Announcement

Collapse
No announcement yet.

401k plan for a small dental office

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • 401k plan for a small dental office

    Hello,

     

    I recently became interested in setting up a 401k for my dental office. Currently I am using a simple IRA. My wife has access to a 403b and a 457 so we try to max those out at $18000 each. Also with my wife's job we max out an HSA and a day care spending account. Other retirement accounts are a backdoor roth for my wife and we put in $6000/yr in a 529 for our daughter. All the extra cash we put towards debt reduction which we should have paid off in the next two years, about $550,000 between 1.8 and 4.5% interest.

    Anyways, I am wondering if anyone can give me some advice in picking out a 401k among the sea of options. Another bit of background info is that we may decide to sell the business in a few years so the account balance may not get all that big. If we don't sell we will likely cut back on hours significantly. Our income continues to go up and I want to cut down on our tax bill in the coming years.

     

    Thanks!

  • #2
    We have Plans held at Vanguard SBRP, Dimensional DC, and Employee Fiduciary.  We generally recommend Employee Fiduciary for new Plans since Vanguard and Dimensional charge a flat fee.  Below is a link to a comparison of the three:

    https://www.fplcapital.com/services/rp-services/#fees

    If you are just starting with your research, those three would be a good place to start.

    Comment


    • #3
      I assume you have read this? https://www.whitecoatinvestor.com/starting-a-401kprofit-sharing-plan-for-a-small-practice-friday-qa-series/

      Let's see - how will this go in the forums?

      First someone will suggest Employee Fiduciary.  Then Konstantin will say they aren't able to do cross-tested plans or a future cash balance plans well and they don't hold your hand enough, but won't suggest any alternatives to him. (how on earth are hundreds of thousands of dental offices/medical/small businesses able to do this without him?)

      Then maybe Tom Zgainer from America's Best 401K will show up, then him and Kon will start fighting.  Tom will claim Kon is a just a dude in an apartment and his company is big and has better resources, then Kon will claim that America's best has extra fees and conflicts of interest.  The truth is somewhere in the middle.

      Then someone will bring up that this might all be stupid because the Republicans still might cap 401Ks at $2,500.

      Then you will feel frustrated because no-one can really do the calculation for you of option 1: just invest in taxable vs. option 2: 401K

      Where is the "Vanguard" for small businesses that offer safe-harbor 401Ks with profit-sharing and cross tested plans for a flat rate with no extra junk?

      I DONT WANT A FIDUCIARY - JUST PUT MY EMPLOYEES ON A TARGET DATE PLAN AND LET ME DO WHAT I WANT.

      Where can someone just get a TPA and work with him or her directly?

       

      Comment


      • #4




        We have Plans held at Vanguard SBRP, Dimensional DC, and Employee Fiduciary.  We generally recommend Employee Fiduciary for new Plans since Vanguard and Dimensional charge a flat fee.  Below is a link to a comparison of the three:

        https://www.fplcapital.com/services/rp-services/#fees

        If you are just starting with your research, those three would be a good place to start.
        Click to expand...


        Is there a way to skip you and just get it going directly with the TPA and setup your own record keeper and custodian.

        Just pay the TPA to do the analysis and design the plan, but the business owner basically run it from there?

        Comment


        • #5







          We have Plans held at Vanguard SBRP, Dimensional DC, and Employee Fiduciary.  We generally recommend Employee Fiduciary for new Plans since Vanguard and Dimensional charge a flat fee.  Below is a link to a comparison of the three:

          https://www.fplcapital.com/services/rp-services/#fees

          If you are just starting with your research, those three would be a good place to start.
          Click to expand…


          Is there a way to skip you and just get it going directly with the TPA and setup your own record keeper and custodian.

          Just pay the TPA to do the analysis and design the plan, but the business owner basically run it from there?
          Click to expand...


          I am pretty certain you can with Vanguard SBRP and Employee Fiduciary, but I do not believe that is an option with Dimensional DC.

