plan requirements and deadlines and your rights and your employer's responsibility (which your employer has apparently passed off to the EJ guy).

https://www.irs.gov/pub/irs-pdf/f5304sim.pdf


I also suggest you use the google box above and search for old threads on 5304 SIMPLE IRAs. I know of a few threads several years ago where a lot of this was discussed in detail.

There is nothing wrong with American Funds other than the higher expense ratios and the loads. They are fine well managed funds. But costs matter. I would use them for as short a time as possible. Be careful the EJ advisor does not move you into funds that have higher ERs (with no load) or a back end load.
krow36
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Re: Employer plan at Ed Jones

Post by krow36 »

Mm8719 wrote: Sat Feb 02, 2019 11:41 am Anyone have thoughts on which route I should go? Also, if I do decide to switch to Vanguard, how much of a pain in the butt is that going to be for me and my office who handles the payroll?
It’s great that your employer is using a Form 5304 SIMPLE IRA. I agree with retiredjg that you will have to wait until 2020 before making contributions to a Vanguard SIMPLE IRA account. In late October, 2019, you should receive paperwork setting up the SIMPLE IRA for 2020. It’s been reported on the forum that EJ has failed to explain that employees with a Form 5304 SIMPLE have the right to select their own financial institution. Please look over the IRS Form 5304 SIMPLE IRA form, and its Instructions.

This is the IRS instruction to the employer:
Employee Notification
You must notify each eligible employee prior to the employee’s 60-day election period described above that he or she can make or change salary reduction elections and select the financial institution that will serve as the trustee, custodian, or issuer of the employee’s SIMPLE IRA. https://www.irs.gov/pub/irs-pdf/f5304sim.pdf , Page 5-6
So before the Election Period (which is between Nov 2 and Dec 31), you should be informed that you have the ability to choose your own Designated Financial Institution (DFI). This assumes that your employer chooses a Form 3504 SIMPLE for 2020. A SIMPLE IRA is a calendar year plan and the employer could change from a 5304 to a 5305 plan next year.

Assuming a Form 5304 for 2020, and that you’ve chosen your DFI to be Vanguard, your employer will need to set up an account with VG using their Plan Authorization form. Your employer will then have 2 SIMPLE IRA accounts for his employees, one with EJ (for most of his employees) and one with VG (for you and possibly others).

You will also need to set up your own SIMPLE IRA account with VG using the New Account form. As mentioned by acunn, you’ll find both these forms in the VG Employer’s SIMPLE IRA Kit: https://personal.vanguard.com/pdf/s194.pdf?2210092784

VG has an app that employers download that organizes the employees’ contributions and facilitates moving contributions from the employer’s bank account to the employees’ VG SIMPLE account. If you are the only employee using VG, you and your employer could consider using acunn’s method of mailing checks each payday.
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David Jay
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Re: Employer plan at Ed Jones

Post by David Jay »

Without of the high-cost of EJ, you can contribute more than 3% :happy
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
Topic Author
Mm8719
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Re: Employer plan at Ed Jones

Post by Mm8719 »

Thanks for all the advice.

I contacted Vanguard and they informed me that I can transfer over the Simple IRA at any time. I actually called back a few days later because I was skeptical of this. The second Vanguard rep at first said I'd have to wait, then stopped himself, put me on hold and after reviewing, he came back and said I could definitely transfer the Simple any time. He said that the Simple is the only type of IRA that the IRS allows to be transferred prior to the 2 years. I asked if he was certain I didn't have to wait for the enrollment period either, and he confirmed that was correct. Looks like I'll be switching over soon.

They sent over a packet of info. I haven't had a chance to look through everything but from what I can tell I have to fill out paperwork work to open the account, and another to authorize them to reach out to EJ and transfer everything over. Then my employer will just have to start sending contributions to VG instead of EJ. It appears there is only 1 form for them to fill out and that's just setting up direct deposit to my account (unless they want to send checks). Doesn't sound too bad.

