SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

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A_Bond
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SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by A_Bond » Mon Jul 08, 2019 10:19 pm

Short time Boglehead, first time poster.

Here are the facts. I am with a small/medium sized business that has their SIMPLE IRAs setup through the local Edward Jones office. (I believe, a Form 5305 DFI.) I went in to the office today to set up my account, as I just became eligible for the company match. My goal is to have the money deposited in the EJ account and then transfer it to a transfer SIMPLE IRA/frozen SIMPLE IRA with either Fidelity (if they offer this) or Vanguard.

During the meeting I was informed that I could NOT simply put the money into a money market account. (I would then want to transfer it to the frozen transfer only account.) When pressed on whether this was an IRS rule or an Edward Jones rule, I got an answer somewhere along the lines of 'fiduciary responsibility' but he skipped out of it so quickly I am almost positive it was just an 'internal policy'. When I mentioned index funds I got the usual 'American Funds beat the index 17 out of 18 times according to this out of scale chart that only covers a few years' pitch. The example that American Funds has prominently displayed on their site shows them losing against the index: https://www.americanfunds.com/individua ... sults.html

My Edward Jones SIMPLE IRA account is set up under their 'guided solutions' plan. This comes with an approx. 1.4% management fee plus the mutual fund expense ratios, plus the forty dollar yearly flat fee, putting the average hit at just over 2%. (I feel like you guys and gals know all of this already, but a lot of this is for my own mental clarity, so please bare with me.)

Since I am new to this plan, no money has been deposited and therefore no money has been invested. Funds are to be deposited at the end of each month. At this point, I have the following questions;
  • Can they actually refuse to allow me to place my funds in a money market account for ease of transfer, or is this just a standard scare tactic?
  • Would the request for transfer (which I know they have to honor in accordance with Form 5305) come direct from Fidelity or whatever company I end up opening a transfer SIMPLE with?
  • Am I correct in assuming they have to allow at minimum one transfer per month?
  • Are there any 'magic words' that I can use to cut through the sales lingo directly and just get this done?
  • Is it worth the bother? Should I just relent and keep my account through Edward Jones with a focus on American Funds?
For additional clarity, I have a Traditional IRA (a rolled over SIMPLE from my last employer) and a ROTH IRA both with Fidelity, so I have a good bit of self directed investing experience. Both of these are built around index tracking funds with low expense ratios.

I apologize for the seemingly basic questions, but I am kind of at my wits end right now due to a lot of pressure at work and just in general. Lots of stuff happening and I need some of your expert/amateur advice. Thank you in advance!

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JD Leonard
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by JD Leonard » Mon Jul 08, 2019 10:59 pm

What are the terms of the company match?

What $ amount would you gain from jumping through the hoops?

Is there a vesting schedule?
- JD Leonard

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A_Bond
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by A_Bond » Mon Jul 08, 2019 11:23 pm

JD Leonard wrote:
Mon Jul 08, 2019 10:59 pm
What are the terms of the company match?

What $ amount would you gain from jumping through the hoops?

Is there a vesting schedule?
Direct match up to 3%.

Gain would be the decrease in fees due to a focus on index funds in place of actively managed funds.

It is a SIMPLE IRA so fully vested.

retiredjg
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by retiredjg » Tue Jul 09, 2019 7:06 am

Have you searched for previous posts on Guided Solutions? If not, use the google box in the upper right hand corner. I recall a very long thread back when Guided Solutions started. You can look for it.

If I recall correctly, when Guided Solutions was first instituted (beginning of the fiduciary rules), you COULD invest in the money market and then transfer your contributions to a frozen IRA (aka transfer IRA) at places like Vanguard.

However, under the current administration, some or all of the fiduciary rules were thrown out and the rules at EJ may have changed. You should be able to get a copy of the Guided Solutions rules and read it for yourself. That is where we found that the long ago poster could invest in money market (if memory serves me well).

Your EJ rep probably does not even know all the rules. Educate yourself and make them do what you want.

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teen persuasion
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by teen persuasion » Tue Jul 09, 2019 9:05 am

I'm in a similar situation, but Wells Fargo + American Funds instead. I have yet to discover if our plan is a 5304 vs 5305, but reading all the paperwork from American Funds it sounds like if 5305 they have to do transfers/rollovers without cost to me, as often as I request. They also specify: "such transfer will be w/o cost or penalty if the contributions have been at all times invested in the class A or F2 shares of American Funds U.S. Govt MMF or other such class of shares or fund as the custodian may designate." I never saw a MMF, and we are restricted to class C shares (with 1% 12b-1 fees), so I'm looking for more information.

As to Fidelity - when I was researching other alternatives (to WF), I considered Fidelity, Schwab, and Vanguard. Vanguard had a $25 annual fee per fund used, until you had a $50k balance with them. I have my Roth IRA there, so wouldn't affect me, but would affect co-workers. Vanguard also insisted on a 5305 SIMPLE IRA. Fidelity had a list of approved fund companies, so I looked at Fidelity's list of funds approved for SIMPLE IRAs. There were no low cost index funds on the list, they were all expensive managed sector funds. Nothing I was interested in investing in. Fidelity did say no fees to set up accounts though. Schwab said no fees to set up, no ongoing fees, and appeared to allow investment in anything they offer. They had really simple forms and instructions for employers to start a SIMPLE thru them, which would be a 5304. So I pitched Schwab to the board of trustees, but they ultimately were afraid to DIY and went with WF who would hold their hand, even realizing the high cost.

So I'm planning to contribute the max (because this is the first exposure I've had to a retirement plan thru an employer, so everything on that side is in DH's name; we need to get more balance), but I'm exploring all my options to duck the high fees ASAP. Given I no longer have to worry about co-workers' side effects , I'll probably look to transfer to Vanguard. I have heard they allow frozen accounts, and I already have accounts there.

