Revamping our pooled 401k - advice needed!

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Topic Author
Island_1225
Posts: 3
Joined: Fri Jun 26, 2015 6:08 pm

Revamping our pooled 401k - advice needed!

Post by Island_1225 »

Hi there!

My family's company has 20 employees, 15 of whom currently participate in the 401k the company has set up. Right now we have a pooled 401k at Charles Schwab with a value of about $275,000. We pay a lot in fees:

~$3100/year to Charles Schwab
~3400/year to investment advisor (.375% of average value of account, per quarter)
~2500/year for recordkeeping, tax filing, testing, etc.

We are starting the process of looking at different options for revamping our 401k. We currently have a pooled account - I was told that it was easier for everyone involved. Even though we have employees ranging in age from 30 to 70, with what one would assume are very different investment objectives, there have been no complaints about the pooled account.

The employer does not match or contribute anything.

Do you think continuing with a pooled account would be best? From an employer's standpoint, is there greater liability offering only a pooled plan (with one investment objective)?

If we were to do participant-directed, would there be a lot more paperwork, more liability for the employer?

In doing my research I am most impressed with Ubiquity (myubiquity.com), which offers participant-directed accounts. For $105/month for the employer, plus $4/per employee, employees can choose from 15 low-cost funds, in addition to ten target date funds. Plus, for that cost Ubiquity handles all of the recordkeeping, tax filing, etc.

See the funds below:


0.09% SWPPX SCHWAB SCHWAB S&P 500 INDEX LARGE BLEND
0.09% SWTSX SCHWAB SCHWAB TOTAL STOCK MARKET INDEX LARGE BLEND
0.19% SWISX SCHWAB SCHWAB INTERNATIONAL INDEX FOREIGN LARGE BLEND
0.31% SFNNX SCHWAB SCHWAB FDMTL INTL LG CO IDX FOREIGN LARGE VALUE
0.47% SFILX SCHWAB SCHWAB FDMTL INTL SM MID CO IDX FOREIGN SMALL/MID GROWTH
0.29% SNXFX SCHWAB SCHWAB 1000 INDEX LARGE BLEND
0.35% SFLNX SCHWAB SCHWAB FDMTL US LG CO IDX LARGE VALUE
0.35% SFSNX SCHWAB SCHWAB FDMTL US SM MID CO IDX SMALL BLEND
0.17% SWSSX SCHWAB SCHWAB SMALL CAP INDEX SMALL BLEND
0.51% SFENX SCHWAB SCHWAB FUNDAMENTAL EMERG MKTS IDX DIVERSIFIED EMERGING MKTS
0.57% SWGSX SCHWAB SCHWAB GMNA FUND
0.29% SWLBX SCHWAB SCHWAB TOTAL BOND MARKET
0.29% SWBDX SCHWAB SCHWAB SHORT-TERM BOND
0.19% SWRSX SCHWAB SCHWAB INFLATION PROTECTED SECURITIES
0.45% SWIIX SCHWAB SCHWAB INTERMEDIATE TERM BOND



The target funds are:

Retirement Date Symbol Description Fund1 Category
Average2
2008 - 2012 SWBRX
Schwab Target 2010 Fund 0.55 0.95
2013 - 2017 SWGRX
Schwab Target 2015 Fund 0.61 1.00
2018 - 2022 SWCRX
Schwab Target 2020 Fund 0.67 1.05
2023 - 2027 SWHRX
Schwab Target 2025 Fund 0.72 1.02
2028 - 2032 SWDRX
Schwab Target 2030 Fund 0.75 1.09
2033 - 2037 SWIRX
Schwab Target 2035 Fund 0.79 1.05
2038 - 2042 SWERX
Schwab Target 2040 Fund 0.81 1.11
2043 - 2047 SWMRX
Schwab Target 2045 Fund 0.82 1.07
2048 - 2052 SWNRX
Schwab Target 2050 Fund 0.83 1.12
2053 or later SWORX
Schwab Target 2055 Fund 0.83 1.05




In short - any advice? Thanks!
sawhorse
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Joined: Sun Mar 01, 2015 6:05 pm

Re: Revamping our pooled 401k - advice needed!