Thanks again for all the responses. If it wasn't for this forum I would have never found out about the form 5304 and realized that I could switch from EJ.
krow36
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Re: Employer plan at Ed Jones

Post by krow36 »

Mm8719 wrote: Sat Feb 16, 2019 8:13 pm They sent over a packet of info. I haven't had a chance to look through everything but from what I can tell I have to fill out paperwork work to open the account, and another to authorize them to reach out to EJ and transfer everything over. Then my employer will just have to start sending contributions to VG instead of EJ. It appears there is only 1 form for them to fill out and that's just setting up direct deposit to my account (unless they want to send checks). Doesn't sound too bad.
I think you have left out a critical step (form). The Form 5304 SIMPLE allows you to have your employer set up an employer account with Vanguard. Did you get the Employer Kit from Vanguard? There’s a form for your employer SIMPLE plan to be set up at Vanguard, and a form for you to set up a personal SIMPLE IRA account. This setup allows your employer to send the contributions directly to your account at Vanguard. After this is established, you can use a Vanguard SIMPLE IRA Asset Transfer form to move the balance of your EJ SIMPLE account to Vanguard.

Is this what Vanguard suggested you do? Getting your employer to set up the plan with Vanguard is the possibly challenging job. You don't mention this chore.

It's not clear to me that you and Vanguard are on the same page. It sounds like you got information on transferring your current balance, which you can do if you set up a VG frozen SIMPLE and then use a VG Asset Transfer form. This does not lead to your employer sending your contributions directly to Vanguard. That only happens if your employer establishes his plan at Vanguard. In other words he would use 2 financial institutions, EJ and VG.
Topic Author
Mm8719
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Re: Employer plan at Ed Jones

Post by Mm8719 »

krow36 wrote: Sat Feb 16, 2019 9:01 pm
Mm8719 wrote: Sat Feb 16, 2019 8:13 pm They sent over a packet of info. I haven't had a chance to look through everything but from what I can tell I have to fill out paperwork work to open the account, and another to authorize them to reach out to EJ and transfer everything over. Then my employer will just have to start sending contributions to VG instead of EJ. It appears there is only 1 form for them to fill out and that's just setting up direct deposit to my account (unless they want to send checks). Doesn't sound too bad.
I think you have left out a critical step (form). The Form 5304 SIMPLE allows you to have your employer set up an employer account with Vanguard. Did you get the Employer Kit from Vanguard? There’s a form for your employer SIMPLE plan to be set up at Vanguard, and a form for you to set up a personal SIMPLE IRA account. This setup allows your employer to send the contributions directly to your account at Vanguard. After this is established, you can use a Vanguard SIMPLE IRA Asset Transfer form to move the balance of your EJ SIMPLE account to Vanguard.

Is this what Vanguard suggested you do? Getting your employer to set up the plan with Vanguard is the possibly challenging job. You don't mention this chore.

It's not clear to me that you and Vanguard are on the same page. It sounds like you got information on transferring your current balance, which you can do if you set up a VG frozen SIMPLE and then use a VG Asset Transfer form. This does not lead to your employer sending your contributions directly to Vanguard. That only happens if your employer establishes his plan at Vanguard. In other words he would use 2 financial institutions, EJ and VG.
From what I understand, since it's the form 5304, my employer can keep his plan at EJ, but the employees have the choice of which FI has their simple ira. I can call back again to double check but VG has made it seem that I'll just transfer my account to them, then my employer will contribute to my VG account going forward. They will also continue to fund other employees a counts at EJ just as they were. I will be looking back through the packet from VG but this is the way it's been explained to me.
bdpb
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Re: Employer plan at Ed Jones

Post by bdpb »

Mm8719 wrote: Sat Feb 16, 2019 9:28 pm VG has made it seem that I'll just transfer my account to them, then my employer will contribute to my VG account going forward. They will also continue to fund other employees a counts at EJ just as they were. I will be looking back through the packet from VG but this is the way it's been explained to me.
For me, this part was not as simple as it seems. For the employer to make contributions to the VG SIMPLE IRA, the VG SIMPLE Employer form calls for an employer name and SS #. In my case the employer refused to do this so we were unable to complete the whole process.
krow36
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Re: Employer plan at Ed Jones

Post by krow36 »