I just have to see whether I can sidestep most of the fees and transfer immediately on contribution, or the rules are written such that the fees are impossible to get around, and I have to pony up, hold my nose for some amount of time before transferring. It's not clear if there are back-end fees that take a year to expire. With rolling biweekly contributions, transfers get tricky. If it turns out our plan IS 5304, then they have the right to change any transfer fees they like, but I should in theory have the right to choose someone instead of WF entirely. But I've just signed up with WF...

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A_Bond
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by A_Bond » Tue Jul 09, 2019 11:35 am

@retiredjg,

I have not dug into that yet but will do so today for sure. I find it hard to believe that they can actually prevent me from placing the incoming money into a money market account since it is technically my account that they are 'helping' with in the first place...

@teen persuasion,

Sounds like we boarded the same ship at different ports.

Although this is not my first employer matched account, this is the first time I've dealt with one that is actively managed/guided. The last one I had was with USAA and offered all of Fidelity's mutual and index funds for purchase. I am surprised that Fidelity wouldn't offer some of their own low-fee index funds in their SIMPLE. I will be calling them sometime this week and I will be sure to bring that up. I hope your situation goes well - keep us up to date!

mhalley
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by mhalley » Tue Jul 09, 2019 11:37 am

Certainly it is possible that you can’t invest in the mm fund. They don’t want to be sued because you put your funds there and then when you retire realize you should have invested it in stocks.

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A_Bond
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by A_Bond » Tue Jul 09, 2019 11:40 am

mhalley wrote:
Tue Jul 09, 2019 11:37 am
Certainly it is possible that you can’t invest in the mm fund. They don’t want to be sued because you put your funds there and then when you retire realize you should have invested it in stocks.
If that is indeed the case, are there any reasonable options available to transfer the money out of the account, into say, a transfer SIMPLE set up with Vanguard/Fidelity/etc.?

If it HAS to be invested in their American Funds offerings, would it then have to be liquidated every month when I would want to transfer?

Spirit Rider
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by Spirit Rider » Tue Jul 09, 2019 3:53 pm

A_Bond wrote:
Mon Jul 08, 2019 10:19 pm
My goal is to have the money deposited in the EJ account and then transfer it to a transfer SIMPLE IRA/frozen SIMPLE IRA with either Fidelity (if they offer this) or Vanguard.
Last I knew, Fidelity does not offer rollover only (frozen) SIMPLE IRA accounts.
During the meeting I was informed that I could NOT simply put the money into a money market account. (I would then want to transfer it to the frozen transfer only account.) When pressed on whether this was an IRS rule or an Edward Jones rule, I got an answer somewhere along the lines of 'fiduciary responsibility' but he skipped out of it so quickly I am almost positive it was just an 'internal policy'.
Not only is this not an IRS rule, it can NOT be an internal policy. It is a direct violation of IRS rules with regard to 5305 SIMPLE IRA plans. They most certainly are not going to put it in a loaded fund that they must refund the money. Almost all SIMPLE IRA custodians will place contributions of participants who elect to transfer contributions in a money market account/fund.

The IRS bible for SIMPLE IRA plans/accounts is Notice 98-4. A snippet from Q&A J-1.

(2) the financial institution agrees that, if a participant so requests, the participant's balance will be transferred without cost or penalty to another SIMPLE IRA (or, after the 2-year period described in Q&A I2, to any IRA) at a financial institution selected by the participant; and (3) each participant is given written notification describing the procedures under which, if a participant so requests, the participant's balance will be transferred without cost or penalty to another SIMPLE IRA (or, after the 2-year period described in Q&A I2, to any IRA) at a financial institution selected by the participant.

If you so request, they MUST provide you with the procedures to elect and do transfers to another account. Also, Q&A J-4

Q. J-4: How does a DFI transfer a participant's balance without cost or penalty?
A. J4: In order to satisfy § 408(p)(7), a participant's balance must be transferred in a trustee-to-trustee transfer directly to a SIMPLE IRA (or, after the 2-year period described in Q&A I2, to any IRA) at the financial institution specified by the participant. A transfer is deemed to be made without cost or penalty if no liquidation, transaction, redemption or termination fee, or any commission, load (whether front-end or back-end) or surrender charge, or similar fee or charge is imposed with respect to the balance being transferred. A transfer will not fail to be made without cost or penalty merely because contributions that a participant has elected to have transferred without cost or penalty are required to be invested in one specified investment option until transferred, even though a variety of investment options are available with respect to contributions that participants have not elected to transfer.

  • Can they actually refuse to allow me to place my funds in a money market account for ease of transfer, or is this just a standard scare tactic?
Sure, they can refuse to allow you to put your contributions in a money market account/fund. However, I have never seen a SIMPLE IRA custodian do so, because they must allow your contributions to be transferred without cost or penalty. Any other option will cost them money.
  • Would the request for transfer (which I know they have to honor in accordance with Form 5305) come direct from Fidelity or whatever company I end up opening a transfer SIMPLE with?
Usually, this is done through the SIMPLE IRA custodian.
  • Am I correct in assuming they have to allow at minimum one transfer per month?
That is correct from Q&A J-3.

Q. J3: Is there a limit on the frequency with which a participant’s balance must be transferred without cost or penalty?
A. J3: In order to satisfy § 408(p)(7), if a participant acts, within applicable reasonable time limits, if any, to request a transfer of his or her balance, the participant's balance must be transferred on a reasonably frequent basis. A participant's balance will be deemed to be transferred on a reasonably frequent basis if it is transferred on a monthly basis.

