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  • Best 401k for small business

    Hello! I have a very small medical practice. We've been open for 8 months now and I am wanting to set up a 401k for myself and my employees. It looks like Vanguard only offers a SIMPLE IRA (which would mess up my backdoor roth, right?). What are other good choices for small business 401k plans?

    Thanks!

  • #2
    there are many prior forum topics with similar questions, and blog posts too. Kon Litovsky has written valuable posts. Vanguard does offer a small business 401k with Ascensus as TPA. Employee Fiduciary is commonly recommended. Guideline has a super simple and affordable plan if you don't need custom options. Sometimes you'll get the best pricing and excellent service from a local provider. You should ask colleagues and knowledgeable CPAs in the area for recommendations.

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    • #3
      Vanguard Ascensus does small business 401ks.  A number of years ago this was not the case.

      At my urging, my firm changed to Vanguard Ascensus.  It was shopped fairly heavily and, at the time, was the best option.

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      • #4
        been happy with america's best 401k

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        • #5
          I use guideline.  i've yet to see anyone come close to their fees (maybe employee fiduciary until you have a larger balance since they have an AUM).  guideline has limitations.  there is no true-up with the match so you shouldn't frontload the 401k.  also the profit sharing options are extremely limited.  If you are just planning on safe harbor i think its fine.

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          • #6




            Hello! I have a very small medical practice. We’ve been open for 8 months now and I am wanting to set up a 401k for myself and my employees. It looks like Vanguard only offers a SIMPLE IRA (which would mess up my backdoor roth, right?). What are other good choices for small business 401k plans?

            Thanks!
            Click to expand...


            There are definitely many platforms available.  I currently work with Vanguard/Ascensus, plain Ascensus, Employee Fiduciary and many others.  Pretty much all bundled platforms are what one would call a 'record-keeper', and it is important to pick the right one for the job.  The question is not which platform is the best (there are pluses and minuses with each one), but which specific plan design you need and what service providers your plan will benefit from.

            First thing, SIMPLE IRA can often be a good start up plan vs. a 401k:

            https://www.whitecoatinvestor.com/the-ideal-retirement-plan-for-your-practice

            In all of my plans I prefer to use an independent/standalone TPA, as that provides better quality of service and better results when it comes to plan design and compliance.  Record-keeper choice depends on the size of the plan. For smaller plans, Ascensus is too expensive.  There are other record-keepers that are very competitively priced that can be used for small plans.

            First, you need to understand whether a 401k or a SIMPLE will be the plan for you in the near future.  I tend to send away plenty of docs with startups to Vanguard to open a SIMPLE IRA.  To pick a 401k over SIMPLE, the following should happen:

            1) You should have the capacity to max out the 401k contribution.

            2) Your staff demographics should be favorable so that the cost justifies the benefit in terms of employer contribution vs. what you can put into the plan.

            So the first thing that has to happen is a design illustration (which hardly any of the big service providers will do for a small plan).  Only then can you decide whether a 401k will be worth it.  Also, you don't necessarily have to open a participant-directed 401k if you don't have to:

            http://www.dentaltown.com/Dentaltown/Article.aspx?i=393&aid=5411

            This can save some money as well as decrease complexity, and this can work as a startup plan which can later be converted to a participant-directed plan without any issues.  Some practices might also open Cash Balance plans later on, so this should be kept in mind when setting up your 401k plan, as not all service providers have the capability to handle CB plans.

            I prefer to build custom-designed plans that address each specific situation rather than use all-in-one service providers where the quality is difficult to monitor advice level is minimal. Smaller practices tend to have the most moving parts, so picking your service providers wisely is always a good idea.
            Kon Litovsky, Principal, Litovsky Asset Management | [email protected] | 401k and Cash Balance plans for solo and group practices, fixed/flat fee, no AUM fees

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            • #7
              the original post was from 2019, however, I am a solo physican with only one employee (I take a w2 for myself too, ie. 2 total individuals). Years ago had a small biz 401K via ADP but the fees and options were not great at all and I was not maxing out, so just was not worth it. I then decided to go with a SEP-IRA for past few years. However, now that I am able to max out the plan, I am interested in considering Vanguard/Ascensus small biz Asensus with the intention to 1) max it out annually and 2) consider opening a cash balance plan as well (within the next year). Are there any other companies that may make more sense to consider? Thanks.

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              • #8
                Originally posted by mjdevito View Post
                the original post was from 2019, however, I am a solo physican with only one employee (I take a w2 for myself too, ie. 2 total individuals). Years ago had a small biz 401K via ADP but the fees and options were not great at all and I was not maxing out, so just was not worth it. I then decided to go with a SEP-IRA for past few years. However, now that I am able to max out the plan, I am interested in considering Vanguard/Ascensus small biz Asensus with the intention to 1) max it out annually and 2) consider opening a cash balance plan as well (within the next year). Are there any other companies that may make more sense to consider? Thanks.
                Vanguard/Ascensus is very expensive for a 2 person plan. CB plan is not something they do anyway, and you would need to hire an actuary to do this for you (and you would need to use a TPA if you want to include a CB plan, as they can not do the necessary TPA work), so you are better off hiring a TPA that can also do CB plan (in addition to a 401k plan), and use a low cost record-keeper for both the 401k and CB plans. CB plan account is pooled, so this can be a custodian, but a record-keeper is more efficient in terms of administration (albeit costs more). I prefer to use Ascensus for plans with at least 15-20 participants, in that case they can be used as a record-keeper (with an outside TPA) and the numbers make sense. A plan with just 2 participants is going to cost you one way or another as it is a full blown 401k plan, but if you are also doing a CB plan (and you are old enough to contribute a significant amount), then the cost will most likely justify the benefit. Big part of setting a plan like this is getting good advice. Vanguard/Ascensus provides zero advice, so having your own TPA/actuary team is key to making sure your plans are set up appropriately.
                Kon Litovsky, Principal, Litovsky Asset Management | [email protected] | 401k and Cash Balance plans for solo and group practices, fixed/flat fee, no AUM fees

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