Small biz 401k options? Would like to switch our plan to one with index funds.

[jonce17]

In January, I'm becoming a partner of a small business (13 employees) and am looking over the companies current 401k. The only employee investment options are in American Funds. In talking to the plan fiduciary, there is no option of adding Vanguard or other index funds to the plan.

I would prefer to adopt a 401k plan with index funds. If you've done this, can you give me some advice on how to go about this?

[ajm184]

American Funds is an active fund management shop, which is not terrible....  Except American Funds is primarily offered only through financial advisors who primarily sell load/12b-1 offerings such as Edward Jones taking away most/if any overperformance of the fund.

The number of participants in the 401K would concern me a bit as it is small, unless all are high income earners.  If only a couple of employees are high income earners, it may run into annual suitability testing issues.  If it fails the annual test, you maybe restricted in terms of contributions below the IRS limit for a given year.

Though I am sympathetic to Vanguard and your desire to have index funds as an option; I would also consider having target date funds.  Depending upon the provider a very easy approach for folks who don't care about retirement asset allocations and just want to contribute and forget about it until they retire.

May make sense to have plan advisor assist in potentially transitioning to a different 401K provider.  I know Konstantin Litovsky is a regular on these boards who for a fee will provide plan advisory assistance.

[jonce17]

At this point only 4 employees contribute to the 401k, but it is available to all. Two (docs) are high-income earners and the others would not be considered. Are you familiar with Employee Fiduciary? Just learning about them...

[openwideguy]

I am very familiar with employee fiduciary.  i learned about the company on bogleheads years ago.

i switched my small dental office's safe harbor 401k plan to them 3-4 years ago.  i have nothing but excellent things to say.  my relationship manager is awesome about returning emails/calls.

the fees are great and the selection of vanguard funds is great.

 

highly recommend them

[jonce17]

Awesome, in speaking with them it sounds like they can fill all roles other than that of a financial advisor to help pick the funds that the plan offers. Did you hire an advisor to do this or did you just pick them on your own?

 

 

[openwideguy]

I did that on my own.  I picked all vanguard funds.  i was following a thread on bogleheads asking if you were to design a selection of funds which would you pick.  i just copied their recommendations.  it is basically a wide range of target date funds, and index funds.  i'll see if this works:

 

Vanguard Total Intl Stk Idx Admiraldetails	VTIAX	0.00% $0.00	%	%	$0.00
Vanguard Infla.Protected Sec Admdetails	VAIPX	0.00% $0.00	%	%	$0.00
Vanguard Total Bond Mk Index Admdetails	VBTLX	0.00% $0.00	%	%	$0.00
Vanguard 500 Idx Admdetails	VFIAX	0.00% $0.00	%	%	$0.00
Vanguard Total Stock Mrkt Idx Admdetails	VTSAX	0.00% $0.00	%	%	$0.00
Vanguard Ext. Market Idx Admdetails	VEXAX	0.00% $0.00	%	%	$0.00
Vanguard Prime Money Market	VMMXX	0.00% $0.00	%	%	$0.00
Vanguard Target Retirement 2025details	VTTVX	0.00% $0.00	%	%	$0.00
Vanguard Target Retirement 2035details	VTTHX	0.00% $0.00	%	%	$0.00
Vanguard Target Retirement 2040details	VFORX	0.00% $0.00	%	%	$0.00
Vanguard Short-Term Bond Idx Adm	VBIRX	0.00% $0.00	%	%	$0.00
Vanguard Sm Cap Val Index Admdetails	VSIAX	0.00% $0.00	%	%	$0.00
Vanguard US REIT Index Admdetails	VGSLX	0.00% $0.00	%	%	$0.00
Vanguard Target Retirement 2020details	VTWNX	0.00% $0.00	%	%	$0.00
Vanguard Target Retirement 2030details	VTHRX	0.00% $0.00	%	%	$0.00
Vanguard Target Retirement 2055details	VFFVX	0.00% $0.00	%	%	$0.00
Vanguard Target Retirement 2015details	VTXVX	0.00% $0.00	%	%	$0.00
Vanguard Target Retirement 2045details	VTIVX	100.00% $0.00	%	%	$0.00
Vanguard Target Retirement 2050details	VFIFX	0.00% $0.00	%	%	$0.00
Vanguard Target Retirement 2060	VTTSX	0.00% $0.00	%	%	$0.00

 

Employee Fiduciary helps with all the mandatory compliance testing etc.  they send me a spreadsheet to fill out once in awhile.  its easy.  i upload a spreadsheet that they create onto their website every other week after i get payroll back.  it takes about 5 minutes to get them the info needed.  i could not be happier.  the fees are great on top of it.  the service is excellent too.

[jonce17]

Thank you

[cgossage]

I second Employee Fiduciary.  They are great and very cost effective.

[toothcarpenter]

Do you all have profit sharing too? How was the plan design - cross tested plan with 3% safe harbor?

[AlexDDS]

toothcarpenter wrote:

Do you all have profit sharing too? How was the plan design – cross tested plan with 3% safe harbor?

Click to expand...

Our plan design - New Comparability with 3% Safe harbor and 2.25% profit sharing to NHCE .

[triad]

any worries about the proposed changes to 401k law?  If the deduction is reduced to 2.4k it hardly seems worth the cost of the plan