Setting up a 401K...

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Setting up a 401K...

Post by WRH » Mon Jul 29, 2019 5:09 pm

Hello all,

I am a 26-year-old first time poster. I started investing and reading the forum around 5 years ago. Thank you all for the knowledge I have gleaned from the forum!

I work in my family’s small business (25 employees) that I hope to own/operate one day. My Dad owns/operates the business now and allows me to help with some decisions. We currently have a Mass Mutual Safe Harbor 401k through the local Edward Jones rep. We are unsatisfied with the expenses and the services were receive from the Edward Jones rep/ Mass Mutual combination. Needless to say, we are researching and shopping our options and would appreciate your input.

Our business is part of an industry organization, that has endorsed providers for many of the services our type of business needs. The organization endorses a wealth management firm for 401k plans. We have met with the firm and feel much more comfortable with them. During the meeting they openly discussed their fee structure, this was different than our dealings with the previous rep. The fees were also substantially lower than our previous 401k.

The only caveat that concerns me is they are proposing a Nationwide Safe Harbor 401k plan. From my previous dealings with Mass Mutual, I feel we should avoid insurance companies and stick to a true investment company i.e. Vanguard/Fidelity/Schwab… When I voiced this concern to the advisor, he was open to it, and said if we prefer to they can set the 401k up through any of the above mentioned investment companies. He also mentioned that their firm has setup multiple 401k’s through Fidelity and Vanguard. The reasons he seemed to favor the Nationwide plan were; their ability to pick the best funds from many companies, as opposed to being bound to a single company’s funds, Nationwide’s web interface, and Nationwide’s “Fund Window”, in which employees can add any fund in the Nationwide portfolio into their plan. We feel the “Fund Window” is a plus since we are looking at a 3(38) Fiduciary plan and this gives those participants who are comfortable accepting the responsibility the ability to choose.
What are the Bogleheads’ thoughts on the situation?

P.S. The majority of our employees are young, around my age, and could use their longer time horizons to benefit tremendously from a good 401k with a match, low costs and good investment options. I feel that since I have been blessed with this knowledge, it is my responsibility to offer a good plan that will help them reach financial independence. Thank you all for helping me achieve this.

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Re: Setting up a 401K...

Post by Portfolio7 » Mon Jul 29, 2019 7:17 pm

I am not an expert by any means, but if it helps here is some background about when I was trying to help DW with her business. Take it with a few grains of salt, especially as I am not in this role professionally, and even if I were, I don't know much about your situation.

I analyzed a variety of safe harbor offerings, and at that time, among the providers under consideration, Employee Fiduciary (EF) had the lowest total cost (if I combine cost to employer + cost to employee). I don't remember precisely how the employer-only costs compared, I believe it was competitive or better. The business was/is about 10-15 people (the work is somewhat seasonal.) Keep in mind I was analyzing primarily for cost (including variety and cost of fund offerings), and because I don't know this field uniquely, there may be other factors for one provider relative to another that I'm unaware of.

The investment committee ended up going with EF and using a fund lineup very similar to what I had talked to DW about (see link below). They were able to get funds across providers (including Admiral funds from Vanguard, but that's moot now.) Also, they did replace the stable value fund with a money market. As I remember, they reduced the number of life strategy funds since the AA is very close (i.e. among 2040, 2045, 2050, 2055, 2060, they kicked out 2045 and 2055.)

Hope that helps just a little.

"An investment in knowledge pays the best interest" - Benjamin Franklin

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Re: Setting up a 401K...

Post by Jablean » Mon Jul 29, 2019 11:38 pm

Kudos for thinking ahead for your employees. We had a company that rolled our 401k about 3 times in 9 years (the first 6 without a match). Each time is was catchup time to figure out which funds to be in. They had some automatic rolls but each time there were more options to choose from. The last was with Mass Mutual which was a definite improvement. No index funds but ones that did roll fairly nicely over to Fidelity when we left the company and rolled it to an IRA.

One of the pros about moving it to a place like Fidelity might be to encourage employees to open more personal accounts with them such as spousal IRA/Roth or even going full banking. It might be a nice primer for young professionals that might not take that step without already being there.

With either sometimes too much choice causes paralysis too so either direction for a basic portfolio or automatically to a balanced fund might be helpful to keep people from too much overthinking or trying to beat the market.

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Re: Setting up a 401K...

Post by niceguy7376 » Tue Jul 30, 2019 8:35 am

Who does your payroll? Sometimes the payroll providers will have relationships with 401k companies.
If you want a good low cost 401k provider, then some of the examples would be Employee Fiduciary (EF), Guideline (started seeing their ads on TV and billboards in last few months) and some other names that I need to search on this forum.
You should be able to get quotes from Fido / VG / Schwab for 25 employee base.

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Re: Setting up a 401K...

Post by Artful Dodger » Tue Jul 30, 2019 10:41 am

I'll echo some of the others and recommend you take a look at Fidelity. I have a single member 401k through them and have access to all their funds including the 0 fee index funds. You do need to file an annual 5500 form, and do non-discrimination testing, and as you noted set up a plan to make sure you meet the fiduciary standard - have an IPS, Investment committee, etc.

I don't know if Fidelity will do the 5500 or non-discrimination testing, so check with the people you are considering what fees they would charge for these services plus whatever add-on they want to offer the Fidelity package.

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Re: Setting up a 401K...

Post by firebirdparts » Tue Jul 30, 2019 10:49 am

I have had Fidelity for years and it's been very good. We have access to "brokeragelink" which is a feature allowing me to buy any mutual fund they are willing to sell, which is about 10,000 mutual funds. Inside the actual 401k of course you have to pick a few funds.

I am not involved in setting up our plan, and I don't know what it costs the company.
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Re: Setting up a 401K...

Post by terran » Tue Jul 30, 2019 3:18 pm

I've seen mentioned as a good low cost option for small businesses with employees (no personal experience because I'm on my own). Looks like it would be $1000 to move your plan, then $1500/year plus a 0.08% added expense ratio, which seems reasonable. Looks like they offer vanguard funds among other investment options.

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