Post by sawhorse »

If he doesn't see this thread, you may want to send leonard a private message. He works as a 401k administrator for a company that specializes in 401k administration.
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retiredjg
Posts: 54082
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Re: Revamping our pooled 401k - advice needed!

Post by retiredjg »

The price that Ubiquity is offering seems like a huge improvement. The list of funds is something of a disaster in my opinion. I hate to be so negative to a first time poster, but here's why.
  • 1) Starting with the target funds - a great choice for a lot of people, especially the ones who don't want to learn much about investing. However these target funds are high cost. Too high cost in my opinion. This list would result in the least experienced people using the most costly funds.

    2) There is a mix of real index funds and Schwab's "fundamental" index funds. Most people won't know the difference. Those looking for "index" may stumble into the fake fundamental index funds instead.

    3) The list is difficult to interpret. There are too many overlapping funds and many people will overlap without knowing it. For example, the 500 index, total stock, 1000 Index, and FDMTL US LG CO IDX LARGE VALUE all cover some of the same ground.

    4) People will see "Total Bond" and think it is an index fund. I'm pretty sure it isn't. There really isn't a fix to this issue - there are a lot of good bond funds that are not index funds. But this one has a name that confuses the issue.
A person who knows how to construct portfolios can make a very good portfolio from the list, but I'm not sure the average employee can. It's just too confusing. Suggest you dump all the fundamental index funds and the GMNA Bond and use the list below. And maybe dump the Total Stock Index too.

0.09% SWPPX SCHWAB SCHWAB S&P 500 INDEX LARGE BLEND
0.09% SWTSX SCHWAB SCHWAB TOTAL STOCK MARKET INDEX LARGE BLEND
0.19% SWISX SCHWAB SCHWAB INTERNATIONAL INDEX FOREIGN LARGE BLEND
0.17% SWSSX SCHWAB SCHWAB SMALL CAP INDEX SMALL BLEND
0.29% SWLBX SCHWAB SCHWAB TOTAL BOND MARKET
0.29% SWBDX SCHWAB SCHWAB SHORT-TERM BOND
0.19% SWRSX SCHWAB SCHWAB INFLATION PROTECTED SECURITIES
0.45% SWIIX SCHWAB SCHWAB INTERMEDIATE TERM BOND

I think you can definitely improve on what you currently have - the costs do seem high. But if what you posted is the only list that Ubiquity offers, I'm disappointed. Did you check Employee Fiduciary?
Topic Author
Island_1225
Posts: 3
Joined: Fri Jun 26, 2015 6:08 pm

Re: Revamping our pooled 401k - advice needed!

Post by Island_1225 »

Sawhorse - thank you, I will contact Leonard!

Retiredjg - I appreciate the input! I contacted Employee Fiduciary and am waiting to hear back. I am curious as to what they offer as well!
Topic Author
Island_1225
Posts: 3
Joined: Fri Jun 26, 2015 6:08 pm

Re: Revamping our pooled 401k - advice needed!

Post by Island_1225 »

Here is how Employee Fiduciary compares to Ubiquity:

EMPLOYEE FIDUCIARY
Participant-directed
To get started: $1000 (conversion fee)
Base Admin./Recordkeeping Fee: $1500/year (for up to 30 employees; after 30, then $30/employee/year)
$1260/year
Asset based fee: ~$200/year (.08% of assets/year)
Per participant fee: $0/employee/month

Funds**
** E.F. gave me this list; these are Vanguard funds that are comparable to those found in the Thrift Savings Plan for federal employees and are supposed to be low-fee, diversified funds with objectives that are similar to the TSP funds.

Vanguard Prime Money Market Fund(3) VMMXX 0.17%
Vanguard Total Bond Market Index (Admiral Shares) VBTLX 0.08%
Vanguard 500 Index (Admiral Shares) VFIAX 0.05%
Vanguard Extended Market Index (Admiral Shares) VEXAX 0.10%
Vanguard Total International Stock Index Fund (Admiral Shares)(4) VTIAX 0.14%