I was told by VG several years ago that if you have a Form 5304 with another FI, your employer must establish his SIMPLE with VG. Your understanding is OK except you’ve omitted the employer plan being established at VG. He keeps the EJ SIMPLE plan for his other employees.
retiredjg
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Re: Employer plan at Ed Jones

Post by retiredjg »

Mm8719 wrote: Sat Feb 16, 2019 9:28 pm From what I understand, since it's the form 5304, my employer can keep his plan at EJ, but the employees have the choice of which FI has their simple ira. I can call back again to double check but VG has made it seem that I'll just transfer my account to them, then my employer will contribute to my VG account going forward. They will also continue to fund other employees a counts at EJ just as they were. I will be looking back through the packet from VG but this is the way it's been explained to me.
There may be two steps that must be accomplished.

I think, but am not sure, that the 5304 plan itself is set up once a year in about November (or when an employee comes on board). I do not think the employer can just change that in the middle of the year for an employee who is already on board. So, It is possible that your individual agreement with the employer to use Vanguard instead of EJ cannot be set up until the next time that plan paperwork is signed near the end of the year.

This does not mean you cannot do a trustee to trustee transfer from the current plan to another SIMPLE IRA in the meantime. This is allowed by law in the first 2 years of your participation. After two years, you can transfer your money to any IRA, not just a SIMPLE IRA.

It may be you will have to do repeated transfers until the end of the year when you set up a different agreement with your employer about where they are supposed to send your check.
krow36
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Re: Employer plan at Ed Jones

Post by krow36 »

I agree with retiredjg that getting your employer to set up VG as your FI needs to be done next fall, before the “election period” (2 Nov to 31 Dec). In the meantime you can do trustee to trustee transfers to a VG frozen SIMPLE account. This works best if you contribute to a no load money market fund in your EJ SIMPLE account.

Ideally you should be able to talk to your employer and get him/her to realize that with a Form 5304 SIMPLE IRA, you have the legal right to select your own FI. The employer needs to be on your side if the EJ "advisor" objects. However some posters in your situation have decided that the 3% match will make up for the higher fees. In order to avoid friction with the employer and the EJ rep, they used the lowest cost equity fund available. Many folks with 401k or 403b plans have high fees and no match, so you are probably better off than they are.
Topic Author
Mm8719
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Re: Employer plan at Ed Jones

Post by Mm8719 »

I appreciate all the input. Sounds bad but I feel like I'm more confused now than when I started looking into this :confused

Part of me now says maybe I should just say screw it and stay with EJ in the no load American Funds.
retiredjg
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Re: Employer plan at Ed Jones

Post by retiredjg »

No, you should not. You are making progress. Just keep going.
acunn
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Re: Employer plan at Ed Jones

Post by acunn »

The two steps are not difficult but do require some persistence if your experience with EJ is anything like mine. I initiated a transfer to my established Rollover IRA at Vanguard first. I was rejected saying I didn’t meet the two year criteria but then when I pressed that the account had been open for many years but had changed to EJ most recently (my employer changing companies) they called EJ to verify this and then the first transfer went through. I did transfers until I could open the Simple at Vanguard and my company opened their employee side (after I brought them the paperwork and helped the process as much as they wanted me to).
I am so glad I persisted. If you will be with this company any length of time it will be worth the effort. No load doesn’t mean no cost. They are getting you with the assets under management fee plus much higher expense ratios. Think 2% plus every single year. There is a great resource on vanguard regarding what the fees are really costing you if you care to check it out. Over time it makes a big enough difference that this effort now will be worth it.
https://investor.vanguard.com/investing ... t-of-costs
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Mm8719
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Re: Employer plan at Ed Jones

Post by Mm8719 »

Looking for follow up advice on this old post. This process has continued to be challenging....my employer is on board but now my Ed Jones representative has brought up a new question that I’m hoping you guys will provide some guidance on..