  • Are there any 'magic words' that I can use to cut through the sales lingo directly and just get this done?
Refer them to IRS Notice 98-4 and their obligations under IRS rules. This is standard stall and obfuscation tactics of Edward Jones and other advisors.
  • Is it worth the bother? Should I just relent and keep my account through Edward Jones with a focus on American Funds?
Absolutely not, there is no reason you should put up with 2%+ fees just to invest your hard earned money. Be persistent, they are in the wrong. If you find too many roadblocks through Edward Jones, contact your employer, refer to IRS Notice 98-4 and their responsibilities. Very often the employers are unaware of the roadblocks these advisors are putting up. Ultimately, it is their responsibility to ensure the law is being followed.

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A_Bond
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by A_Bond » Tue Jul 09, 2019 10:13 pm

@Spirit Rider,

Wow. Thank you so much for the in-depth reply.
  • I had heard that as well in regards to Fidelity not offering transfer SIMPLES. I contacted Fidelity's general support the other day and they said they THOUGHT it might be a possibility, but directed me to call their specialized support directly. I hope to do so tomorrow. Since I am with Fidelity already, it's worth a shot.
  • It sounds like from both your reply and the other replies in this thread, is that I should just be straight forward and inform them that I will be transferring my contributions at the end of every month (money is withheld and matched from my pay checks are deposited to EJ every month) to a transfer SIMPLE IRA - no ifs, ands or buts. At this point, I would also request/demand the procedures in order to do so. If they continue to stall, simply reiterate the fact that they are required to allow transfers without fees in accordance with IRS rules. I am assuming doing so via email would be suggested to keep things in writing?
  • If I am reading your reply correctly, Edward Jones as the custodian would be where the transfers would be initiated at? Or would it be the company where the transfer SIMPLE is set up? (Vanguard, Fidelity, etc.)
  • Thank you for the encouragement to be persistent - it is appreciated.

retiredjg
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by retiredjg » Wed Jul 10, 2019 6:33 am

In defense of Edward Jones.....(not something I thought I'd ever say)......you are probably dealing with a local salesman who has little to no understanding of the "big picture" when it comes to SIMPLE IRAs.

He may have no idea what Form 5305 is because they use their own forms. He may not know you can use the money market account because nobody has ever asked for that before (and I believe it is listed in a different place in the "owners manual" we saw in the past). And he likely has never heard of, much less seen, IRS Notice 98-4. In other words, you may know more about this subject now than he does.

Yeah, maybe he is stalling or putting up roadblocks, or maybe he is just ignorant and and does not know any better and thinks he is telling you the truth.

You definitely want to use the frozen (transfer) SIMPLE IRA. And you will need to be persistent cause this guy may not yet know how to accomplish what you are asking for. But you do need to stay on good terms with him so try your best to be patient as well. :wink:

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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by retiredjg » Wed Jul 10, 2019 7:18 am

I went looking for the old Guided Solutions manual, but the link took me to the current manual. It does say that the money market fund is not one of the "eligible investments".

I'm thinking the money could be left in money market until transferred out, particularly if you transfer it within a few days of deposit.

https://www.edwardjones.com/images/guid ... ochure.pdf

retiredjg
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by retiredjg » Wed Jul 10, 2019 7:20 am

This is old, but you may find something helpful.

viewtopic.php?f=2&t=163592

Spirit Rider
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by Spirit Rider » Wed Jul 10, 2019 8:15 am

The most important thing is to "file an election to transfer" during you open enrollment period. Verbally telling an Edward Jones employee is not sufficient. It is an absolute IRS requirement that they provide you as part of the notice/enrollment package, specific information on your right to transfer to another SIMPLE IRA custodian.

You should carefully read every single page in your notice/enrollment package. Advisors are well known for only providing enrollment information and failing to provide notice of your right to and how to transfer in a 5305-SIMPLE IRA. If you did not receive a proper notice, notify your employer immediately.

They are the ones on the hook for any penalties and as is often the case, not aware that the advisor (EJ) is not providing proper notice and/or dragging their feet on transfer elections/procedures. In fact, it is not unheard of here on BHs, that you might be the first one to fight the battle.

SIMPLE IRA transfers must be requested from the existing custodian (EJ). I don't know if Vanguard can help with this. Be advised, that EJ does not have to make this easy. On BHs we have seen where many custodians require a paper form for each transfer. There are custodians which allow you to set up automatic transfers, but I don't remember if EJ is one of them.

@retiredjg may be correct. It could just be ignorance on the EJ advisor's part. They typically operate their own local office. However, call me cynical, they will be losing money on each participant who chooses to transfer contributions.

It continues to amaze me how many SIMPLE IRA plans are massively expensive through advisors. Especially, when there are such good low cost plans from ETrade, Fidelity, Schwab, TD Ameritrade, Vanguard, etc... I think it is probably because the business owners end up using their own advisor for the plan and don't know any better or have drunk the Koolaid.

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teen persuasion
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by teen persuasion » Wed Jul 10, 2019 8:26 pm

Spirit Rider and retiredjg, thanks for the detailed explanations. You've confirmed some of my observations and cynicisms.

The WF people seemed baffled when I mentioned 5304/5.

The part I'm not clear about is whose form I need. Is it WF, or American Funds (whose name is all over the "custodial agreement"), or Capital Bank and Trust Company (the custodian, per the paperwork). From questioning the WF people, WF won't be servicing our accounts, they're just the middlemen who got to select American Funds for us :confused ; we will have to access our accounts online thru American Funds' website, presumably (once they are created).