          Comment


          • #6
            Thanks for the responses. I checked out the article you listed which was a good starting point. I did call Vanguard last week and they called back a few days later to chat, however was not able to talk at that time. I'll check in with them again next week. From the examples I saw in the article, my situation is fairly similar except I am not looking at investing in this for the next 30 years, maybe 5 years max. If it is a wash then I would rather do the 401k route and get my employees some additional retirement savings.

            Comment


            • #7




              Thanks for the responses. I checked out the article you listed which was a good starting point. I did call Vanguard last week and they called back a few days later to chat, however was not able to talk at that time. I’ll check in with them again next week. From the examples I saw in the article, my situation is fairly similar except I am not looking at investing in this for the next 30 years, maybe 5 years max. If it is a wash then I would rather do the 401k route and get my employees some additional retirement savings.
              Click to expand...


              Report back what you decide to do!

              Comment


              • #8




                I assume you have read this? https://www.whitecoatinvestor.com/starting-a-401kprofit-sharing-plan-for-a-small-practice-friday-qa-series/

                Let’s see – how will this go in the forums?

                First someone will suggest Employee Fiduciary.  Then Konstantin will say they aren’t able to do cross-tested plans or a future cash balance plans well and they don’t hold your hand enough, but won’t suggest any alternatives to him. (how on earth are hundreds of thousands of dental offices/medical/small businesses able to do this without him?)

                Then maybe Tom Zgainer from America’s Best 401K will show up, then him and Kon will start fighting.  Tom will claim Kon is a just a dude in an apartment and his company is big and has better resources, then Kon will claim that America’s best has extra fees and conflicts of interest.  The truth is somewhere in the middle.

                Then someone will bring up that this might all be stupid because the Republicans still might cap 401Ks at $2,500.

                Then you will feel frustrated because no-one can really do the calculation for you of option 1: just invest in taxable vs. option 2: 401K

                Where is the “Vanguard” for small businesses that offer safe-harbor 401Ks with profit-sharing and cross tested plans for a flat rate with no extra junk?

                I DONT WANT A FIDUCIARY – JUST PUT MY EMPLOYEES ON A TARGET DATE PLAN AND LET ME DO WHAT I WANT.

                Where can someone just get a TPA and work with him or her directly?

                 
                Click to expand...


                Nice funny bone - where have you been all my life (at least my life on this forum)? Employee Fiduciary is probably the closest you can get to the Vanguard for small businesses.
                Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

                Comment


                • #9
                  Hi there,

                  I just made the transition to Vanguard for our small business. For 15 or fewer employees Vanguard will charge you 2,500 dollars. On top of that you will pay the expense ratios for the funds you invest in. For us the Vanguard fees add up to 11 basis points (not including ERs). We pay this as a business rather than passing the expense to participants. So the participants only pay the ER. Not too bad, right? Small business Vanguard 401k has ERs in the admiral class or for target funds its institutional class.

                  We have a TPA who does a good job and does it for a reasonable fee. We pay this as a business expense as well, again, so participants only pay the ER and their money can grow as efficiently as possible.

                  Make sure your 401k is 404(c) compliant and go through the fiduciary checklist from Vanguard and you should be good to go.

                  We don’t have an adviser but will likely add one if and when we go to a cash balance plan. If you don’t have a solid knowledge base in investing then you might want to add an adviser. I would go with someone who is flat fee. I think it makes no sense to pay an adviser a percent of AUM fee.

                  I believe for most people this approach will be cheaper than even employee fiduciary.

                  Comment


                  • #10
                    Hi wheels.

                    I'm a private practice dentist with 5 employees (6 including my wife).  I recently set-up a 401(k) profit sharing plan for my office.  The cheapest way to do it is to hire an independent third party administrator to design and bookkeep the plan, and set-up a pooled account with Vanguard to hold the investments.  From what you currently do for retirement savings, it sounds like you are more than qualified to handle this yourself without a company like EF, etc.  With a pooled account you direct the investments (follow a Boglehead 3-fund plan and there's no way you'll get sued).

                    My cost was $1500 to set-up the plan, about $1300 a year for bookkeeping, and less than $100 per year for a bond to protect against employees suing you for mismanagement of funds.