So I am in process of switching my Ed Jones Simple to Fidelity finally. The Ed Jones simple is 5304. Apparently Fidelity only offers a 5305. So the EJ rep is saying he does not think it’s appropriate for the employer to have both a 5304 and a 5305, even though the 5305 with Fidelity is only being set up as a “master account” in order for me to have my acct there. The reps concern is that all the other Accts at EJ with 5304 would be impacted since the 5305 says everything has to be with that one financial institution. I previously was told by Fidelity that this was their process and that it would have no impact on any of the other accts at Ed Jones, but the EJ rep is concerned I was fed bad info. I will say the EJ rep has been understanding in all this and genuinely seems concerned, not just that he is trying to keep me (that ship has sailed)...so who is right ? And his question is, if the point of the 5304 is to allow an employee to choose their DFI, then why would the employer have to set up a master account ? He is saying that if I found a FI that did the 5304, we would not have to go thru any of this and be able to just have me set up an account and employer sent contributions without having to set up a “master account.”
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David Jay
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Re: Employer plan at Ed Jones

Post by David Jay »

Mm8719 wrote: Thu Sep 03, 2020 6:53 pmHe is saying that if I found a FI that did the 5304, we would not have to go thru any of this and be able to just have me set up an account and employer sent contributions without having to set up a “master account.”
How about doing this?

Here are a few high-quality brokerages to contact to see if they can do a 5304:
Vanguard
Schwab
eTrade
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
retired@50
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Re: Employer plan at Ed Jones

Post by retired@50 »

Mm8719 wrote: Thu Sep 03, 2020 6:53 pm Looking for follow up advice on this old post. This process has continued to be challenging....my employer is on board but now my Ed Jones representative has brought up a new question that I’m hoping you guys will provide some guidance on..

So I am in process of switching my Ed Jones Simple to Fidelity finally. The Ed Jones simple is 5304. Apparently Fidelity only offers a 5305.
...
So use Vanguard. They are better than EJ by a country mile.

I suspect the EJ rep is making this as hard as possible on you because they don't want to lose the money. You nearly gave up once already. They are trying to wear you down. noli illegitimi carborundum

Regards,
This is one person's opinion. Nothing more.
Topic Author
Mm8719
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Re: Employer plan at Ed Jones

Post by Mm8719 »

David Jay wrote: Thu Sep 03, 2020 6:58 pm
Mm8719 wrote: Thu Sep 03, 2020 6:53 pmHe is saying that if I found a FI that did the 5304, we would not have to go thru any of this and be able to just have me set up an account and employer sent contributions without having to set up a “master account.”
How about doing this?

Here are a few high-quality brokerages to contact to see if they can do a 5304:
Vanguard
Schwab
eTrade
I’ve called Schwab, Vanguard and Fidelity. They all said the process is the same —employer must set up a master account, and then I set up my acct and transfer everything from EJ. Going forward my employer makes contributions directly to the new acct.

And that’s how it’s been explained to me on here as well. But the EJ rep is now very adamant that this is not proper and he doesn’t see how the employer can have both a 5304 and a 5305 at once.
Mr.BB
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Re: Employer plan at Ed Jones

Post by Mr.BB »

You may be getting a 3% match from your employer but how much do you lose by being with the Edward Jones and their fees? Subtract that from the 3% match.
Last edited by Mr.BB on Thu Sep 03, 2020 7:26 pm, edited 1 time in total.
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."
Topic Author
Mm8719
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Re: Employer plan at Ed Jones

Post by Mm8719 »

retired@50 wrote: Thu Sep 03, 2020 7:10 pm
Mm8719 wrote: Thu Sep 03, 2020 6:53 pm Looking for follow up advice on this old post. This process has continued to be challenging....my employer is on board but now my Ed Jones representative has brought up a new question that I’m hoping you guys will provide some guidance on..

So I am in process of switching my Ed Jones Simple to Fidelity finally. The Ed Jones simple is 5304. Apparently Fidelity only offers a 5305.
...
So use Vanguard. They are better than EJ by a country mile.

I suspect the EJ rep is making this as hard as possible on you because they don't want to lose the money. You nearly gave up once already. They are trying to wear you down. noli illegitimi carborundum

Regards,
Thanks for the encouragement!

