Small business 401k

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Topic Author
JSDNJ
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Small business 401k

Post by JSDNJ »

I live in NJ, and do business in the tri-state area of NY/NJ and CT. CT and soon NJ will be implementing a mandatory retirement plan that all businesses will have to offer to their employees. It doesn't cost anything, but there is administration involved. This will result in submitting payroll records to different states, dealing with different rules and other annoyances.

Because of this, I decided to start looking into 401k plans for my employees. Mind you, I employ many lower wage individuals who generally might not be interested, but I figured if I can try to swing offering it, it will also save me the trouble of dealing with multiple state plans.

My payroll provider (ADP) offers 401k plans, and according to them and what I have read, the Fed is currently offering up to $5k in annual tax credits for 401k plan costs for 3 years. This would effectively make the plan free, since ADPs annual cost would be below $5k.

Additionally, the Fed is offering up to $1k tax credit per employee match. In other words, anything we match per employee will be recouped via tax credit up to $1k each. This is for 2 years then phases out over 5.

Before I bite the bullet here, I want to make sure I am not missing anything. To be clear, I WANT to provide more benefits to my employees, but we are a very small shop and everything is razor thin as it is. Anyone with any knowledge in this area?
5outof10
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Re: Small business 401k

Post by 5outof10 »

Avoid 401K programs offered by any and all insurance companies (e.g., Principal, Nationwide) and Big Banks (e.g., Wells Fargo).

Last time I checked, Vanguard has a 401k that was a flat fee. It seems expensive at first (~$4k annually if I remember correctly) but you will thank yourself as total assets over all employees in the 401K grows.

I would avoid the ones that charge low annual costs (~1k per year) and then charge each participant what are effectively AUMs. A lot of these are over 1% each year above and beyond each fund's annual expense ratio.

Just my 1.5 cents.
Checking 10K, Sinking Funds 50K (HYSA/MMF), EF 50K (I bonds), Taxable/Retirement: 72% VTI, 18% VXUS, 10% BND | I would like to own a gold bar one day, to be able to say I own a gold bar.
GeMoney
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Re: Small business 401k

Post by GeMoney »

Regarding the plan provider, I recommend also taking a look at Guideline. They primarily offer Vanguard funds, is low cost, and has a connector to ADP Run payroll. Whomever you select, just make sure it's full service to include compliance responsibilities such as filing the 5500, calculating the top heavy numbers, etc.
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ruralavalon
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Location: Illinois

Re: Small business 401k

Post by ruralavalon »

JSDNJ wrote: Thu Feb 16, 2023 7:30 pm I live in NJ, and do business in the tri-state area of NY/NJ and CT. CT and soon NJ will be implementing a mandatory retirement plan that all businesses will have to offer to their employees. It doesn't cost anything, but there is administration involved. This will result in submitting payroll records to different states, dealing with different rules and other annoyances.

Because of this, I decided to start looking into 401k plans for my employees. Mind you, I employ many lower wage individuals who generally might not be interested, but I figured if I can try to swing offering it, it will also save me the trouble of dealing with multiple state plans.

My payroll provider (ADP) offers 401k plans, and according to them and what I have read, the Fed is currently offering up to $5k in annual tax credits for 401k plan costs for 3 years. This would effectively make the plan free, since ADPs annual cost would be below $5k.

Additionally, the Fed is offering up to $1k tax credit per employee match. In other words, anything we match per employee will be recouped via tax credit up to $1k each. This is for 2 years then phases out over 5.

Before I bite the bullet here, I want to make sure I am not missing anything. To be clear, I WANT to provide more benefits to my employees, but we are a very small shop and everything is razor thin as it is. Anyone with any knowledge in this area?
In addition to Vanguard consider
1) https://www.employeefiduciary.com/; and
2) https://www.guideline.com/401k.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
Topic Author
JSDNJ
Posts: 331
Joined: Wed Feb 04, 2015 4:17 pm

Re: Small business 401k

Post by JSDNJ »

Thanks for the suggestions. I will look at some other providers.

Vanguard charges $4k/year for 15 employees. ADP charges $271/month plus $5/employee. I was leaning toward ADP for the sheer convenience of everything being under one roof. I want as little administrative work on my end as possible, otherwise I'd just go with the state plan.

I imagine the current federal incentives would apply to any provider.
Topic Author
JSDNJ
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Re: Small business 401k

Post by JSDNJ »

Looking into guideline a bit further, I like what they offer with a couple of exceptions.

They don't offer target date funds, and they dont differentiate between full and part time employees. I do not (cannot) offer this to part time or seasonal employees, so that sort of kills Guidline as an option.
mcraepat9
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Re: Small business 401k

Post by mcraepat9 »

Look into Employee Fiduciary then. I used them in the past and found them to be useful. They use open fund architecture so you can select the funds you want in the plan (including TDFs).
Amateur investors are not cool-headed logicians.
5outof10
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Re: Small business 401k

Post by 5outof10 »

mcraepat9 wrote: Fri Feb 17, 2023 9:01 pm Look into Employee Fiduciary then. I used them in the past and found them to be useful. They use open fund architecture so you can select the funds you want in the plan (including TDFs).
Employee Fiduciary's website states that the annual fee is $1,500 per year plus .08% of total assets in the plan (plus, I am presuming, the funds/ETFs' expense ratios).

If they handle the compliance testing and reporting and allow Vanguard investments then this seems like a terrific option to pursue.

I wish I had known about something like this when I was looking for plans.
Checking 10K, Sinking Funds 50K (HYSA/MMF), EF 50K (I bonds), Taxable/Retirement: 72% VTI, 18% VXUS, 10% BND | I would like to own a gold bar one day, to be able to say I own a gold bar.
Topic Author
JSDNJ
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Re: Small business 401k

Post by JSDNJ »

:happy
mcraepat9 wrote: Fri Feb 17, 2023 9:01 pm Look into Employee Fiduciary then. I used them in the past and found them to be useful. They use open fund architecture so you can select the funds you want in the plan (including TDFs).
Yea I have a call into their sales people. They all have various drawbacks. Employee fiduciary doesn’t seem to integrate with payroll which means more admin for me.
mcraepat9
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Re: Small business 401k

Post by mcraepat9 »

JSDNJ wrote: Sat Feb 18, 2023 9:13 am :happy
mcraepat9 wrote: Fri Feb 17, 2023 9:01 pm Look into Employee Fiduciary then. I used them in the past and found them to be useful. They use open fund architecture so you can select the funds you want in the plan (including TDFs).
Yea I have a call into their sales people. They all have various drawbacks. Employee fiduciary doesn’t seem to integrate with payroll which means more admin for me.
Correct, it doesn't integrate with payroll providers. Having done some back of the envelope math on increased admin cost versus increased cost of the plan by integrated providers, EF ended up ahead by a healthy margin in my situation.
Amateur investors are not cool-headed logicians.
Topic Author
JSDNJ
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Re: Small business 401k

Post by JSDNJ »

mcraepat9 wrote: Sat Feb 18, 2023 8:08 pm
JSDNJ wrote: Sat Feb 18, 2023 9:13 am :happy
mcraepat9 wrote: Fri Feb 17, 2023 9:01 pm Look into Employee Fiduciary then. I used them in the past and found them to be useful. They use open fund architecture so you can select the funds you want in the plan (including TDFs).
Yea I have a call into their sales people. They all have various drawbacks. Employee fiduciary doesn’t seem to integrate with payroll which means more admin for me.
Correct, it doesn't integrate with payroll providers. Having done some back of the envelope math on increased admin cost versus increased cost of the plan by integrated providers, EF ended up ahead by a healthy margin in my situation.
So how does the actual process work for employees contributions etc?