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A_Bond
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by A_Bond » Wed Jul 10, 2019 10:50 pm

@retiredjg, from my conversations with the advisor, they are most likely knowledgeable about the subject - the obfuscation very well could be intentional. I will do my best to stay on good terms.

@Spirit Rider, The open enrollment period should be until the end of the month. I will be digging through the packet tomorrow/over the weekend in an attempt to find the transfer information. My hard goal is to prep all of my information and requests over this weekend and send it out in writing via email to the EJ office on Monday morning.

I am assuming I should have the transfer SIMPLE IRA set up and ready to go in advance?

I would agree that it does seem like Edward Jones was chosen due to the proximity of the office and the friendly, hometown nature they can present.


I also want to thank everyone for your ongoing assistance. Just being able to hash this out in writing has helped tremendously.

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A_Bond
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by A_Bond » Sat Jul 13, 2019 11:02 am

Update - Completely spaced that Fidelity's Small Business retirement investing support is in the office between M-F only, not on the weekends. Guess I will be making a call on Monday on my way home from the office.

I am about halfway through the EJ Guided Solutions IRA packet. Finally found the part dealing with transfers.

Disclosure Statement - Section D; Part 1.

  • "Transfers. A transfer is a movement of assets between like retirement plans. A direct transfer of funds in your SIMPLE IRA from one trustee/custodian to another trustee/custodian is not a rollover. Because there is no distribution to you, the transfer is tax-free. You may make unlimited transfers between IRAs within the same 12-month period."
I see no written instructions on how to actually complete this transfer.

The fee schedule is spread throughout the entire packet. From what I gather, there is a 1.35% 'management' fee, a $40.00 flat fee to keep the account open, plus the fund's fee. No front-load fees.

retiredjg
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by retiredjg » Sat Jul 13, 2019 11:11 am

If I recall correctly, EJ's solution to the fiduciary rules - Guided Solutions - was to drop the funds with front end loads and add on (or increase)the advisory fee. It was a clear affront to what the fiduciary rules were supposed to do, but there are always "unintended consequences" in legislation. At EJ, I think the customers got the "unintended consequences".

The statement is correct that a trustee to trustee transfer is not a "rollover". However it is commonly called a rollover in ordinary conversation (yes, I'm guilty too) so don't expect lay people to always use the right term. :happy

Tell us when you find the transfer instructions.

Jablean
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by Jablean » Sat Jul 13, 2019 1:45 pm

I've found that it's best to have the entity (ie Fidelity) receiving the funds to request transfers. That saves you one step. But my transfers were one time only. Hopefully when you call on Monday they will tell you if you can set up a re-occurrence sweep (my words) that requests the transfer monthly of everything in your EJ account.

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wildungar2000
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by wildungar2000 » Sat Jul 13, 2019 3:11 pm

A_Bond wrote:
Mon Jul 08, 2019 10:19 pm
My goal is to have the money deposited in the EJ account and then transfer it to a transfer SIMPLE IRA/frozen SIMPLE IRA with either Fidelity (if they offer this) or Vanguard.
A_Bond wrote:
Sat Jul 13, 2019 11:02 am
Update - Completely spaced that Fidelity's Small Business retirement investing support is in the office between M-F only, not on the weekends. Guess I will be making a call on Monday on my way home from the office.
I researched this back in Nov. 2018, looking into the Big 3 for my transfer SIMPLE IRA: viewtopic.php?t=262892

At that time, Vanguard would allow it, while Schwab and Fidelity did not. We have seen lots of changes with Fidelity, like them getting into the HSA game, so maybe in today's world they allow it? Please let us know what you find out.

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A_Bond
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by A_Bond » Sat Jul 13, 2019 8:42 pm

@retiredjg, I will indeed!

@Jablean, I plan on calling both Vanguard and Fidelity regarding this. Will inquire regarding the 're-occurring sweep' to see if it can be automated from their end.

@wildlungar2000, Thank you for sharing your experience. I will definitely let you all know what I find out after I give them a call.

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A_Bond
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by A_Bond » Mon Jul 15, 2019 10:02 pm

Update - Called Fidelity today. As suspected, they do not offer a transfer/frozen SIMPLE IRA option. On to Vanguard!

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A_Bond
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by A_Bond » Tue Jul 16, 2019 8:12 pm

Another update. Called Vanguard today. Their support was quite helpful and very knowledgeable. Unlike when I called Fidelity, I didn't have to walk them through the idea of a transfer/frozen SIMPLE - the support specialist immediately jumped in and offered options and asked the right questions.

Unfortunately, there is no way for Vanguard to set up reoccurring transfers, it would have to be done manually each month through Vanguard. I kind of figured this, but still a bit of a bummer. Also, the two-year' clock (before you are able to convert it into a Traditional IRA) on the SIMPLE resets upon each transfer, something I didn't realize. Cost per account is still $25.00 per year - almost half what the yearly cost to keep the EJ account open is.

I confirmed that it is indeed a 5305 SIMPLE. The obvious best-case scenario would be to convince my employer to switch to a 5304. Does anyone have any good links to a step by step guide on how to switch this over? I am wanting to be armed with as much knowledge as possible regarding this before approaching the higher-ups. If I am unable to convince them to do this, I will have to bite the bullet and just go ahead with the frozen SIMPLE and monthly paper transfers.

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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by Spirit Rider » Tue Jul 16, 2019 9:06 pm

A_Bond wrote:
Tue Jul 16, 2019 8:12 pm
Unfortunately, there is no way for Vanguard to set up reoccurring transfers, it would have to be done manually each month through Vanguard. I kind of figured this, but still a bit of a bummer.
That is correct the source SIMPLE IRA custodian controls the trustee -> trustee transfer process. Usually this is a manual form for each initiated transfer, but some custodians will automate periodic transfers.
Also, the two-year' clock (before you are able to convert it into a Traditional IRA) on the SIMPLE resets upon each transfer, something I didn't realize.
The Vanguard representative was incorrect.