Vanguard has the same process as Fidelity has outlined. So either way the EJ rep is saying that is the improper way of doing things...
acunn
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Re: Employer plan at Ed Jones

Post by acunn »

Take a look at the Employer kit for Vanguard Simple IRA. First page at the bottom asterisk. “Alternately you can use the 5304”.. and your company keeps this form in a file and does not send it to Vanguard. That agreement is between you and the company you work for and can be a 5304 if they already have a 5304 plan active.
Hopefully someone will be along to correct me if I am wrong but I believe the very nice concerned EJ rep is blowing smoke :)
Keep pursuing. I do not know about the other companies.
GuyInFL
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Re: Employer plan at Ed Jones

Post by GuyInFL »

David Jay wrote: Thu Sep 03, 2020 6:58 pmBut the EJ rep is now very adamant that this is not proper and he doesn’t see how the employer can have both a 5304 and a 5305 at once.
So...EJ is correct and what Vanguard, Fidelity, and Schwab are proposing violates the law...lol
I’d ask the EJ rep to provide an opinion from their legal department backing up his thought process.
krow36
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Re: Employer plan at Ed Jones

Post by krow36 »

The intent of a Form 5304 is to allow employees to choose their FI. The employer could have more than two FI’s where they send their employees' contributions. A FI (Fidelity) must establish that the employer is establishing a valid SIMPLE IRA with them, and that is done using the forms that the FI (Fidelity) requires. The SIMPLE IRA regulations are basically the same for the Form 5304 and the Form 5305, with one exception. That has to do with the Form 5304 allowing selection of a FI by each employee. The completed forms are not sent to the IRS, but are kept by the employer. The IRS doesn't know or care which Form was used. I don’t think the concerns of the EJ advisor are valid and he should not be involved.
tibbitts
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Re: Employer plan at Ed Jones

Post by tibbitts »

Mm8719 wrote: Thu Sep 03, 2020 7:26 pm
retired@50 wrote: Thu Sep 03, 2020 7:10 pm
Mm8719 wrote: Thu Sep 03, 2020 6:53 pm Looking for follow up advice on this old post. This process has continued to be challenging....my employer is on board but now my Ed Jones representative has brought up a new question that I’m hoping you guys will provide some guidance on..

So I am in process of switching my Ed Jones Simple to Fidelity finally. The Ed Jones simple is 5304. Apparently Fidelity only offers a 5305.
...
So use Vanguard. They are better than EJ by a country mile.

I suspect the EJ rep is making this as hard as possible on you because they don't want to lose the money. You nearly gave up once already. They are trying to wear you down. noli illegitimi carborundum

Regards,
Thanks for the encouragement!

Vanguard has the same process as Fidelity has outlined. So either way the EJ rep is saying that is the improper way of doing things...
So what is the EJ rep saying is the correct way to accomplish what you want?
Dottie57
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Re: Employer plan at Ed Jones

Post by Dottie57 »

retiredjg wrote: Tue Feb 19, 2019 7:18 am No, you should not. You are making progress. Just keep going.
+1
Topic Author
Mm8719
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Re: Employer plan at Ed Jones

Post by Mm8719 »

krow36 wrote: Thu Sep 03, 2020 8:11 pm The intent of a Form 5304 is to allow employees to choose their FI. The employer could have more than two FI’s where they send their employees' contributions. A FI (Fidelity) must establish that the employer is establishing a valid SIMPLE IRA with them, and that is done using the forms that the FI (Fidelity) requires. The SIMPLE IRA regulations are basically the same for the Form 5304 and the Form 5305, with one exception. That has to do with the Form 5304 allowing selection of a FI by each employee. The completed forms are not sent to the IRS, but are kept by the employer. The IRS doesn't know or care which Form was used. I don’t think the concerns of the EJ advisor are valid and he should not be involved.
Thanks, Krow36. I was glad to see you comment, as you seem to be very knowledgeable on this subject.

Part of me wants to just tell the EJ rep to take a hike, but he actually is a nice guy (despite his company being greedy) and since he still services the rest of our company’s employees, and my boss thinks highly of him, I am keeping him in the loop and discussing everything. And really he already knows I’m leaving one way or the other, I’ve made that clear, so it seems to be genuine concern from him, even though I do not think he’s accurate. Also, I’m worried that he may also be telling my boss the same thing which may get him to back track on being on board to do the account with Fidelity...