                    You need to have income of $350,000+ and the desire to save $72,000+ per year for it to be worth it, and in my circumstances my plan design gives me about 88% of the total cost as retirement benefit to me.  (Total cost each year for contributions to the plan, employee match, and profit sharing to employees is about $80,000 and I get about $72,000 of that).

                    Hope that helps.  Let me know if you want my TPA's contact info.

                    Comment


                    • #11
                      With Employee Fiduciary you can have a participant directed 401k plan with all Vanguard Admiral Shares funds for $1,500 +0.08% + 500 for New Comparability testing . I think you can have up to 25 funds for your investment selection.
























                      Comment


                      • #12
                        My Father is a dentist and I helped him set up his 401k a couple of years ago. I suggest looking into profit sharing if you want to contribute to the maximum of $55,000 for 2018. We were deciding between Vanguard (Ascensus), Employee Fiduciary, and Ubiquity. Ubiquity had the best marketing and held our hand through the process of creating the 401k so we went with them. They updated their online platform right when taxes were due and we were trying to do profit sharing for the first time and several issues occurred. It was a very painful process, but definitely worth the trouble. Since then things have gone smoothly but if I could do it over again I would have chosen Employee Fiduciary or Vanguard (Ascensus).

                        Comment


                        • #13




                          Hello,

                           

                          I recently became interested in setting up a 401k for my dental office. Currently I am using a simple IRA. My wife has access to a 403b and a 457 so we try to max those out at $18000 each. Also with my wife’s job we max out an HSA and a day care spending account. Other retirement accounts are a backdoor roth for my wife and we put in $6000/yr in a 529 for our daughter. All the extra cash we put towards debt reduction which we should have paid off in the next two years, about $550,000 between 1.8 and 4.5% interest.

                          Anyways, I am wondering if anyone can give me some advice in picking out a 401k among the sea of options. Another bit of background info is that we may decide to sell the business in a few years so the account balance may not get all that big. If we don’t sell we will likely cut back on hours significantly. Our income continues to go up and I want to cut down on our tax bill in the coming years.

                           

                          Thanks!
                          Click to expand...


                          I would start here:

                          http://www.dentaltown.com//Dentaltown/Article.aspx?i=403&aid=5625

                          It is not a guarantee that a 401k would be a better choice for you.  A SIMPLE might be better.  If you are happy with $18k salary deferral and can't contribute any more, I wouldn't do a 401k in the first place, considering the cost and the complexity.

                          So the first step is to figure out whether a 401k or a SIMPLE would make more sense.  If you are unsure, I would continue doing SIMPLE because of the cost of starting/running/closing a 401k plan.  I would only consider a 401k if you can (together with your spouse) contribute $40k or more (ideally closer to the maximum), AND I would get design studies done in that case to make sure the cost of doing the maximum is appropriate given the alternatives (that is, % to owner ratio is high enough to justify the cost).

                           
                          Kon Litovsky, Principal, Litovsky Asset Management | [email protected] | 401k and Cash Balance plans for solo and group practices, fixed/flat fee, no AUM fees

                          Comment


                          • #14







                            We have Plans held at Vanguard SBRP, Dimensional DC, and Employee Fiduciary.  We generally recommend Employee Fiduciary for new Plans since Vanguard and Dimensional charge a flat fee.  Below is a link to a comparison of the three:

                            https://www.fplcapital.com/services/rp-services/#fees

                            If you are just starting with your research, those three would be a good place to start.
                            Click to expand…


                            Is there a way to skip you and just get it going directly with the TPA and setup your own record keeper and custodian.

                            Just pay the TPA to do the analysis and design the plan, but the business owner basically run it from there?
                            Click to expand...


                            Yes, if you can get everyone to do everything for you just right, then things would be perfect.  In a perfect world that would be how it works.  Unfortunately, TPAs are not fiduciaries, and record-keepers need supervision.  Someone has to oversee the TPA and the record-keeper, and provide advice to the plan sponsor on who the best TPA/record-keeper/plan design, etc. would be.