The two year clock begins on the date of the first contribution to your first SIMPLE IRA. Vanguard does not have to report your first contribution date from EJ even if you provide it to them. However, at a minimum your first rollover contribution to Vanguard establishes the two year clock for that account's reporting. The resetting on each transfer is absolutely false. If you do your first transfer as soon as the first contributions are in your EJ account, there will be very little difference between EJ's two year clock and Vanguard's two year clock even if they don't take EJ's date into account for reporting.

Again from IRS Notice 98-4, Q&A H5 page 15 and H5 page 17

Q. I5: When does the 2-year period described in Q&A I2 begin?
A. I5: The 2-year period described in Q&A I2 begins on the first day on which contributions made by the individual's employer are deposited in the individual's SIMPLE IRA.


Q. H5: Is a SIMPLE IRA trustee responsible for reporting whether a distribution to a participant occurred during the 2-year period described in Q&A I2?
A. H5: Yes. A SIMPLE IRA trustee is required to report on Form 1099R whether a distribution to a participant occurred during the 2-year period described in Q&A I2. A trustee is permitted to prepare this report on the basis of its own records with respect to the SIMPLE IRA account. A trustee may, but is not required to, take into account other adequately substantiated information regarding the date on which an individual first participated in any SIMPLE IRA Plan maintained by the individual’s employer. See Q&A I2 on the effect of distributions within this 2-year period.

Cost per account is still $25.00 per year - almost half what the yearly cost to keep the EJ acunt open is.
Last time I checked Vanguard charge $25/account/fund.
I confirmed that it is indeed a 5305 SIMPLE. The obvious best-case scenario would be to convince my employer to switch to a 5304. Does anyone have any good links to a step by step guide on how to switch this over? I am wanting to be armed with as much knowledge as possible regarding this before approaching the higher-ups. If I am unable to convince them to do this, I will have to bite the bullet and just go ahead with the frozen SIMPLE and monthly paper transfers.
An employer can only change from a 5305-SIMPLE to a 5304-SIMPLE on January 1st of the year with notification no later than the beginning of the 11/2 notice/enrollment period. They could still select EJ as the default custodian, with anyone wanting a different custodian electing to do so and transferring their assets if they want. They do not automatically transfer.

The company would have to adopt a 5304-SIMPLE at each custodian that employees elected and arrange to make contributions to those different custodians. It is often rather difficult to convince an employer to do this.

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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by retiredjg » Wed Jul 17, 2019 5:36 am

In my reading of IRS materials on the SIMPLE IRA, I don't recall seeing anything about the 2 year clock resetting. Besides that, it just does not make any sense. How many "first contributions" can there be?

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A_Bond
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by A_Bond » Tue Jul 23, 2019 7:15 pm

@retiredjg & Spirit Rider,

I'm back... Thinking back through this, it makes perfect sense that the 2 year period would not reset.

I do need some feedback on this. Here is where I am sitting at this point.
  • I received the information required from Vanguard to open the frozen SIMPLE. Working through this now and I hope to have the paperwork sent in within the next couple of days.
  • What do you all think of this email I am planning on sending to the local EJ office?

    "EJ Financial Advisor,

    In accordance with Section D; Part 1 of the provided Disclosure Statement and IRS Notice 98-4, I am notifying you of my intention to complete monthly non-fee inducing transfers (not roll-over) of contributions to this EJ hosted SIMPLE IRA plan. Transfers will be sent to a transfer (frozen) SIMPLE IRA under the management of the Vanguard Group. This should begin sometime in the next month.

    Due to this, I am requesting that the monthly deposit from my employer into the EJ hosted SIMPLE IRA be kept in liquid form and not invested in any actively or passively mutual funds or ETFs in order to not incur fees. This will aid in the ease of transfer between the two SIMPLE IRA accounts.

    Thank you,
    A_Bond"

RubyTuesday
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by RubyTuesday » Tue Jul 23, 2019 7:31 pm

retiredjg wrote:
Wed Jul 10, 2019 6:33 am
In defense of Edward Jones.....(not something I thought I'd ever say)......you are probably dealing with a local salesman who has little to no understanding of the "big picture" when it comes to SIMPLE IRAs.

He may have no idea what Form 5305 is because they use their own forms. He may not know you can use the money market account because nobody has ever asked for that before (and I believe it is listed in a different place in the "owners manual" we saw in the past). And he likely has never heard of, much less seen, IRS Notice 98-4. In other words, you may know more about this subject now than he does.

Yeah, maybe he is stalling or putting up roadblocks, or maybe he is just ignorant and and does not know any better and thinks he is telling you the truth.

You definitely want to use the frozen (transfer) SIMPLE IRA. And you will need to be persistent cause this guy may not yet know how to accomplish what you are asking for. But you do need to stay on good terms with him so try your best to be patient as well. :wink:
You realize that is no defense of EJ, but rather an indictment. EJ does the hiring, training (mostly sales I suspect), and is responsible for the compliance.

RT

retiredjg
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by retiredjg » Wed Jul 24, 2019 8:52 am

A_Bond wrote:
Tue Jul 23, 2019 7:15 pm
@retiredjg & Spirit Rider,

I'm back... Thinking back through this, it makes perfect sense that the 2 year period would not reset.

I do need some feedback on this. Here is where I am sitting at this point.
  • I received the information required from Vanguard to open the frozen SIMPLE. Working through this now and I hope to have the paperwork sent in within the next couple of days.
  • What do you all think of this email I am planning on sending to the local EJ office?