With ADP and Guideline it seems they have a portal that handles it and I have to do almost nothing.
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Lee_WSP
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Re: Small business 401k

Post by Lee_WSP »

JSDNJ wrote: Tue Feb 21, 2023 8:16 am
mcraepat9 wrote: Sat Feb 18, 2023 8:08 pm
JSDNJ wrote: Sat Feb 18, 2023 9:13 am :happy
mcraepat9 wrote: Fri Feb 17, 2023 9:01 pm Look into Employee Fiduciary then. I used them in the past and found them to be useful. They use open fund architecture so you can select the funds you want in the plan (including TDFs).
Yea I have a call into their sales people. They all have various drawbacks. Employee fiduciary doesn’t seem to integrate with payroll which means more admin for me.
Correct, it doesn't integrate with payroll providers. Having done some back of the envelope math on increased admin cost versus increased cost of the plan by integrated providers, EF ended up ahead by a healthy margin in my situation.
So how does the actual process work for employees contributions etc?

With ADP and Guideline it seems they have a portal that handles it and I have to do almost nothing.
You most likely have to manually punch it in every pay period. If you have a bookkeeper, that’d just be part of their duties and shouldn’t cost you much if anything extra. If you don’t have a bookkeeper, I highly recommend one unless you love punching in those numbers and thus won’t mind the additional 401k inputs.

Or you could just wait and see if your business category starts offering lower cost 401ks to comply with the new laws.
smitcat
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Re: Small business 401k

Post by smitcat »

JSDNJ wrote: Tue Feb 21, 2023 8:16 am
mcraepat9 wrote: Sat Feb 18, 2023 8:08 pm
JSDNJ wrote: Sat Feb 18, 2023 9:13 am :happy
mcraepat9 wrote: Fri Feb 17, 2023 9:01 pm Look into Employee Fiduciary then. I used them in the past and found them to be useful. They use open fund architecture so you can select the funds you want in the plan (including TDFs).
Yea I have a call into their sales people. They all have various drawbacks. Employee fiduciary doesn’t seem to integrate with payroll which means more admin for me.
Correct, it doesn't integrate with payroll providers. Having done some back of the envelope math on increased admin cost versus increased cost of the plan by integrated providers, EF ended up ahead by a healthy margin in my situation.
So how does the actual process work for employees contributions etc?

With ADP and Guideline it seems they have a portal that handles it and I have to do almost nothing.
We did this for a bit over 5 years ending about 2 years back now.
With employee Fiduciary I would sign on and import a payroll file at each payroll period - we had weekly payroll.
The entire process of secure sign in / import payroll / check / log out took about 8 minutes typically.

We did spend more time with the 401K reviewing he funds, filling staff requests, and answering questions than with the weekly inputs.
mcraepat9
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Re: Small business 401k

Post by mcraepat9 »

smitcat wrote: Tue Feb 21, 2023 10:29 am
JSDNJ wrote: Tue Feb 21, 2023 8:16 am
mcraepat9 wrote: Sat Feb 18, 2023 8:08 pm
JSDNJ wrote: Sat Feb 18, 2023 9:13 am :happy
mcraepat9 wrote: Fri Feb 17, 2023 9:01 pm Look into Employee Fiduciary then. I used them in the past and found them to be useful. They use open fund architecture so you can select the funds you want in the plan (including TDFs).
Yea I have a call into their sales people. They all have various drawbacks. Employee fiduciary doesn’t seem to integrate with payroll which means more admin for me.
Correct, it doesn't integrate with payroll providers. Having done some back of the envelope math on increased admin cost versus increased cost of the plan by integrated providers, EF ended up ahead by a healthy margin in my situation.
So how does the actual process work for employees contributions etc?

With ADP and Guideline it seems they have a portal that handles it and I have to do almost nothing.
We did this for a bit over 5 years ending about 2 years back now.
With employee Fiduciary I would sign on and import a payroll file at each payroll period - we had weekly payroll.
The entire process of secure sign in / import payroll / check / log out took about 8 minutes typically.

We did spend more time with the 401K reviewing he funds, filling staff requests, and answering questions than with the weekly inputs.
I had a similar experience. EF has a secure employee portal as well, but changes to payroll were inputted manually. Under 15 minutes every payroll, with 26 payroll runs a year, the incremental expense was de minimis. Anyone that runs a small business knows the payroll services “integrations” are a cottage industry trying to grab a piece of your profits by making it *easier* for you. It felt much better giving employees access to top notch funds at a rock bottom price than defaulting to the higher expense/fee option solely because it integrated more easily.

Being able to choose the funds offered was a huge plus as well. We modeled our 401k fund lineup off of the TSP, so a very limited set of index funds and TDFs.
Amateur investors are not cool-headed logicians.
Topic Author
JSDNJ
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Re: Small business 401k

Post by JSDNJ »

mcraepat9 wrote: Tue Feb 21, 2023 10:45 am
smitcat wrote: Tue Feb 21, 2023 10:29 am
JSDNJ wrote: Tue Feb 21, 2023 8:16 am
mcraepat9 wrote: Sat Feb 18, 2023 8:08 pm
JSDNJ wrote: Sat Feb 18, 2023 9:13 am :happy

Yea I have a call into their sales people. They all have various drawbacks. Employee fiduciary doesn’t seem to integrate with payroll which means more admin for me.
Correct, it doesn't integrate with payroll providers. Having done some back of the envelope math on increased admin cost versus increased cost of the plan by integrated providers, EF ended up ahead by a healthy margin in my situation.
So how does the actual process work for employees contributions etc?

With ADP and Guideline it seems they have a portal that handles it and I have to do almost nothing.
We did this for a bit over 5 years ending about 2 years back now.
With employee Fiduciary I would sign on and import a payroll file at each payroll period - we had weekly payroll.
The entire process of secure sign in / import payroll / check / log out took about 8 minutes typically.

We did spend more time with the 401K reviewing he funds, filling staff requests, and answering questions than with the weekly inputs.
I had a similar experience. EF has a secure employee portal as well, but changes to payroll were inputted manually. Under 15 minutes every payroll, with 26 payroll runs a year, the incremental expense was de minimis. Anyone that runs a small business knows the payroll services “integrations” are a cottage industry trying to grab a piece of your profits by making it *easier* for you. It felt much better giving employees access to top notch funds at a rock bottom price than defaulting to the higher expense/fee option solely because it integrated more easily.

Being able to choose the funds offered was a huge plus as well. We modeled our 401k fund lineup off of the TSP, so a very limited set of index funds and TDFs.

Any experience with Betterment? Their cost is similar to EF but it integrates with ADP run.

Plus they have an app for employees to login and choose their fund, edit their contribution rate etc.

With a younger employee base I see value in the app.
mcraepat9
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Re: Small business 401k

Post by mcraepat9 »

JSDNJ wrote: Tue Feb 21, 2023 10:53 am
mcraepat9 wrote: Tue Feb 21, 2023 10:45 am
smitcat wrote: Tue Feb 21, 2023 10:29 am
JSDNJ wrote: Tue Feb 21, 2023 8:16 am
mcraepat9 wrote: Sat Feb 18, 2023 8:08 pm

Correct, it doesn't integrate with payroll providers. Having done some back of the envelope math on increased admin cost versus increased cost of the plan by integrated providers, EF ended up ahead by a healthy margin in my situation.
So how does the actual process work for employees contributions etc?

