Employer plan at Ed Jones

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Mm8719
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Employer plan at Ed Jones

Post by Mm8719 » Sat Jan 12, 2019 1:48 pm

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 » Sat Jan 12, 2019 2:56 pm

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 » Sat Jan 12, 2019 3:03 pm

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 » Sat Jan 12, 2019 3:07 pm

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 » Sat Jan 12, 2019 3:12 pm

Mm8719 wrote:
Sat Jan 12, 2019 1:48 pm
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.
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 » Sat Jan 12, 2019 8:03 pm

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 » Sun Jan 13, 2019 1:28 pm

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 » Sat Feb 02, 2019 11:41 am

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 » Sat Feb 02, 2019 11:52 am

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 » Sat Feb 02, 2019 11:58 am

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...

ICMoney
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Re: Employer plan at Ed Jones

Post by ICMoney » Sat Feb 02, 2019 12:55 pm

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 » Sat Feb 02, 2019 1:06 pm

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 » Sat Feb 02, 2019 2:12 pm

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 » Mon Feb 04, 2019 12:21 pm

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 » Mon Feb 04, 2019 7:23 pm

Without of the high-cost of EJ, you can contribute more than 3% :happy
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Topic Author
Mm8719
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Re: Employer plan at Ed Jones

Post by Mm8719 » Sat Feb 16, 2019 8:13 pm

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 » 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.

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Mm8719
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Re: Employer plan at Ed Jones

Post by Mm8719 » Sat Feb 16, 2019 9:28 pm

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 » Sat Feb 16, 2019 10:38 pm

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 » Sat Feb 16, 2019 10:52 pm

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 » Sun Feb 17, 2019 7:47 am

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 » Sun Feb 17, 2019 1:49 pm

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 » Mon Feb 18, 2019 9:31 pm

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 » Tue Feb 19, 2019 7:18 am

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 » Tue Feb 19, 2019 7:43 am

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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