So that is why I am trying to educate myself further and be able to communicate this better. I realize since Vanguard Fidelity and Schwab have all said the same thing, along with you guys, this has to be accurate. But the part that I think is not making sense is this ....the 5304 Simple allows employees to have a plan anywhere. But then the employer signs paperwork at Fidelity for a 5305 plan , which says employees do not have the right to choose and have to use that particular FI. So I am having trouble explaining how despite signing that, the rest of the accounts will be unaffected and be able to still remain at EJ. Is it that the first Simple 5304 supersedes any additional paperwork or Simple plans that are created , such as the new master account at Fidelity? Please help me break this down better
Topic Author
Mm8719
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Re: Employer plan at Ed Jones

Post by Mm8719 »

tibbitts wrote: Thu Sep 03, 2020 8:29 pm
Mm8719 wrote: Thu Sep 03, 2020 7:26 pm
retired@50 wrote: Thu Sep 03, 2020 7:10 pm
Mm8719 wrote: Thu Sep 03, 2020 6:53 pm Looking for follow up advice on this old post. This process has continued to be challenging....my employer is on board but now my Ed Jones representative has brought up a new question that I’m hoping you guys will provide some guidance on..

So I am in process of switching my Ed Jones Simple to Fidelity finally. The Ed Jones simple is 5304. Apparently Fidelity only offers a 5305.
...
So use Vanguard. They are better than EJ by a country mile.

I suspect the EJ rep is making this as hard as possible on you because they don't want to lose the money. You nearly gave up once already. They are trying to wear you down. noli illegitimi carborundum

Regards,
Thanks for the encouragement!

Vanguard has the same process as Fidelity has outlined. So either way the EJ rep is saying that is the improper way of doing things...
So what is the EJ rep saying is the correct way to accomplish what you want?
He is saying I would either have to do a frozen simple type of thing, or find someone who accepts the 5304. And he’s saying if I find someone that accepts the 5304, my company won’t even have to set up a new acct or do anything..instead I’d just have to set up my own acct at the different FI then fill out a “payroll reduction agreement form” or something if that nature, that outlines how much my employer will deduct for the simple and where to send the contributions. The employer would then just send direct deposit or check to the FI I chose. HOWEVER, none of the 3 FIs that I called have this as an option. They all said the same thing, my employer has to set up the master acct in order for me to have my acct set up with them . EJ advisor says I need to just call more FIs until I find one that does the 5304.
krow36
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Re: Employer plan at Ed Jones

Post by krow36 »

I think the EJ rep is trying a phony argument on you. A “frozen simple sort of thing” also would also require your employer to fill out the Fidelity forms that establish your employer’s SIMPLE IRA. I have confirmed that process with Vanguard's frozen SIMPLE IRA. (It's been reported that Fidelity doesn't do frozen SIMPLE IRA accounts.) Again, the IRS does not get involved in whether the employer is using a Form 5304 or a Form 5305 SIMPLE IRA because the form stays with the employer. The IRS doesn’t care, because it is between the employer and the each employee. I think maybe you should discuss this with your employer and head off the EJ rep trying to influence him.

Correction: What I confirmed with Vanguard several years ago was that they require the employer using a Form 5304 plan must submit the Account Application to Vanguard to establish the validity of the employee's SIMPLE IRA. The OP confirmed the same thing.

The transfer frozen account does not require that form from the employer. The employee fills out Vanguard's SIMPLE IRA Account form designating it as a frozen account, fills out a SIMPLE IRA Asset Transfer form, and includes a recent statement from the employee's current FI. It all goes to Vanguard and they do a trustee to trustee transfer of the amount designated.
Last edited by krow36 on Sun Sep 06, 2020 12:28 pm, edited 1 time in total.
AllMostThere
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Re: Employer plan at Ed Jones

Post by AllMostThere »

OMG! For the past 20 months, this EJ Rep has been feeding the OP a load of Fear Uncertainty and Doubt (FUD) by injecting a perception of complexity. The EJ Rep is NOT looking out for the OP's best interests with all this FUD. OP, this why you need to cut the EJ Rep from the communication loop, listen to the educated BH posters and move on. RUN RUN RUN away! Your original plan for move to Vanguard is a great idea.
retiredjg
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Re: Employer plan at Ed Jones

Post by retiredjg »

I do not think the EJ rep is messing with you at all. I think he has a legitimate point. It makes a lot of sense to me that a company should/could not have both a 5304 and 5305 SIMPLE at that same time. This is certainly true of other types of retirement plans.