    "EJ Financial Advisor,

    In accordance with Section D; Part 1 of the provided Disclosure Statement and IRS Notice 98-4, I am notifying you of my intention to complete monthly non-fee inducing transfers (not roll-over) of contributions to this EJ hosted SIMPLE IRA plan. Transfers will be sent to a transfer (frozen) SIMPLE IRA under the management of the Vanguard Group. This should begin sometime in the next month.

    Due to this, I am requesting that the monthly deposit from my employer into the EJ hosted SIMPLE IRA be kept in liquid form and not invested in any actively or passively mutual funds or ETFs in order to not incur fees. This will aid in the ease of transfer between the two SIMPLE IRA accounts.

    Thank you,
    A_Bond"
Seems OK to me, but I'd like to hear what Spirit Rider thinks.

Spirit Rider
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by Spirit Rider » Wed Jul 24, 2019 10:54 am

retiredjg wrote:
Wed Jul 24, 2019 8:52 am
Seems OK to me, but I'd like to hear what Spirit Rider thinks.
I am an inclined to think that EJ has their own form for electing the rollover of contributions or a checkbox and/or section in their standard enrollment form. I know we have had form members with a SIMPLE IRA through EJ. If we could get their attention, maybe they could comment.

You really should be engaging your employer for help with this. The bottom line is that it is their butt on the line if the plan is not operated in compliance with IRS rules and regulations.

SuzBanyan
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by SuzBanyan » Wed Jul 24, 2019 4:02 pm

The OP said she had a prior Simple IRA with another employer and that all the funds in that have been transferred to her tIRA. Doesn’t this mean the 2 year waiting period has already been satisfied and she does not need a new frozen Simple? That instead, she can just transfer to an existing tIRA?

retiredjg
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by retiredjg » Wed Jul 24, 2019 4:27 pm

I assumed the old SIMPLE at the previous employer did not count as part of the 2 year clock. But it is an interesting question.

Spirit Rider
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by Spirit Rider » Wed Jul 24, 2019 10:13 pm

SuzBanyan wrote:
Wed Jul 24, 2019 4:02 pm
The OP said she had a prior Simple IRA with another employer and that all the funds in that have been transferred to her tIRA. Doesn’t this mean the 2 year waiting period has already been satisfied and she does not need a new frozen Simple? That instead, she can just transfer to an existing tIRA?
See my post from Tue Jul 16, 2019 9:06 pm and the quoted IRS Notice 98-4 Q&A H5. Technically, if the two (2) year period has been met across all SIMPLE IRAs, there is no restriction on transfers. However, each custodian can just use their own records.

Topic Author
A_Bond
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by A_Bond » Thu Jul 25, 2019 1:07 pm

@Spirit Rider, @retiredjg, @SuzBanyan,

"A trustee may, but is not required to, take into account other adequately substantiated information regarding the date on which an individual first participated in any SIMPLE IRA Plan maintained by the individual’s employer."

How likely would it be that a financial institution would actually take into account my original SIMPLE in regards to the 2-year period? This does raise the possibility that I could go with my original choice of Fidelity and open a tIRA and transfer from my EJ SIMPLE on a monthly basis.

But wouldn't that cause an issue if I transferred funds out of a SIMPLE into a tIRA on a monthly basis, since they are not the same type of account?

retiredjg
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by retiredjg » Thu Jul 25, 2019 1:37 pm

This means you would have to ask the people you want to take money away from to do you a favor. I wouldn't go there. They may want some favor in return.

Put the money into Vanguard. Wait 2 years and transfer it to Fidelity. Then change your EJ paperwork to Fidelity.

But if you do want to do this, do you actually have some credible documentation from your earlier SIMPLE IRA of the exact date that the first contribution was made?

Topic Author
A_Bond
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by A_Bond » Thu Jul 25, 2019 3:38 pm

retiredjg wrote:
Thu Jul 25, 2019 1:37 pm
This means you would have to ask the people you want to take money away from to do you a favor. I wouldn't go there. They may want some favor in return.

Put the money into Vanguard. Wait 2 years and transfer it to Fidelity. Then change your EJ paperwork to Fidelity.

But if you do want to do this, do you actually have some credible documentation from your earlier SIMPLE IRA of the exact date that the first contribution was made?
Gotcha. I do have documentation from my earlier SIMPLE IRA showing the dates of the first contributions. Since it was my first retirement account years ago, I saved literally everything.

At this time, I am still on track to do what I originally mentioned. Email the EJ rep to order him to keep the funds as liquid as possible, Open a frozen SIMPLE IRA with Vanguard, initiate monthly transfers from EJ to Vanguard.

Spirit Rider
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by Spirit Rider » Thu Jul 25, 2019 8:13 pm

A_Bond wrote:
Thu Jul 25, 2019 1:07 pm
@Spirit Rider, @retiredjg, @SuzBanyan,

"A trustee may, but is not required to, take into account other adequately substantiated information regarding the date on which an individual first participated in any SIMPLE IRA Plan maintained by the individual’s employer."

How likely would it be that a financial institution would actually take into account my original SIMPLE in regards to the 2-year period? This does raise the possibility that I could go with my original choice of Fidelity and open a tIRA and transfer from my EJ SIMPLE on a monthly basis.
Many do and many don't. I have no idea if EJ will.
But wouldn't that cause an issue if I transferred funds out of a SIMPLE into a tIRA on a monthly basis, since they are not the same type of account?
No, it doesn't cause any issue. Regardless of whether it is a traditional, SEP or SIMPLE IRA, all transfers are IRA -> IRA transfers. The issue of a SIMPLE IRA -> traditional IRA transfer is just one of reporting by the SIMPLE IRA custodian.