With ADP and Guideline it seems they have a portal that handles it and I have to do almost nothing.
We did this for a bit over 5 years ending about 2 years back now.
With employee Fiduciary I would sign on and import a payroll file at each payroll period - we had weekly payroll.
The entire process of secure sign in / import payroll / check / log out took about 8 minutes typically.

We did spend more time with the 401K reviewing he funds, filling staff requests, and answering questions than with the weekly inputs.
I had a similar experience. EF has a secure employee portal as well, but changes to payroll were inputted manually. Under 15 minutes every payroll, with 26 payroll runs a year, the incremental expense was de minimis. Anyone that runs a small business knows the payroll services “integrations” are a cottage industry trying to grab a piece of your profits by making it *easier* for you. It felt much better giving employees access to top notch funds at a rock bottom price than defaulting to the higher expense/fee option solely because it integrated more easily.

Being able to choose the funds offered was a huge plus as well. We modeled our 401k fund lineup off of the TSP, so a very limited set of index funds and TDFs.

Any experience with Betterment? Their cost is similar to EF but it integrates with ADP run.

Plus they have an app for employees to login and choose their fund, edit their contribution rate etc.

With a younger employee base I see value in the app.
Did not exist at the time when I was shopping for 401k plans.
Amateur investors are not cool-headed logicians.
smitcat
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Re: Small business 401k

Post by smitcat »

JSDNJ wrote: Tue Feb 21, 2023 10:53 am
mcraepat9 wrote: Tue Feb 21, 2023 10:45 am
smitcat wrote: Tue Feb 21, 2023 10:29 am
JSDNJ wrote: Tue Feb 21, 2023 8:16 am
mcraepat9 wrote: Sat Feb 18, 2023 8:08 pm

Correct, it doesn't integrate with payroll providers. Having done some back of the envelope math on increased admin cost versus increased cost of the plan by integrated providers, EF ended up ahead by a healthy margin in my situation.
So how does the actual process work for employees contributions etc?

With ADP and Guideline it seems they have a portal that handles it and I have to do almost nothing.
We did this for a bit over 5 years ending about 2 years back now.
With employee Fiduciary I would sign on and import a payroll file at each payroll period - we had weekly payroll.
The entire process of secure sign in / import payroll / check / log out took about 8 minutes typically.

We did spend more time with the 401K reviewing he funds, filling staff requests, and answering questions than with the weekly inputs.
I had a similar experience. EF has a secure employee portal as well, but changes to payroll were inputted manually. Under 15 minutes every payroll, with 26 payroll runs a year, the incremental expense was de minimis. Anyone that runs a small business knows the payroll services “integrations” are a cottage industry trying to grab a piece of your profits by making it *easier* for you. It felt much better giving employees access to top notch funds at a rock bottom price than defaulting to the higher expense/fee option solely because it integrated more easily.

Being able to choose the funds offered was a huge plus as well. We modeled our 401k fund lineup off of the TSP, so a very limited set of index funds and TDFs.

Any experience with Betterment? Their cost is similar to EF but it integrates with ADP run.

Plus they have an app for employees to login and choose their fund, edit their contribution rate etc.

With a younger employee base I see value in the app.
No experience with Betterment.
Our employees could login, choose/change funds, review history, print, etc as well.
hackandblaze
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Re: Small business 401k

Post by hackandblaze »

We just switched from a SIMPLE IRA to employee fiduciary. I looked at guideline too but settled on EF as I read multiple reviews that the guideline customer service wasn't great once you were set up. I'll say that it's been a seamless transition from our Vanguard SIMPLE to the 401k. The EF rep that helped me set up our plan was on top of every single detail and made the setup very easy. The cost is $1500 per year plus 0.08% AUM. There's various configurations on setting up your plan and that's probably the most time consuming part--but EF helps guide you through it all.

For the payroll portion, it really isn't that bad to submit your contributions. They give you a template spreadsheet with your employee's information input already and then each pay period you just do some simple math and enter the 401k contributions and company match. For 10 employees it takes me under 15 minutes every two weeks to enter the data into the spreadsheet and upload to their website. I wouldn't get too hung up on the integration to ADP, I just don't see it being that much more beneficial from a time-savings standpoint. Good luck!
surveyor
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Re: Small business 401k

Post by surveyor »

Keep in mind that you have a fudiciary duty as plan administrator.
Topic Author
JSDNJ
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Re: Small business 401k

Post by JSDNJ »

surveyor wrote: Tue Feb 21, 2023 1:54 pm Keep in mind that you have a fudiciary duty as plan administrator.
Isn’t part of their role to take on that responsibility as the plan provider?
surveyor
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Re: Small business 401k

Post by surveyor »

You'll be a named fiduciary. As the employer offering the plan I don't think there is a way around that. I see this as troubling for small businesses. They either have to do a bunch of work with an EF type outfit or go with a high cost plan provider.

Also, there are rules regarding highly compensated employees (HCE). You can avoid testing altogether with a safe-harbor, but that requires employer contributions. Did you look into a SIMPLE IRA plan?
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ruralavalon
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Re: Small business 401k

Post by ruralavalon »

For background information on the SIMPLE IRA see:
(1) wiki article SIMPLE IRA; and
(2) Vanguard SMALL BUSINESS RETIREMENT, Simple-IRA.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
Topic Author
JSDNJ
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Re: Small business 401k

Post by JSDNJ »

surveyor wrote: Wed Feb 22, 2023 8:54 am You'll be a named fiduciary. As the employer offering the plan I don't think there is a way around that. I see this as troubling for small businesses. They either have to do a bunch of work with an EF type outfit or go with a high cost plan provider.

Also, there are rules regarding highly compensated employees (HCE). You can avoid testing altogether with a safe-harbor, but that requires employer contributions. Did you look into a SIMPLE IRA plan?
Compliance testing seems to be a part of all the provider offerings. Don’t think a simple IRA works for a business structured like mine.
smitcat
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Re: Small business 401k

Post by smitcat »

surveyor wrote: Wed Feb 22, 2023 8:54 am You'll be a named fiduciary. As the employer offering the plan I don't think there is a way around that. I see this as troubling for small businesses. They either have to do a bunch of work with an EF type outfit or go with a high cost plan provider.

Also, there are rules regarding highly compensated employees (HCE). You can avoid testing altogether with a safe-harbor, but that requires employer contributions. Did you look into a SIMPLE IRA plan?
We used a safe harbor plan but if the 'owners' did not want to participate there would likely be no problems. In any case you can model this up front for a good view.

"You'll be a named fiduciary. As the employer offering the plan I don't think there is a way around that. I see this as troubling for small businesses."
Why?
hackandblaze
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Re: Small business 401k

Post by hackandblaze »

Employee Fiduciary has a good article that explains the responsibilities of being a fiduciary:

https://www.employeefiduciary.com/blog/ ... s_amp=true

You will need to obtain an ERISA fidelity bond. My insurance agent for my commercial insurance line was able to get us the bond for around $250 this year. I’m no expert on 401k’s, but if you’re a small shop a safe harbor plan is probably what you want to go with. Being the fiduciary may come with some risk, but likely nothing compared to all the many risks of involved in owning a business.
Topic Author
JSDNJ
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Re: Small business 401k

Post by JSDNJ »

hackandblaze wrote: Wed Feb 22, 2023 7:46 pm Employee Fiduciary has a good article that explains the responsibilities of being a fiduciary:

https://www.employeefiduciary.com/blog/ ... s_amp=true

You will need to obtain an ERISA fidelity bond. My insurance agent for my commercial insurance line was able to get us the bond for around $250 this year. I’m no expert on 401k’s, but if you’re a small shop a safe harbor plan is probably what you want to go with. Being the fiduciary may come with some risk, but likely nothing compared to all the many risks of involved in owning a business.
I can’t afford the match required by safe harbor.
Topic Author
JSDNJ
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Re: Small business 401k

Post by JSDNJ »

What I don’t understand is how I am not named fiduciary with the state plan but will need to be named fiduciary with my own plan through a provider.

