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Does anyone have any experience with the ADP 401k plan?

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  • Does anyone have any experience with the ADP 401k plan?

    They are claiming they only charge a flat fee and not a percentage of the portfolio, and no other fees such as trading, buying or selling stocks, and that this fee is tax deductible.

    Considering the tax deductible component it's about 200-2500 per year, regardless of the size of your portfolio.

    They claim that this much better than fiedlity or vanguard.

    You can but different products with them, including vanguard and other known names

  • #2




    They are claiming they only charge a flat fee and not a percentage of the portfolio, and no other fees such as trading, buying or selling stocks, and that this fee is tax deductible.

    Considering the tax deductible component it’s about 200-2500 per year, regardless of the size of your portfolio.

    They claim that this much better than fiedlity or vanguard.

    You can but different products with them, including vanguard and other known names
    Click to expand...


    Yes, they are some of the worst plans around.  If you want a profit sharing plan that has a good design, you need an independent TPA.  They don't have an ERISA 3(38) fiduciary, and they can't provide any advice to you regarding which plan to set up or how to build your investment menu/model portfolios.  Their support is terrible and the quality of service is too.  When someone comes to us with an ADP plan, the first thing we do is get rid of it and move them to a low cost record-keeper with a good TPA to provide admin and plan design.  You don't want to find out that ADP messed up your plan one day, because they do it all the time, and you get to pay for it.  Also, payroll integration is not worth the hassle - you can easily set up payroll submissions at any record-keeper, so that's not really ever an issue given how easy it is to do this.

    This set of WCI posts discusses the needs of small practice plans, and what really matters when setting one up:

    https://litovskymanagement.com/2015/07/small-practice-retirement-plans/

    With providers such as ADP you get what you pay for, pretty much.  Fidelity is not much better, by the way (the costs are outrageous), and Vanguard, while somewhat better, is still the same thing: huge record-keeper (Ascensus), no ERISA 3(38) fiduciary, no independent TPA (so don't expect a good plan design) and no support/advice to you as the plan sponsor (and higher cost for less services).  I sometimes use Ascensus as a record-keeper for larger group practices, but we work with an independent TPA to make sure that they oversee Ascensus (which has been known to make mistakes from time to time).
    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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    • #3
      Thanks Kon, this is what they said:

      "

      The advisor does have some things incorrect. ADP is the administrator for the plan, no need for any TPA. We are the TPA.  We also are ahead on the fiduciary rule and the investment manager of the plan( I have an attachment above on this, so compliant with 3/38). Plan design in your case is not much of an issue until the day  you ever hire employees. So, In sending you the documents, I have the match and profit share at your discretion, at the end of the year you can do one, or the other, or a combination to get to the maximum amount you desire.  Payroll integration is not worth the hassle, until you find how hard it is to do it yourself or pay someone to get it right.


      You are going to hear different answers form different individuals depending on their own personal interest or contacts ( Does the advisor have a financial  relationship with the TPA he is recommending?). So use your best judgment on what you do. ADP has done 401k plans for over 20 years and payroll for 60. Tough to beat that type of record.


      "


       

      I think I will just stick with the boring Fidelity (and they're inferior technology-adoption - too much paper!) until I get a better grasp of the alternatives

      Comment


      • #4




        Thanks Kon, this is what they said:


        The advisor does have some things incorrect. ADP is the administrator for the plan, no need for any TPA. We are the TPA.  We also are ahead on the fiduciary rule and the investment manager of the plan( I have an attachment above on this, so compliant with 3/38). Plan design in your case is not much of an issue until the day  you ever hire employees. So, In sending you the documents, I have the match and profit share at your discretion, at the end of the year you can do one, or the other, or a combination to get to the maximum amount you desire.  Payroll integration is not worth the hassle, until you find how hard it is to do it yourself or pay someone to get it right.


        You are going to hear different answers form different individuals depending on their own personal interest or contacts ( Does the advisor have a financial  relationship with the TPA he is recommending?). So use your best judgment on what you do. ADP has done 401k plans for over 20 years and payroll for 60. Tough to beat that type of record.



         

        I think I will just stick with the boring Fidelity (and they’re inferior technology-adoption – too much paper!) until I get a better grasp of the alternatives
        Click to expand...


        Yes, they are the TPA, and a really bad one at that. Everyone knows how bad ADP is.  They are a huge company and you don't ever get to talk to a real TPA, but layers of representatives.  The whole thing about 'compliant 3(38)' is really funny because you can comply with an automated program, that delivers zero value to you personally.  That's not the point at all.  The whole idea is that docs need good advice from an experienced 3(38) fiduciary (who specializes in working with doctors and dentists) who can tell you about the following:

        1) investment selection using low cost index funds

        2) model portfolios so that you can invest in a single allocation

        3) advice regarding optimal accumulation and distribution strategies

        4) advice on tax planning and other retirement plans such as Cash Balance

        And payroll integration is not worth the extra money and nowadays it is as easy as sending your payroll report to the record-keeper and that' all it takes (literally just sending an email).

        It is funny that they are concerned about financial relationship for advisers and TPAs, if anything, they are the ones where everything is bundled and under a single roof so there is no oversight, and their 3(38) services are basically nothing of value.  This is why it is valuable to have your own TPA and your own record-keeper and an independent 3(38) fiduciary to oversee everything (and they are right that there should not be any financial relationship between the providers, and I would never allow this type of relationship to occur in the first place because it is a conflict of interest).

        Your 401k plan is not just an account - it is part of your overall investment strategy, and just opening one at a specific provider is not enough. My model is to integrate low cost 401k services with comprehensive advice, and this is something no retirement plan providers do because they are simply selling their platform, and they don't consider your entire financial situation and how the 401k plan would fit into it, so for that reason I believe that it is better to work with your own ERISA 3(38) fiduciary who can help you select the best plan (401k or SIMPLE or combo) and also help you pick the best providers to implement your plan.

         

         
        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


        • #5
          Yes. Between May 2018 - June 2019 - I  invested about $6,700 and lost $600. I researched all of the mutual fund options and none of them have performed well. I bought VOO and VOOG ETFs on Robinhood during the same time period, and they have netted me a positive gain. I trying to convince my employer to change the ADP 401k plan to something else - anything is better than ADP. I wish I could roll it over, but I can't until I leave - (So I'm trapped). It's an unfair system.

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