If EJ will accept your evidence of two years of elapsed time, then you can do transfers to an IRA.

retiredjg
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by retiredjg » Fri Jul 26, 2019 7:59 am

The way Spirit Rider portrays it, the two year time period is not something you show/prove to the IRS. It is something you show/prove to the current SIMPLE administrator. That puts things in a different light for me.

Showing evidence of your previous 2 years to EJ would not be asking them for a favor. You show them and they can choose to accept it or not. If they accept it, things become simpler and you get to use Fido.

I see no reason not to do that.

Topic Author
A_Bond
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by A_Bond » Mon Sep 16, 2019 10:04 pm

I'm back....

I was forced to place some of my financial planning on hold, as a bunch of other personal and work stuff demanded my full attention. I am glad I did, as I just was alerted to the fact that it is NOT a SIMPLE 5305, but a SIMPLE 5304!

I am so sorry for wanting my hand held, but due to this realization, I am in need of assistance once again. All of the information I went about gathering was for a frozen SIMPLE solution under the impression that I was in a 5305.

I obviously do NOT want to stick with EJ, but would much rather be with Fidelity or Vanguard. What information can I provide my employer with in order to get this switched over as fast as possible when I am in a 5304? Is there a time limit regarding this? Not sure if this matters, but I do have a bit of money in the current EJ SIMPLE that I would need to get transferred over as well.

krow36
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by krow36 » Tue Sep 17, 2019 1:05 am

A_Bond wrote:
Mon Sep 16, 2019 10:04 pm
I obviously do NOT want to stick with EJ, but would much rather be with Fidelity or Vanguard. What information can I provide my employer with in order to get this switched over as fast as possible when I am in a 5304? Is there a time limit regarding this? Not sure if this matters, but I do have a bit of money in the current EJ SIMPLE that I would need to get transferred over as well.
Spirit Rider is the BH authority on SIMPLE IRAs, but I think you need to inform your employer of your desire to select Fidelity as your Financial Institution (FI). This must be done before the Election Period which starts Nov 1. Your employer will have to fill out the Fidelity forms for establishing a SIMPLE account for the business (the same forms as needed if Fidelity was the Designated FI for all the employees). I think your Fidelity SIMPLE account would have an effective date of Jan 1, 2020.
G. EMPLOYER ADMINISTRATIVE AND NOTIFICATION REQUIREMENTS
Q. G􏰀1: What notification requirements apply to employers?
A. G􏰀1: An employer must notify each employee, immediately before the employee’s 60-day election period described in Q&A E􏰀1, of the employee’s opportunity to enter into a salary reduction agreement or to modify a prior agreement. If applicable, this notification must disclose an employee’s ability to select the financial institution that will serve as the trustee of the employee’s SIMPLE IRA as described in Q&A E􏰀4. https://www.irs.gov/pub/irs-drop/not98-4.pdf
Although the IRS rules are clear, it seems that EJ does not follow them by notifying employees that a Form 5304 SIMPLE allows the employee to select their FI. Unfortunately the employer may side with EJ rep and resist following the IRS rules. Hopefully this doesn't happen with you, but it as been reported on the forum.

You could download and study the required Fidelity forms and try to help the HR office? You do want to be careful to avoid getting fired! Good luck!

retiredjg
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by retiredjg » Tue Sep 17, 2019 7:12 am

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

Read this and download the 5304 form. Notice it is an agreement between you and your employer (not EJ). It allows two things. First, it allows your employer to take some of your salary and put it somewhere for your benefit. Second, it allows you to choose where your money goes. Your employer will have to figure out a way to get the money there. EJ is not involved.

The open enrollment period is coming up soon. Be ready for it.Do your homework and find out if you can do a 5304 SIMPLE at Vanguard (if that is your preference). If not, you may need to try Fidelity.

Good luck and let us know how this works out for you.

acunn
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by acunn » Tue Sep 17, 2019 7:47 am

if you work for a smaller company I would print off all of the required forms from where you would like your Simple IRA set up and walk in with them when you go to discuss using them instead of EJ. Hold their hand a little and help them in whatever capacity they want (fill out the forms for them is they would like). If this process is difficult for them then it will be harder to convince them that you have the RIGHT to use what company you prefer. Best wishes!!

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A_Bond
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by A_Bond » Tue Sep 17, 2019 8:14 pm

Thank you all very much. This is quite helpful. I will be needing to do a lot of hand-holding on this as the business is balking at following the requirement to allow a choice of a financial institution in accordance with 5304.

I noticed in form 5304 that where it allows me to name my FI, it asks for the account name and number. I am assuming that before filling out 5304, I need to have everything set up with the employer and my chosen FI? Am I correct that my deadline for all of this is November 1st and it would take effect on January 1st of 2020?

I have so many questions. Do I and my employer have to fill out all of the new FI paperwork before the 5304? What happens to my existing SIMPLE at EJ? How do I close one and open another without any overlap? Will there be issues if they overlap? Do I keep contributing to the EJ SIMPLE until January? Can I transfer my EJ SIMPLE immediately?

These are just a few of the questions I will be hitting the Fidelity rep with tomorrow via phone... :D

I have to admit, this has been incredibly stressful for me. I can't wait until this is over.

acunn
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by acunn » Tue Sep 17, 2019 8:26 pm

Hopefully the fidelity person you contact will be as helpful for you as the Vanguard rep was for me. He walked me through everything and even emailed me a copy of every form that was needed. The Simple addition to my account was seamless and new deposits started perfectly. It took longer for the old account at EJ to be transferred over. But stay persistent and follow up. There have been no regrets for the time and research it took to make the switch and I have been grateful to these amazing bogleheads for their help!

krow36
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by krow36 » Tue Sep 17, 2019 10:48 pm

A_Bond wrote:
Tue Sep 17, 2019 8:14 pm
Thank you all very much. This is quite helpful. I will be needing to do a lot of hand-holding on this as the business is balking at following the requirement to allow a choice of a financial institution in accordance with 5304.