I don’t see what the difference is on its face.
smitcat
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Re: Small business 401k

Post by smitcat »

JSDNJ wrote: Wed Feb 22, 2023 9:42 pm
hackandblaze wrote: Wed Feb 22, 2023 7:46 pm Employee Fiduciary has a good article that explains the responsibilities of being a fiduciary:

https://www.employeefiduciary.com/blog/ ... s_amp=true

You will need to obtain an ERISA fidelity bond. My insurance agent for my commercial insurance line was able to get us the bond for around $250 this year. I’m no expert on 401k’s, but if you’re a small shop a safe harbor plan is probably what you want to go with. Being the fiduciary may come with some risk, but likely nothing compared to all the many risks of involved in owning a business.
I can’t afford the match required by safe harbor.
My mistake - you posted this above...
"Additionally, the Fed is offering up to $1k tax credit per employee match. In other words, anything we match per employee will be recouped via tax credit up to $1k each. This is for 2 years then phases out over 5."
smitcat
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Re: Small business 401k

Post by smitcat »

JSDNJ wrote: Thu Feb 23, 2023 2:32 pm What I don’t understand is how I am not named fiduciary with the state plan but will need to be named fiduciary with my own plan through a provider.

I don’t see what the difference is on its face.
There is a lot to learn whether or not you perform any of the tasks involved in operating a 401K. I am not sure what is offered in NJ but there were short 'courses' offered for free on 401K's by the SBA offices in NY.

Briefly and not meant to be at all-inclusive when you open and run a 401K there are rules to be followed.
Some are educational, fund choices, some are posting related, some are operational, some are reporting related, etc.
When you hire out the entire process of opening and running the 401K some folks feel that it 'absolves' you from any potential liabilities.
I would suggest that you will need to know enough about a 401K that you can easily steer clear of any problems if you choose to operate the 401K partially thru folks like EF.
In any case... someone in your organization or someone you employ needs to learn a bunch more at some point.
PersonalFinanceJam
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Re: Small business 401k

Post by PersonalFinanceJam »

JSDNJ wrote: Thu Feb 23, 2023 2:32 pm What I don’t understand is how I am not named fiduciary with the state plan but will need to be named fiduciary with my own plan through a provider.

I don’t see what the difference is on its face.
Ultimately under the hood the two different plans are completely different account types. The state plans set up to this point are all Roth IRA's under the hood. There are no fiduciary requirements on a Roth IRA from an employer standpoint. A 401k is an actual employer sponsored plan covered by ERISA which is the law where the fiduciary requirements come from.

All the state laws I have seen up to this point basically say an employer of xx size must provide an appropriate retirement plan. If the employer does not set up a plan, then they are required to enroll their employees in the state plan. However the state plan is not a 401k, but an IRA. It will be interesting to see if states try to pivot since the secure act passed making a pooled employer plan of unrelated employers possible. There are downsides there for sure, but it would be interesting.
Topic Author
JSDNJ
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Re: Small business 401k

Post by JSDNJ »

smitcat wrote: Thu Feb 23, 2023 2:47 pm
JSDNJ wrote: Wed Feb 22, 2023 9:42 pm
hackandblaze wrote: Wed Feb 22, 2023 7:46 pm Employee Fiduciary has a good article that explains the responsibilities of being a fiduciary:

https://www.employeefiduciary.com/blog/ ... s_amp=true

You will need to obtain an ERISA fidelity bond. My insurance agent for my commercial insurance line was able to get us the bond for around $250 this year. I’m no expert on 401k’s, but if you’re a small shop a safe harbor plan is probably what you want to go with. Being the fiduciary may come with some risk, but likely nothing compared to all the many risks of involved in owning a business.
I can’t afford the match required by safe harbor.
My mistake - you posted this above...
"Additionally, the Fed is offering up to $1k tax credit per employee match. In other words, anything we match per employee will be recouped via tax credit up to $1k each. This is for 2 years then phases out over 5."
While this is true, I’m planning beyond the expiration of the credits and as a small employer I’m unable to match 3.5%.
Topic Author
JSDNJ
Posts: 331
Joined: Wed Feb 04, 2015 4:17 pm

Re: Small business 401k

Post by JSDNJ »

smitcat wrote: Thu Feb 23, 2023 2:56 pm
JSDNJ wrote: Thu Feb 23, 2023 2:32 pm What I don’t understand is how I am not named fiduciary with the state plan but will need to be named fiduciary with my own plan through a provider.

I don’t see what the difference is on its face.
There is a lot to learn whether or not you perform any of the tasks involved in operating a 401K. I am not sure what is offered in NJ but there were short 'courses' offered for free on 401K's by the SBA offices in NY.

Briefly and not meant to be at all-inclusive when you open and run a 401K there are rules to be followed.
Some are educational, fund choices, some are posting related, some are operational, some are reporting related, etc.
When you hire out the entire process of opening and running the 401K some folks feel that it 'absolves' you from any potential liabilities.
I would suggest that you will need to know enough about a 401K that you can easily steer clear of any problems if you choose to operate the 401K partially thru folks like EF.
In any case... someone in your organization or someone you employ needs to learn a bunch more at some point.
I feel like I have a pretty good grasp. I need to compare EF to Guideline etc from a liability perspective.
smitcat
Posts: 13227
Joined: Mon Nov 07, 2016 9:51 am

Re: Small business 401k

Post by smitcat »

JSDNJ wrote: Thu Feb 23, 2023 3:09 pm
smitcat wrote: Thu Feb 23, 2023 2:47 pm
JSDNJ wrote: Wed Feb 22, 2023 9:42 pm
hackandblaze wrote: Wed Feb 22, 2023 7:46 pm Employee Fiduciary has a good article that explains the responsibilities of being a fiduciary:

https://www.employeefiduciary.com/blog/ ... s_amp=true

You will need to obtain an ERISA fidelity bond. My insurance agent for my commercial insurance line was able to get us the bond for around $250 this year. I’m no expert on 401k’s, but if you’re a small shop a safe harbor plan is probably what you want to go with. Being the fiduciary may come with some risk, but likely nothing compared to all the many risks of involved in owning a business.
I can’t afford the match required by safe harbor.
My mistake - you posted this above...
"Additionally, the Fed is offering up to $1k tax credit per employee match. In other words, anything we match per employee will be recouped via tax credit up to $1k each. This is for 2 years then phases out over 5."
While this is true, I’m planning beyond the expiration of the credits and as a small employer I’m unable to match 3.5%.
FWIW - we had 40+ employees and had only 8-9 participating in the 401K at any point in time.
The safe harbor allowed both of us (as owners) to max out our 401K accounts.
mcraepat9
Posts: 1827
Joined: Thu Jul 16, 2015 11:46 am

Re: Small business 401k

Post by mcraepat9 »

JSDNJ wrote: Wed Feb 22, 2023 10:40 am
surveyor wrote: Wed Feb 22, 2023 8:54 am You'll be a named fiduciary. As the employer offering the plan I don't think there is a way around that. I see this as troubling for small businesses. They either have to do a bunch of work with an EF type outfit or go with a high cost plan provider.