Having said that, if you have gotten the same information from 3 different financial institutions, I think he is probably mistaken.

Or even though his concern might be reasonable, maybe this is simply the paperwork necessary to achieve what you want. And that paperwork does not go anywhere other than your employers file cabinet - I think that means something. If some kind of violation could be involved, you'd think that paperwork would have to go somewhere.

Did I understand that Vanguard does offer the 5304 SIMPLE? Maybe you can achieve what you want by using the 5304 form at Vanguard - this might be something that your employer is more comfortable with. And everybody gets pretty much what they want and you can all stop worrying about it.
retiredjg
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Re: Employer plan at Ed Jones

Post by retiredjg »

Take a good look at this.

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


To set up a plan at Vanguard, your employer would fill in two things.
  • 1. SEP-IRA/SIMPLE IRA Plan Authorization Form

    2. IRS Form 5305-SIMPLE or IRS Form 5304-SIMPLE (this form does not go to either Vanguard or the IRS).
krow36
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Re: Employer plan at Ed Jones

Post by krow36 »

Great find, retiredjg and acunn! The asterisk note, addressed to the employer:
*Alternately, you may use IRS Form 5304-SIMPLE. This form allows each employee to invest with the financial institution of his or her choice, which may increase your administrative and recordkeeping responsibilities. If you complete this form, keep it for your records; don’t send it to Vanguard.
So the fact that Fidelity don't normally set up a Form 5304 SIMPLE isn't relevant. In any case, the employer has to fill out Fidelity's forms to establish the SIMPLE with them.
Last edited by krow36 on Fri Sep 04, 2020 2:36 pm, edited 1 time in total.
retiredjg
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Re: Employer plan at Ed Jones

Post by retiredjg »

krow36 wrote: Fri Sep 04, 2020 12:31 pm Great find, retiredjg! The asterisk note, addressed to the employer:
*Alternately, you may use IRS Form 5304-SIMPLE. This form allows each employee to invest with the financial institution of his or her choice, which may increase your administrative and recordkeeping responsibilities. If you complete this form, keep it for your records; don’t send it to Vanguard.
So the fact that Fidelity don't normally set up a Form 5304 SIMPLE isn't relevant. In any case, the employer has to fill out Fidelity's forms to establish the SIMPLE with them.
Thanks, but I didn't find it. Acunn found it and mentioned it above. I just went looking. :happy

Not so sure about your conclusion about Fidelity though. I looked at their plan as well and it actually says in the first paragraph that it can only be used with a 5305 SIMPLE. Go figure that one out, especially since I'm not sure that Fidelity ever even sees that particular form. Not sure if that is an administrative uh-oh or if their plan actually is a little different.

It is apparent that Vanguard uses the IRS 5304 or 5305 form instead of an in-house modification. Maybe Fidelity uses an in-house form and just does not have one for 5304.

All speculation on my part.
krow36
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Re: Employer plan at Ed Jones

Post by krow36 »

mistake in correcting a mistake!??
retiredjg
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Re: Employer plan at Ed Jones

Post by retiredjg »

If that comment is for me, you'll have to explain further. :happy
krow36
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Re: Employer plan at Ed Jones

Post by krow36 »

retiredjg wrote: Fri Sep 04, 2020 3:39 pm If that comment is for me, you'll have to explain further. :happy
Sorry for not be clear. Both mistakes were mine!
Topic Author
Mm8719
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Re: Employer plan at Ed Jones

Post by Mm8719 »

Thanks for the input guys.

Update: as expected the EJ rep called my employer today and explained to him the concerns he had and that what we were trying to do was improper. My boss then called Fidelity and spoke the rep I’ve been working with. He pointed out the concerns about signing the plan adoption agreement which stated it was 5305 and how it could conflict with the 5304 at EJ. The rep, who is not exactly an expert on the Simple plans, read through the paperwork and told my boss that it looked like EJ was correct. :oops: My boss then emails me saying based on that this won’t work and we need to figure out a new plan...