I noticed in form 5304 that where it allows me to name my FI, it asks for the account name and number. I am assuming that before filling out 5304, I need to have everything set up with the employer and my chosen FI? Am I correct that my deadline for all of this is November 1st and it would take effect on January 1st of 2020?
The Form 5304 should be passed out to you before Nov 2, completed and passed back to your employer before Jan 1, 2020. I think it would be a good idea for you to talk to the Fidelity (or Vanguard?) rep and have them help you with the forms. There’s the forms your employer needs to fill out to set up a Fidelity SIMPLE for the business, and the form for you to fill out to set up your Fidelity SIMPLE IRA account. The Fidelity rep will fill you in on the timeline.

I have so many questions. Do I and my employer have to fill out all of the new FI paperwork before the 5304? What happens to my existing SIMPLE at EJ?
You should continue to contribute to your EJ SIMPLE through 2019. A SIMPLE IRA is set up annually on a calendar basis. Hopefully your Fidelity SIMPLE account will be active starting Jan 1, 2020. Your EJ SIMPLE will be inactive in 2020 and you will be able to transfer it to Fidelity. Don't worry about the transfer, you can do it in 2020 at your convenience. It often can take a month or more.
How do I close one and open another without any overlap? They can both exist at the same time but only one can be active. Will there be issues if they overlap? No. Do I keep contributing to the EJ SIMPLE until January? Yes. Can I transfer my EJ SIMPLE immediately? I would focus on getting the Fidelity SIMPLE set up and making contributions to it. After that going smoothly, then is the time to deal with the transfer process. One challenge at a time? Your in this for the long haul.

These are just a few of the questions I will be hitting the Fidelity rep with tomorrow via phone... :D Questions are great! Ask the Fido rep, and ask them here!

I have to admit, this has been incredibly stressful for me. I can't wait until this is over.
Understood. Your employer has not done their employees a favor by selecting an expensive rep to advise on the business' SIMPLE IRA plan.

Topic Author
A_Bond
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by A_Bond » Wed Sep 18, 2019 5:22 pm

Update - Called Fidelity and spoke to their retirement team.

In terms of fees, NO flat account fee for either the employer or the employee. Transfers are handled between the employer and Fidelity via their Plan Manager website, no option for old school check. They see no issues with keeping the old SIMPLE open while I begin using a new SIMPLE through them - direct SIMPLE to SIMPLE transfers can be done at any point. The only paperwork required are the sheets you all have graciously linked me to. I would need to fill out the Fidelity paperwork before completing the Form 5304 due to it asking for the account name, number, etc.

Here is where it gets a bit funky and this group's help is probably needed. Fidelity sets up all of the SIMPLE IRAS under a Form 5305 DFI, not a Form 5304. Could this cause any issues for the EMPLOYER by having a bunch of SIMPLE accounts set up under a 5304 (other employees) and a 5305 (for me). The Fidelity rep didn't think so, but any second, third or more opinions would be fantastic.

retiredjg
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by retiredjg » Wed Sep 18, 2019 5:26 pm

I think it is a deal breaker but we'll see what Spirit Rider says.

Topic Author
A_Bond
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by A_Bond » Wed Sep 18, 2019 5:29 pm

retiredjg wrote:
Wed Sep 18, 2019 5:26 pm
I think it is a deal breaker but we'll see what Spirit Rider says.
Dang it.... I had that feeling.

To save time, I emailed the questions I asked the Fidelity rep over to the Vanguard rep I have been talking with to see if they had any thoughts on the 5304 v. 5305 issue.

(Also, how does one summon a Spirit Rider...? :D )

retiredjg
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by retiredjg » Wed Sep 18, 2019 6:05 pm

Spirit Rider is almost certainly following this thread since he (I think) posted in it.

You can always send a private message. Do you know how to do that?

Maybe acunn will have something to share as well.

acunn
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by acunn » Wed Sep 18, 2019 6:15 pm

I would also think that if Fidelity requires a 5305 that would be a deal breaker but will defer to spirit rider.

Per the IRS:
“You can use Form 5304-SIMPLE or Form 5305-SIMPLE to set up a SIMPLE IRA plan. Each form is a model Savings Incentive Match Plan for Employees (SIMPLE) plan document.

Use Form 5304-SIMPLE if you allow each plan participant to select the financial institution for receiving his or her SIMPLE IRA plan contributions.

Use Form 5305-SIMPLE if you will deposit all SIMPLE IRA plan contributions at an employer-designated financial institution.”

I would think changing to a 5305 would require all simple participants to use Fidelity but I look forward to the answer for this.

krow36
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Re: SIMPLE IRA - Transfer of Funds from Edward Jones to Fidelity (Send help!)

Post by krow36 » Wed Sep 18, 2019 8:17 pm

I don't think that Fidelity's using a Form 5305 SIMPLE IRA is a problem. Vanguard told me that they would handle a Form 5304 "refugee" (my term) the same way. They said they do not do Form 5304 SIMPLE IRA accounts.

Remember that the signed Form 530X is not sent to Vanguard or to the IRS. It stays in the HR office and the employee's files. Vanguard will be the Designated FI, designated by the employee rather than by the employer, allowed because the employer chose to use a Form 5304 SIMPLE. :)

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