Also, there are rules regarding highly compensated employees (HCE). You can avoid testing altogether with a safe-harbor, but that requires employer contributions. Did you look into a SIMPLE IRA plan?
Compliance testing seems to be a part of all the provider offerings. Don’t think a simple IRA works for a business structured like mine.
SIMPLE IRA isn't great for a business with NJ employees given how NJ state income tax treats IRA contributions.
Amateur investors are not cool-headed logicians.
Topic Author
JSDNJ
Posts: 331
Joined: Wed Feb 04, 2015 4:17 pm

Re: Small business 401k

Post by JSDNJ »

smitcat wrote: Thu Feb 23, 2023 4:03 pm
JSDNJ wrote: Thu Feb 23, 2023 3:09 pm
smitcat wrote: Thu Feb 23, 2023 2:47 pm
JSDNJ wrote: Wed Feb 22, 2023 9:42 pm
hackandblaze wrote: Wed Feb 22, 2023 7:46 pm Employee Fiduciary has a good article that explains the responsibilities of being a fiduciary:

https://www.employeefiduciary.com/blog/ ... s_amp=true

You will need to obtain an ERISA fidelity bond. My insurance agent for my commercial insurance line was able to get us the bond for around $250 this year. I’m no expert on 401k’s, but if you’re a small shop a safe harbor plan is probably what you want to go with. Being the fiduciary may come with some risk, but likely nothing compared to all the many risks of involved in owning a business.
I can’t afford the match required by safe harbor.
My mistake - you posted this above...
"Additionally, the Fed is offering up to $1k tax credit per employee match. In other words, anything we match per employee will be recouped via tax credit up to $1k each. This is for 2 years then phases out over 5."
While this is true, I’m planning beyond the expiration of the credits and as a small employer I’m unable to match 3.5%.
FWIW - we had 40+ employees and had only 8-9 participating in the 401K at any point in time.
The safe harbor allowed both of us (as owners) to max out our 401K accounts.
This scenario ruled out EF as an option for me. They charge a fee for every ‘eligible’ employee, not just those participating. I’m leaning toward ADP despite Betterment being a little cheaper.
smitcat
Posts: 13227
Joined: Mon Nov 07, 2016 9:51 am

Re: Small business 401k

Post by smitcat »

JSDNJ wrote: Tue Mar 21, 2023 9:13 pm
smitcat wrote: Thu Feb 23, 2023 4:03 pm
JSDNJ wrote: Thu Feb 23, 2023 3:09 pm
smitcat wrote: Thu Feb 23, 2023 2:47 pm
JSDNJ wrote: Wed Feb 22, 2023 9:42 pm

I can’t afford the match required by safe harbor.
My mistake - you posted this above...
"Additionally, the Fed is offering up to $1k tax credit per employee match. In other words, anything we match per employee will be recouped via tax credit up to $1k each. This is for 2 years then phases out over 5."
While this is true, I’m planning beyond the expiration of the credits and as a small employer I’m unable to match 3.5%.
FWIW - we had 40+ employees and had only 8-9 participating in the 401K at any point in time.
The safe harbor allowed both of us (as owners) to max out our 401K accounts.
This scenario ruled out EF as an option for me. They charge a fee for every ‘eligible’ employee, not just those participating. I’m leaning toward ADP despite Betterment being a little cheaper.
There was no fee for employees not enrolled in the Employee Fiduciary plan that we were in for over 4 years - until we sold the business and the new owner continued with EF.
Add up all the fees for any program and then decide - we were in NY so there may be rules that are different. Consider what any costs represent to the business on an after-tax basis an not an upfront basis.
Also, our goals did not include making money from the 401K program, we were fine with reasonable costs for our staff.
Topic Author
JSDNJ
Posts: 331
Joined: Wed Feb 04, 2015 4:17 pm

Re: Small business 401k

Post by JSDNJ »

smitcat wrote: Wed Mar 22, 2023 6:23 am
JSDNJ wrote: Tue Mar 21, 2023 9:13 pm
smitcat wrote: Thu Feb 23, 2023 4:03 pm
JSDNJ wrote: Thu Feb 23, 2023 3:09 pm
smitcat wrote: Thu Feb 23, 2023 2:47 pm

My mistake - you posted this above...
"Additionally, the Fed is offering up to $1k tax credit per employee match. In other words, anything we match per employee will be recouped via tax credit up to $1k each. This is for 2 years then phases out over 5."
While this is true, I’m planning beyond the expiration of the credits and as a small employer I’m unable to match 3.5%.
FWIW - we had 40+ employees and had only 8-9 participating in the 401K at any point in time.
The safe harbor allowed both of us (as owners) to max out our 401K accounts.
This scenario ruled out EF as an option for me. They charge a fee for every ‘eligible’ employee, not just those participating. I’m leaning toward ADP despite Betterment being a little cheaper.
There was no fee for employees not enrolled in the Employee Fiduciary plan that we were in for over 4 years - until we sold the business and the new owner continued with EF.
Add up all the fees for any program and then decide - we were in NY so there may be rules that are different. Consider what any costs represent to the business on an after-tax basis an not an upfront basis.
Also, our goals did not include making money from the 401K program, we were fine with reasonable costs for our staff.
According to their proposal, they charge a fee per eligible employee which can add up in a scenario like mine. Not sure what you mean by ‘making money’ from the 401k program.

Right now, I’m between Betterment and ADP. Betterment will cost me ~$1,000 less annually.
smitcat
Posts: 13227
Joined: Mon Nov 07, 2016 9:51 am

Re: Small business 401k

Post by smitcat »

JSDNJ wrote: Wed Mar 22, 2023 10:05 am
smitcat wrote: Wed Mar 22, 2023 6:23 am
JSDNJ wrote: Tue Mar 21, 2023 9:13 pm
smitcat wrote: Thu Feb 23, 2023 4:03 pm
JSDNJ wrote: Thu Feb 23, 2023 3:09 pm

While this is true, I’m planning beyond the expiration of the credits and as a small employer I’m unable to match 3.5%.
FWIW - we had 40+ employees and had only 8-9 participating in the 401K at any point in time.
The safe harbor allowed both of us (as owners) to max out our 401K accounts.
This scenario ruled out EF as an option for me. They charge a fee for every ‘eligible’ employee, not just those participating. I’m leaning toward ADP despite Betterment being a little cheaper.
There was no fee for employees not enrolled in the Employee Fiduciary plan that we were in for over 4 years - until we sold the business and the new owner continued with EF.
Add up all the fees for any program and then decide - we were in NY so there may be rules that are different. Consider what any costs represent to the business on an after-tax basis an not an upfront basis.
Also, our goals did not include making money from the 401K program, we were fine with reasonable costs for our staff.
According to their proposal, they charge a fee per eligible employee which can add up in a scenario like mine. Not sure what you mean by ‘making money’ from the 401k program.