I immediately call the rep at Fidelity and ask him if that info came from him or from an IRA specialist in their corporate office. As expected he said that was based off what he interpreted from the paperwork. So I told him to get an actual IRA specialist that was well versed in these things...guess what— the specialist checked on it , then checked with his manager and then confirmed that in fact what we have been trying to do is perfectly fine. He said that an employer is fine to leave the 5304 plan with all the other accounts at EJ, and then set up the master acct with Fidelity which would be a 5305. He confirmed multiple times that would not in any way impact the accts at EJ. I asked them to document the file, and the rep agreed to call and talk to my boss again. I emailed my boss back and he was cool, just asked for a specialist or management at Fidelity to contact him directly to talk further (no more dealing with the rep who has basically just been a middle man). So we shall see how this goes now. Hopefully someone that can speak on this intelligently with my boss will contact him after the holiday. I have a feeling it will now take even more convincing to get my boss to agree to this again.

I guess if all else fails I will just have to find a company that uses the same 5304 paperwork. So far Vanguard is the only one that uses it as someone has now pointed out, but I really wanted to go with Fidelity.
krow36
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Location: WA

Re: Employer plan at Ed Jones

Post by krow36 »

The Vanguard SEP-IRA/SIMPLE IRA Plan Authorization Form does not mention whether the plan is using Form 5304 or Form 5305. https://personal.vanguard.com/pdf/s194.pdf?2210092784
Neither does the Fidelity SIMPLE IRA—Adoption Agreement: https://www.fidelity.com/bin-public/060 ... 021111.pdf
These are the forms that an employer using a Form 5304 SIMPLE IRA is required to submit to a FI selected by an employee to establish the validity of the employee’s SIMPLE IRA. So I think the EJ rep claim is bogus.

You have to be careful when when asking about “transferring a SIMPLE IRA” with the reps because establishing a “transfer SIMPLE IRA account” is a different process associated with a Form 5305 SIMPLE where the first contribution was made less than 2 years ago. Here’s how it’s done at Vanguard. You fill out their SIMPLE IRA New Account Form and in Section 2, you check that it is a “New frozen account”. You then complete their SIMPLE IRA Asset Transfer Form and include a copy of a recent statement from you current FI. You send it to the FI your employer is using (EJ), not to the local rep, and a trustee to trustee transfer is made. It doesn’t involve your employer or the rep he uses. With your Form 5304 SIMPLE with EJ, they are not required to (but may) make the transfer free of fees, as they are required to do with a Form 5305 SIMPLE. As Fidelity has told you, you could make this transfer now. But your and the employer’s contributions will continue to go to your EF SIMPLE account. Fidelity has been reported in the past as not accommodating transfer SIMPLE accounts and posters have gone to Vanguard. If you are past the 2 years, you can transfer to an IRA at Fidelity and skip the transfer SIMPLE.

After your employer sets up the Vanguard SIMPLE IRA and your and the employer’s contributions are going directly to your new Vanguard SIMPLE account, you can transfer it all the EJ balance and be rid of EJ! :D
If you are past the 2 years since the first contribution, you should transfer the EJ balance to an IRA to avoid Vanguard's SIMPLE IRA $25/yr/fund fees.
retiredjg
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Re: Employer plan at Ed Jones

Post by retiredjg »

krow36 wrote: Sat Sep 05, 2020 11:12 pm The Vanguard SEP-IRA/SIMPLE IRA Plan Authorization Form does not mention whether the plan is using Form 5304 or Form 5305. https://personal.vanguard.com/pdf/s194.pdf?2210092784
Neither does the Fidelity SIMPLE IRA—Adoption Agreement: https://www.fidelity.com/bin-public/060 ... 021111.pdf
This is what I meant above.

https://www.fidelity.com/bin-public/060 ... landoc.pdf

  • "This Prototype Plan may only be used in con- junction with an Internal Revenue Service (“IRS”) Model SIMPLE-IRA, Form 5305-S or Form 5305-SA or an IRS approved Prototype SIMPLE-IRA."
If I'm understanding these two forms correctly, the one you found is the thing that can only be used in conjunction with the IRS Model Simple....and so on. I don't know why they would do that.
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