Diversified funds based on various time horizons
Vanguard Target Retirement Income Fund VTINX 0.16%
Vanguard Target Retirement 2010 Fund VTENX 0.16%
Vanguard Target Retirement 2015 Fund VTXVX 0.16%
Vanguard Target Retirement 2020 Fund VTWNX 0.16%
Vanguard Target Retirement 2025 Fund VTTVX 0.17%
Vanguard Target Retirement 2030 Fund VTHRX 0.17%
Vanguard Target Retirement 2035 Fund VTTHX 0.18%
Vanguard Target Retirement 2040 Fund VFORX 0.18%
Vanguard Target Retirement 2045 Fund VTIVX 0.18%
Vanguard Target Retirement 2050 Fund VFIFX 0.18%
Vanguard Target Retirement 2055 Fund VFFVX 0.18%
Vanguard Target Retirement 2060 Fund VTTSX 0.18%

Supplements

Vanguard Short-Term Government Bond Index Fund (Admiral Shares) VSBSX 0.12%
Vanguard Total Stock Market Index Fund (Admiral Shares) VTSAX 0.05%
Vanguard Total International Bond Index Fund (Admiral Shares) VTABX 0.20%
Vanguard Growth Index Fund (Admiral Shares) VIGAX 0.09%
Vanguard Value Index Fund (Admiral Shares) VVIAX 0.09






UBIQUITY
Participant-directed
To get started: $1495 ($1000 conversion and $495 setup fee)
Base Admin./Recordkeeping Fee: $1260/year (for up to 50 employees; then, from 50-100 employees, $1800/year)
Asset based fee: $0
Per participant fee: $4/employee/month


Funds
0.09% SWPPX SCHWAB SCHWAB S&P 500 INDEX LARGE BLEND
0.09% SWTSX SCHWAB SCHWAB TOTAL STOCK MARKET INDEX LARGE BLEND
0.19% SWISX SCHWAB SCHWAB INTERNATIONAL INDEX FOREIGN LARGE BLEND
0.31% SFNNX SCHWAB SCHWAB FDMTL INTL LG CO IDX FOREIGN LARGE VALUE
0.47% SFILX SCHWAB SCHWAB FDMTL INTL SM MID CO IDX FOREIGN SMALL/MID GROWTH
0.29% SNXFX SCHWAB SCHWAB 1000 INDEX LARGE BLEND
0.35% SFLNX SCHWAB SCHWAB FDMTL US LG CO IDX LARGE VALUE
0.35% SFSNX SCHWAB SCHWAB FDMTL US SM MID CO IDX SMALL BLEND
0.17% SWSSX SCHWAB SCHWAB SMALL CAP INDEX SMALL BLEND
0.51% SFENX SCHWAB SCHWAB FUNDAMENTAL EMERG MKTS IDX DIVERSIFIED EMERGING MKTS
0.57% SWGSX SCHWAB SCHWAB GMNA FUND
0.29% SWLBX SCHWAB SCHWAB TOTAL BOND MARKET
0.29% SWBDX SCHWAB SCHWAB SHORT-TERM BOND
0.19% SWRSX SCHWAB SCHWAB INFLATION PROTECTED SECURITIES
0.45% SWIIX SCHWAB SCHWAB INTERMEDIATE TERM BOND



Diversified funds based on various time horizons
Retirement Date Symbol Description Fund1 Category
Average2
2008 - 2012 SWBRX
Schwab Target 2010 Fund 0.55 0.95
2013 - 2017 SWGRX
Schwab Target 2015 Fund 0.61 1.00
2018 - 2022 SWCRX
Schwab Target 2020 Fund 0.67 1.05
2023 - 2027 SWHRX
Schwab Target 2025 Fund 0.72 1.02
2028 - 2032 SWDRX
Schwab Target 2030 Fund 0.75 1.09
2033 - 2037 SWIRX
Schwab Target 2035 Fund 0.79 1.05
2038 - 2042 SWERX
Schwab Target 2040 Fund 0.81 1.11
2043 - 2047 SWMRX
Schwab Target 2045 Fund 0.82 1.07
2048 - 2052 SWNRX
Schwab Target 2050 Fund 0.83 1.12
2053 or later SWORX
Schwab Target 2055 Fund 0.83 1.05





- Any thoughts or input? -
frugalmeister
Posts: 31
Joined: Sat Feb 02, 2013 10:37 am

Re: Revamping our pooled 401k - advice needed!