Right now, I’m between Betterment and ADP. Betterment will cost me ~$1,000 less annually.
No problem - carry on.
Topic Author
JSDNJ
Posts: 331
Joined: Wed Feb 04, 2015 4:17 pm

Re: Small business 401k

Post by JSDNJ »

smitcat wrote: Wed Mar 22, 2023 10:23 am
JSDNJ wrote: Wed Mar 22, 2023 10:05 am
smitcat wrote: Wed Mar 22, 2023 6:23 am
JSDNJ wrote: Tue Mar 21, 2023 9:13 pm
smitcat wrote: Thu Feb 23, 2023 4:03 pm

FWIW - we had 40+ employees and had only 8-9 participating in the 401K at any point in time.
The safe harbor allowed both of us (as owners) to max out our 401K accounts.
This scenario ruled out EF as an option for me. They charge a fee for every ‘eligible’ employee, not just those participating. I’m leaning toward ADP despite Betterment being a little cheaper.
There was no fee for employees not enrolled in the Employee Fiduciary plan that we were in for over 4 years - until we sold the business and the new owner continued with EF.
Add up all the fees for any program and then decide - we were in NY so there may be rules that are different. Consider what any costs represent to the business on an after-tax basis an not an upfront basis.
Also, our goals did not include making money from the 401K program, we were fine with reasonable costs for our staff.
According to their proposal, they charge a fee per eligible employee which can add up in a scenario like mine. Not sure what you mean by ‘making money’ from the 401k program.

Right now, I’m between Betterment and ADP. Betterment will cost me ~$1,000 less annually.
No problem - carry on.
Looks like the fee only applies when you have >30 eligible employees.
HomeStretch
Posts: 11335
Joined: Thu Dec 27, 2018 2:06 pm

Re: Small business 401k

Post by HomeStretch »

JSDNJ wrote: Thu Feb 23, 2023 2:32 pm What I don’t understand is how I am not named fiduciary with the state plan but will need to be named fiduciary with my own plan through a provider.

I don’t see what the difference is on its face.
The plan provider has liability if they function as the named Plan Trustee and/or Plan Administrator. There used to be third-parties that would take on the fiduciary Trustee function for small plans if the plan provider would not assume these functions. When I priced the third-party option about 10 years ago, the fee was $10k for a plan with 35 participants.

If you use Vanguard for the higher fee, do they act as the Plan fiduciary?

If you take on the fiduciary function, look into whether your business liability coverage covers you as the 401k fiduciary. In a larger company setting, this was additional liability coverage associated with the D&O policy.
smitcat
Posts: 13227
Joined: Mon Nov 07, 2016 9:51 am

Re: Small business 401k

Post by smitcat »

JSDNJ wrote: Wed Mar 22, 2023 10:58 am
smitcat wrote: Wed Mar 22, 2023 10:23 am
JSDNJ wrote: Wed Mar 22, 2023 10:05 am
smitcat wrote: Wed Mar 22, 2023 6:23 am
JSDNJ wrote: Tue Mar 21, 2023 9:13 pm

This scenario ruled out EF as an option for me. They charge a fee for every ‘eligible’ employee, not just those participating. I’m leaning toward ADP despite Betterment being a little cheaper.
There was no fee for employees not enrolled in the Employee Fiduciary plan that we were in for over 4 years - until we sold the business and the new owner continued with EF.
Add up all the fees for any program and then decide - we were in NY so there may be rules that are different. Consider what any costs represent to the business on an after-tax basis an not an upfront basis.
Also, our goals did not include making money from the 401K program, we were fine with reasonable costs for our staff.
According to their proposal, they charge a fee per eligible employee which can add up in a scenario like mine. Not sure what you mean by ‘making money’ from the 401k program.

Right now, I’m between Betterment and ADP. Betterment will cost me ~$1,000 less annually.
No problem - carry on.
Looks like the fee only applies when you have >30 eligible employees.
If you are comparing possible 401K's that are $1K different in annual costs before taxes, it is more or less a wash.
I would look at the costs for the employee (and your own account) and also at the ease of use for staff and owner.
Does not matter who you use ...I have no attachments to any of them. (and we are done)

IMO - a decent 401K helps to attract and retain good staff and that alone is worth much more than $1K per employee.
Topic Author
JSDNJ
Posts: 331
Joined: Wed Feb 04, 2015 4:17 pm

Re: Small business 401k

Post by JSDNJ »

smitcat wrote: Wed Mar 22, 2023 1:41 pm
JSDNJ wrote: Wed Mar 22, 2023 10:58 am
smitcat wrote: Wed Mar 22, 2023 10:23 am
JSDNJ wrote: Wed Mar 22, 2023 10:05 am
smitcat wrote: Wed Mar 22, 2023 6:23 am

There was no fee for employees not enrolled in the Employee Fiduciary plan that we were in for over 4 years - until we sold the business and the new owner continued with EF.
Add up all the fees for any program and then decide - we were in NY so there may be rules that are different. Consider what any costs represent to the business on an after-tax basis an not an upfront basis.
Also, our goals did not include making money from the 401K program, we were fine with reasonable costs for our staff.
According to their proposal, they charge a fee per eligible employee which can add up in a scenario like mine. Not sure what you mean by ‘making money’ from the 401k program.

Right now, I’m between Betterment and ADP. Betterment will cost me ~$1,000 less annually.
No problem - carry on.
Looks like the fee only applies when you have >30 eligible employees.
If you are comparing possible 401K's that are $1K different in annual costs before taxes, it is more or less a wash.
I would look at the costs for the employee (and your own account) and also at the ease of use for staff and owner.
Does not matter who you use ...I have no attachments to any of them. (and we are done)

IMO - a decent 401K helps to attract and retain good staff and that alone is worth much more than $1K per employee.
I agree with you. Thing about ADP is they don’t offer the option for the record keeping/participant fee to be paid by employee.

I’m worried that over time that participant fee could balloon like crazy because I have a large roster of people that work intermittently but may qualify to enroll.

Betterment allows me to have the participant fee paid by the employee.

They claim full integration with ADP (Who I use for payroll) but who knows really. All of this is making my head spin quite frankly.
smitcat
Posts: 13227
Joined: Mon Nov 07, 2016 9:51 am

Re: Small business 401k

Post by smitcat »

JSDNJ wrote: Fri Mar 24, 2023 9:54 pm
smitcat wrote: Wed Mar 22, 2023 1:41 pm
JSDNJ wrote: Wed Mar 22, 2023 10:58 am
smitcat wrote: Wed Mar 22, 2023 10:23 am
JSDNJ wrote: Wed Mar 22, 2023 10:05 am

According to their proposal, they charge a fee per eligible employee which can add up in a scenario like mine. Not sure what you mean by ‘making money’ from the 401k program.

Right now, I’m between Betterment and ADP. Betterment will cost me ~$1,000 less annually.
No problem - carry on.
Looks like the fee only applies when you have >30 eligible employees.
If you are comparing possible 401K's that are $1K different in annual costs before taxes, it is more or less a wash.
I would look at the costs for the employee (and your own account) and also at the ease of use for staff and owner.
Does not matter who you use ...I have no attachments to any of them. (and we are done)

IMO - a decent 401K helps to attract and retain good staff and that alone is worth much more than $1K per employee.
I agree with you. Thing about ADP is they don’t offer the option for the record keeping/participant fee to be paid by employee.

I’m worried that over time that participant fee could balloon like crazy because I have a large roster of people that work intermittently but may qualify to enroll.

Betterment allows me to have the participant fee paid by the employee.