                            For some dentists a pooled 401k plan would work best:

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

                            For others it would be a SIMPLE IRA not a 401k plan.

                            Would a TPA do a design study for you?  Maybe, if you know what to ask.  Would they optimize your design?  Maybe, but I wouldn't guarantee that, having seen too many designs that are not optimal.

                            Cost is not the only factor when it comes to 401k plans.  If you don't know what you are doing, there is no way for you to know whether what you have is optimal.  You can always try Ascensus and Employee Fiduciary, and once you realize that they are really not good at plan design, then you might look for your own TPA.  Also, as a record-keeper, Ascensus does not do pooled plans, and EF's pooled 401k plans are too expensive vs. alternatives (since they charge a per participant fee for a one-person account for a pooled 401k plan).

                            Again, your TPA is not a fiduciary, so they are not necessarily going to tell you that you can optimize your salary to minimize employer contribution - they will simply do a design based on what you tell them.  In some cases things work out well, in others they don't, but don't expect them to tell you that your % to owner is too low for a profit sharing design, and that a SIMPLE would be a better plan - it is not their job to do so.

                            Can you do a plan without a good adviser - absolutely, but then you have to do all of the legwork, and you won't necessarily save a lot of money doing it this way, especially if your adviser knows how to save you money in different ways.
                            Kon Litovsky, Principal, Litovsky Asset Management | [email protected] | 401k and Cash Balance plans for solo and group practices, fixed/flat fee, no AUM fees

                            Comment


                            • #15




                              Thanks for the responses. I checked out the article you listed which was a good starting point. I did call Vanguard last week and they called back a few days later to chat, however was not able to talk at that time. I’ll check in with them again next week. From the examples I saw in the article, my situation is fairly similar except I am not looking at investing in this for the next 30 years, maybe 5 years max. If it is a wash then I would rather do the 401k route and get my employees some additional retirement savings.
                              Click to expand...


                              Vanguard and EF are in the business of selling plans, not in the business of providing advice.  I absolutely love it when docs call Vanguard expecting to get advice, and all they get is, well, not much.  Vanguard is registered as a broker, which just means that they are selling a product, their funds.  Even though it is a really good product, Vanguard is not a fiduciary, and people you call will not offer you ANY advice that will help you make the right decision because they are not allowed to offer such advice (even if they wanted to provide it).  Good advice costs money, but it also holds significant value, so one size fits all is not a model that would work for everyone.  While some are able to navigate this themselves, just like investing, not everyone is going to be comfortable doing it.

                              This is exactly why I prefer the fiduciary model, where you first get advice from a fiduciary, and then and only then you go about determining the architecture of your plan, and pick the best plan providers to implement your plan. In many cases the cost is rather small compared with the benefit, and in a good number of cases we simply tell the docs to set up a SIMPLE rather than a 401k plan because that's the right thing to do for them.

                              Everyone has different needs - some prefer to have pooled 401k plans, some will need a combo 401k/Cash Balance plan, and unfortunately all of the service providers out there who are selling these plans will sell you a plan whether you want/need one or not, without providing you with actual advice on whether this is the best solution for you.  I see this all the time, I work with lots of different providers, TPAs, actuaries, record-keepers, etc.  Without unbiased advice offered in your best interest (unless you are en expert in the field and know how things work) it can be difficult to know what the best course of action would be.

                              Small practice 401k plans are just as complex as large practice plans, and until you've experienced things yourself, it is difficult to appreciate this complexity. Everything is rosy when a plan is just starting, but eventually errors/mistakes accumulate, and in most cases this has to do with administrative side, not on the investment side.  This is where a good TPA can play an important role, yet Ascensus and EF are conveyor belt providers where there is nobody in charge, so you are basically on your own with respect to plan design, plan administration and compliance.  This is why the choice of providers is important.  From my experience, having your own ERISA 3(38) fiduciary and your own TPA is important, while the record-keeper is secondary.
                              Kon Litovsky, Principal, Litovsky Asset Management | [email protected] | 401k and Cash Balance plans for solo and group practices, fixed/flat fee, no AUM fees

                              Comment

                              Working...
                              X