Post by frugalmeister »

Ubiquity would be my choice. I like that they don't have an asset based fee. I don't understand why so many 401k plans should cost the employee or employer more once they accrue more money in the plan. An asset based fee feels like the plan is penalizing the diligent investor. You can build a very low cost, simple index fund portfolio with the options in the Ubiquity plan. That being said, the Schwab Target funds are not what I would consider low cost. If you want a plan with good target date funds, you probably need to go with Employee Fiduciary.
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retiredjg
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Re: Revamping our pooled 401k - advice needed!

Post by retiredjg »

I think EF is far and away the better choice.
  • - It is true they have an asset based fee, but that is considerably less than the $4/person/month participant fee changed by Ubiquity.

    -EF has everything you need and nothing you don't need. The Ubiquity list is lacking and confusing and puts people who want a target fund at a significant disadvantage.
No comparison in my opinion.
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retiredjg
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Re: Revamping our pooled 401k - advice needed!

Post by retiredjg »

Is that the only list that Ubiquity has to offer or just the one you are most interested in looking at?
frugalmeister
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Joined: Sat Feb 02, 2013 10:37 am

Re: Revamping our pooled 401k - advice needed!

Post by frugalmeister »

retiredjg wrote:I think EF is far and away the better choice.
  • - It is true they have an asset based fee, but that is considerably less than the $4/person/month participant fee changed by Ubiquity.
The asset based fee is lower cost until the participant's account reaches $60,000. For an account over $60,000 the set monthly participant fee is the lower cost. $60,000*0.08% =$48 vs. annual set cost of $48. It really depends on how much the participant plans to put into the plan, which fee structure is preferred.
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retiredjg
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Re: Revamping our pooled 401k - advice needed!

Post by retiredjg »

I'm not the original poster, but I read the information as $4 per each one of 15 participants per month. That's $720 for Ubiquity. Compared to about $200 for EF.

Did I misunderstand?
frugalmeister
Posts: 31
Joined: Sat Feb 02, 2013 10:37 am

Re: Revamping our pooled 401k - advice needed!

Post by frugalmeister »

retiredjg wrote:I'm not the original poster, but I read the information as $4 per each one of 15 participants per month. That's $720 for Ubiquity. Compared to about $200 for EF.

Did I misunderstand?
retiredjg,
Sorry for the confusion. Maybe I misunderstand. :happy You are correct that as the total assets stand now, EF's asset based fee is less than the Ubiquity Monthly participant fee. I think you and I are looking at this from different perspectives. I was looking at the fact that as assets grow, EF's asset based fee will eventually overtake the set monthly fee of Ubiquity. Total assets in the plan now about $275,000. Those assets would need to get to $900,000 to hit the break even point between the two types of fees we are comparing here. With a better plan than is available currently, I would expect the employees to increase their participation in the 401K and assets increase as a result. If the OP doesn't foresee the assets reaching that break even point any time in the next couple years, then EF's fee structure may be alright. My previous post was just evaluating a hypothetical individual participant as an example, and how the two types of fees compared, as these are commonly fees that the participant ends up paying out of his account.
alinna
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Re: Revamping our pooled 401k - advice needed!

Post by alinna »

My workplace has their plan with Ubiquity (formerly the Online 401k). I'm surprised to hear there isn't an asset based fee, as we pay 0.04% to TD Ameritrade Trust Company as they are the custodian of the funds. We also had Vanguard offered as a default fund option, rather than Schwab. I'd definitely look into seeing whether you could get a list of Vanguard funds - we had no problem getting Signal (now Admiral) shares.
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retiredjg
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Re: Revamping our pooled 401k - advice needed!

Post by retiredjg »

frugalmeister wrote: I was looking at the fact that as assets grow, EF's asset based fee will eventually overtake the set monthly fee of Ubiquity. Total assets in the plan now about $275,000. Those assets would need to get to $900,000 to hit the break even point between the two types of fees we are comparing here.
Agreed there is a point in the future when the Ubiquity plan will become somewhat cheaper.

But as the assets grow, so will the importance of the difference in the expense ratios. Since the employer is also a participant and will benefit from the better lineup and lower expense ratios, if I were the employer, I'd want the better plan, even if it does cost a little bit more.
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