They claim full integration with ADP (Who I use for payroll) but who knows really. All of this is making my head spin quite frankly.
"I’m worried that over time that participant fee could balloon like crazy because I have a large roster of people that work intermittently but may qualify to enroll."
While we have been out of this for about 3 years now there was a requirement for a minimum hours per year worked and another for time period before vesting.
While we did our best to 'sell' our sage harbor 401K to the staff the number of employees who enrolled and then stayed with the program was less than 20% over 3 years.
Look back on your employee payroll records and see how many were actually around with these criteria:
- employed full time 3+ years
- at least 1,000 hrs per fiscal year
- carried any vacation and sick time
That will give you a clue as to who will qualify, and then a fraction of that will stay with the plan.
Topic Author
JSDNJ
Posts: 331
Joined: Wed Feb 04, 2015 4:17 pm

Re: Small business 401k

Post by JSDNJ »

smitcat wrote: Sat Mar 25, 2023 8:54 am
JSDNJ wrote: Fri Mar 24, 2023 9:54 pm
smitcat wrote: Wed Mar 22, 2023 1:41 pm
JSDNJ wrote: Wed Mar 22, 2023 10:58 am
smitcat wrote: Wed Mar 22, 2023 10:23 am

No problem - carry on.
Looks like the fee only applies when you have >30 eligible employees.
If you are comparing possible 401K's that are $1K different in annual costs before taxes, it is more or less a wash.
I would look at the costs for the employee (and your own account) and also at the ease of use for staff and owner.
Does not matter who you use ...I have no attachments to any of them. (and we are done)

IMO - a decent 401K helps to attract and retain good staff and that alone is worth much more than $1K per employee.
I agree with you. Thing about ADP is they don’t offer the option for the record keeping/participant fee to be paid by employee.

I’m worried that over time that participant fee could balloon like crazy because I have a large roster of people that work intermittently but may qualify to enroll.

Betterment allows me to have the participant fee paid by the employee.

They claim full integration with ADP (Who I use for payroll) but who knows really. All of this is making my head spin quite frankly.
"I’m worried that over time that participant fee could balloon like crazy because I have a large roster of people that work intermittently but may qualify to enroll."
While we have been out of this for about 3 years now there was a requirement for a minimum hours per year worked and another for time period before vesting.
While we did our best to 'sell' our sage harbor 401K to the staff the number of employees who enrolled and then stayed with the program was less than 20% over 3 years.
Look back on your employee payroll records and see how many were actually around with these criteria:
- employed full time 3+ years
- at least 1,000 hrs per fiscal year
- carried any vacation and sick time
That will give you a clue as to who will qualify, and then a fraction of that will stay with the plan.
My roster is unique in that I’ll have part timers who qualify (SECURE 2.0 means 500 hours in 2 consecutive years)

In 2025 auto enrollment becomes law. So unless they opt out, I’ll wind up with a lot of participants. Even if then work only a few shifts here and there. Lots of guys stay with me part time once they start their careers elsewhere. So even if they don’t work every month, if they are enrolled they will continue to cost me a monthly participant fee indefinitely.

That’s an issue I can eliminate by passing the participant fee onto the employee @$72/yr.
smitcat
Posts: 13227
Joined: Mon Nov 07, 2016 9:51 am

Re: Small business 401k

Post by smitcat »

JSDNJ wrote: Sat Mar 25, 2023 10:17 am
smitcat wrote: Sat Mar 25, 2023 8:54 am
JSDNJ wrote: Fri Mar 24, 2023 9:54 pm
smitcat wrote: Wed Mar 22, 2023 1:41 pm
JSDNJ wrote: Wed Mar 22, 2023 10:58 am

Looks like the fee only applies when you have >30 eligible employees.
If you are comparing possible 401K's that are $1K different in annual costs before taxes, it is more or less a wash.
I would look at the costs for the employee (and your own account) and also at the ease of use for staff and owner.
Does not matter who you use ...I have no attachments to any of them. (and we are done)

IMO - a decent 401K helps to attract and retain good staff and that alone is worth much more than $1K per employee.
I agree with you. Thing about ADP is they don’t offer the option for the record keeping/participant fee to be paid by employee.

I’m worried that over time that participant fee could balloon like crazy because I have a large roster of people that work intermittently but may qualify to enroll.

Betterment allows me to have the participant fee paid by the employee.

They claim full integration with ADP (Who I use for payroll) but who knows really. All of this is making my head spin quite frankly.
"I’m worried that over time that participant fee could balloon like crazy because I have a large roster of people that work intermittently but may qualify to enroll."
While we have been out of this for about 3 years now there was a requirement for a minimum hours per year worked and another for time period before vesting.
While we did our best to 'sell' our sage harbor 401K to the staff the number of employees who enrolled and then stayed with the program was less than 20% over 3 years.
Look back on your employee payroll records and see how many were actually around with these criteria:
- employed full time 3+ years
- at least 1,000 hrs per fiscal year
- carried any vacation and sick time
That will give you a clue as to who will qualify, and then a fraction of that will stay with the plan.
My roster is unique in that I’ll have part timers who qualify (SECURE 2.0 means 500 hours in 2 consecutive years)

In 2025 auto enrollment becomes law. So unless they opt out, I’ll wind up with a lot of participants. Even if then work only a few shifts here and there. Lots of guys stay with me part time once they start their careers elsewhere. So even if they don’t work every month, if they are enrolled they will continue to cost me a monthly participant fee indefinitely.

That’s an issue I can eliminate by passing the participant fee onto the employee @$72/yr.
"My roster is unique in that I’ll have part timers who qualify (SECURE 2.0 means 500 hours in 2 consecutive years)"
Yeah - we auto enrolled as well, but they did not stay in the program over time.

"So even if they don’t work every month, if they are enrolled they will continue to cost me a monthly participant fee indefinitely."
There was no per participant fee for our plan - does that fee get removed when the plan reaches a specific size ($$)?

"That’s an issue I can eliminate by passing the participant fee onto the employee @$72/yr"
Sounds to me alike a good idea.

FWIW - I just checked our past records for 2019 the last full year of records. We had 76 people that appeared on payroll (PT, a few hours, full time, left, etc). We had an average of about 46 FT employees overt the year, we had we had 14 total people in the 401K plan of which we were two.
So, 12 staff that were in the 401K plan other than us.
Topic Author
JSDNJ
Posts: 331
Joined: Wed Feb 04, 2015 4:17 pm

Re: Small business 401k

Post by JSDNJ »

smitcat wrote: Sat Mar 25, 2023 10:31 am
JSDNJ wrote: Sat Mar 25, 2023 10:17 am
smitcat wrote: Sat Mar 25, 2023 8:54 am
JSDNJ wrote: Fri Mar 24, 2023 9:54 pm
smitcat wrote: Wed Mar 22, 2023 1:41 pm

If you are comparing possible 401K's that are $1K different in annual costs before taxes, it is more or less a wash.
I would look at the costs for the employee (and your own account) and also at the ease of use for staff and owner.
Does not matter who you use ...I have no attachments to any of them. (and we are done)

IMO - a decent 401K helps to attract and retain good staff and that alone is worth much more than $1K per employee.
I agree with you. Thing about ADP is they don’t offer the option for the record keeping/participant fee to be paid by employee.

I’m worried that over time that participant fee could balloon like crazy because I have a large roster of people that work intermittently but may qualify to enroll.

Betterment allows me to have the participant fee paid by the employee.

They claim full integration with ADP (Who I use for payroll) but who knows really. All of this is making my head spin quite frankly.
"I’m worried that over time that participant fee could balloon like crazy because I have a large roster of people that work intermittently but may qualify to enroll."
While we have been out of this for about 3 years now there was a requirement for a minimum hours per year worked and another for time period before vesting.
While we did our best to 'sell' our sage harbor 401K to the staff the number of employees who enrolled and then stayed with the program was less than 20% over 3 years.
Look back on your employee payroll records and see how many were actually around with these criteria:
- employed full time 3+ years
- at least 1,000 hrs per fiscal year
- carried any vacation and sick time
That will give you a clue as to who will qualify, and then a fraction of that will stay with the plan.
My roster is unique in that I’ll have part timers who qualify (SECURE 2.0 means 500 hours in 2 consecutive years)

In 2025 auto enrollment becomes law. So unless they opt out, I’ll wind up with a lot of participants. Even if then work only a few shifts here and there. Lots of guys stay with me part time once they start their careers elsewhere. So even if they don’t work every month, if they are enrolled they will continue to cost me a monthly participant fee indefinitely.

That’s an issue I can eliminate by passing the participant fee onto the employee @$72/yr.
"My roster is unique in that I’ll have part timers who qualify (SECURE 2.0 means 500 hours in 2 consecutive years)"
Yeah - we auto enrolled as well, but they did not stay in the program over time.

"So even if they don’t work every month, if they are enrolled they will continue to cost me a monthly participant fee indefinitely."
There was no per participant fee for our plan - does that fee get removed when the plan reaches a specific size ($$)?

"That’s an issue I can eliminate by passing the participant fee onto the employee @$72/yr"
Sounds to me alike a good idea.

FWIW - I just checked our past records for 2019 the last full year of records. We had 76 people that appeared on payroll (PT, a few hours, full time, left, etc). We had an average of about 46 FT employees overt the year, we had we had 14 total people in the 401K plan of which we were two.
So, 12 staff that were in the 401K plan other than us.
ADP says you can bill their fees ‘to the trust’ when the assets reach $250k, which for our group will be a while.

Once an employee is participating, they charge the participant fee indefinitely until the employee is terminated.

Part of me feels guilty if I choose betterment and pass the $6/month to my employees, but I have to be conscious of my cost.

I am also employed by a public company with a $30 billion market cap, and their 401k (empower) also charges $10/quarter for record keeping, so it’s not unheard of.
smitcat
Posts: 13227
Joined: Mon Nov 07, 2016 9:51 am

Re: Small business 401k

Post by smitcat »

JSDNJ wrote: Sat Mar 25, 2023 9:11 pm
smitcat wrote: Sat Mar 25, 2023 10:31 am
JSDNJ wrote: Sat Mar 25, 2023 10:17 am
smitcat wrote: Sat Mar 25, 2023 8:54 am
JSDNJ wrote: Fri Mar 24, 2023 9:54 pm

I agree with you. Thing about ADP is they don’t offer the option for the record keeping/participant fee to be paid by employee.

I’m worried that over time that participant fee could balloon like crazy because I have a large roster of people that work intermittently but may qualify to enroll.

Betterment allows me to have the participant fee paid by the employee.

They claim full integration with ADP (Who I use for payroll) but who knows really. All of this is making my head spin quite frankly.
"I’m worried that over time that participant fee could balloon like crazy because I have a large roster of people that work intermittently but may qualify to enroll."
While we have been out of this for about 3 years now there was a requirement for a minimum hours per year worked and another for time period before vesting.
While we did our best to 'sell' our sage harbor 401K to the staff the number of employees who enrolled and then stayed with the program was less than 20% over 3 years.
Look back on your employee payroll records and see how many were actually around with these criteria:
- employed full time 3+ years
- at least 1,000 hrs per fiscal year
- carried any vacation and sick time
That will give you a clue as to who will qualify, and then a fraction of that will stay with the plan.
My roster is unique in that I’ll have part timers who qualify (SECURE 2.0 means 500 hours in 2 consecutive years)

In 2025 auto enrollment becomes law. So unless they opt out, I’ll wind up with a lot of participants. Even if then work only a few shifts here and there. Lots of guys stay with me part time once they start their careers elsewhere. So even if they don’t work every month, if they are enrolled they will continue to cost me a monthly participant fee indefinitely.

That’s an issue I can eliminate by passing the participant fee onto the employee @$72/yr.
"My roster is unique in that I’ll have part timers who qualify (SECURE 2.0 means 500 hours in 2 consecutive years)"
Yeah - we auto enrolled as well, but they did not stay in the program over time.

"So even if they don’t work every month, if they are enrolled they will continue to cost me a monthly participant fee indefinitely."
There was no per participant fee for our plan - does that fee get removed when the plan reaches a specific size ($$)?

"That’s an issue I can eliminate by passing the participant fee onto the employee @$72/yr"
Sounds to me alike a good idea.

FWIW - I just checked our past records for 2019 the last full year of records. We had 76 people that appeared on payroll (PT, a few hours, full time, left, etc). We had an average of about 46 FT employees overt the year, we had we had 14 total people in the 401K plan of which we were two.
So, 12 staff that were in the 401K plan other than us.
ADP says you can bill their fees ‘to the trust’ when the assets reach $250k, which for our group will be a while.

Once an employee is participating, they charge the participant fee indefinitely until the employee is terminated.

Part of me feels guilty if I choose betterment and pass the $6/month to my employees, but I have to be conscious of my cost.

I am also employed by a public company with a $30 billion market cap, and their 401k (empower) also charges $10/quarter for record keeping, so it’s not unheard of.
"ADP says you can bill their fees ‘to the trust’ when the assets reach $250k, which for our group will be a while."
As owners we rolled our previous 401K balances into the company 401K which immediately brought the balance above any limits.
This also gave us access to great low fee funds in the new account and the ability to work a backdoor Roth with the basis which was left in the old account.
TacoLover
Posts: 655
Joined: Wed Feb 01, 2023 9:43 am

Re: Small business 401k

Post by TacoLover »

5outof10 wrote: Fri Feb 17, 2023 12:09 am Avoid 401K programs offered by any and all insurance companies (e.g., Principal, Nationwide) and Big Banks (e.g., Wells Fargo).

Last time I checked, Vanguard has a 401k that was a flat fee. It seems expensive at first (~$4k annually if I remember correctly) but you will thank yourself as total assets over all employees in the 401K grows.

I would avoid the ones that charge low annual costs (~1k per year) and then charge each participant what are effectively AUMs. A lot of these are over 1% each year above and beyond each fund's annual expense ratio.

Just my 1.5 cents.
I have been a happy personal investor at vg for decades. I was frustrated with inappropriate fees for my business’ 401k and so I moved it to vanguard. I’ve been sufficiently unhappy with vanguards administration of the 401k that I’m making plans to switch to fidelity. Fyi.
Topic Author
JSDNJ
Posts: 331
Joined: Wed Feb 04, 2015 4:17 pm

Re: Small business 401k

Post by JSDNJ »

TacoLover wrote: Sun Mar 26, 2023 5:30 pm
5outof10 wrote: Fri Feb 17, 2023 12:09 am Avoid 401K programs offered by any and all insurance companies (e.g., Principal, Nationwide) and Big Banks (e.g., Wells Fargo).

Last time I checked, Vanguard has a 401k that was a flat fee. It seems expensive at first (~$4k annually if I remember correctly) but you will thank yourself as total assets over all employees in the 401K grows.

I would avoid the ones that charge low annual costs (~1k per year) and then charge each participant what are effectively AUMs. A lot of these are over 1% each year above and beyond each fund's annual expense ratio.

Just my 1.5 cents.
I have been a happy personal investor at vg for decades. I was frustrated with inappropriate fees for my business’ 401k and so I moved it to vanguard. I’ve been sufficiently unhappy with vanguards administration of the 401k that I’m making plans to switch to fidelity. Fyi.
They were too expensive I never even considered them as an option.
Topic Author
JSDNJ
Posts: 331
Joined: Wed Feb 04, 2015 4:17 pm

Re: Small business 401k

Post by JSDNJ »

FWIW, I settled on Betterment.
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