Vanguard TDFs in Taxable Accounts Lawsuit

[litovskyassetmanagement]

This is not enough information. What is the total employer contribution amount? What do the numbers look like with $120k? Chances are they don't look...

[litovskyassetmanagement]

I totally agree. At this point, who knows whether employees in entity D were eligible under any other plans? A good TPA want to know the start dates of...

[litovskyassetmanagement]

I would roll them over into the entity D plan is the best solution. I wouldn't move them to an IRA as that will not allow you to do backdoor Roth. As...

[litovskyassetmanagement]

Here's SEP eligibility criteria:

https://www.irs.gov/pub/irs-pdf/f5305sep.pdf

I don't believe 1099 contractors are eligible...

[litovskyassetmanagement]

For SEP, all participants have to meet the rules. For example, if your business is 2 years old, you can not set 3 out of 5 rule. It has to be 2 out of...

[litovskyassetmanagement]

Yes, when in doubt, always talk to an ERISA attorney. My current TPA does not take over plans like that unless ERISA attorney reviews them for compliance....

[litovskyassetmanagement]

Yes, if they did the testing, that's the way to go, but still it is expensive and all plan provisions have to be coordinated, so it is usually not the...

[litovskyassetmanagement]

If you have employees in an entity D, you should simply terminate/discontinue all other plans and concentrate on entity D. If you have any other income...

[litovskyassetmanagement]

That's not how controlled group works in practice. The TPA has to do testing of both plans together. If that's not done, then you are not following the...

[litovskyassetmanagement]

If in doubt about rollovers, always consult the IRS rollover chart:

https://www.irs.gov/pub/irs-tege/rollover_chart.pdf

You...

[litovskyassetmanagement]

As spiritrider says, $20M is usually the cutoff for Vanguard proper to setup and administer a 401k + PS plan. Even then they are just a record-keeper/broker,...

[litovskyassetmanagement]

If this is a relatively new plan, then contribution fluctuation isn't an issue yet. It will be once participants get into $500k-$1M range. I don't believe...

[litovskyassetmanagement]

Just no. 21 year plan? That's a joke. No actuary who's worthy of working on CB plans will give a 35 year old a 21 year plan. Your plan should last no...

[litovskyassetmanagement]

I don't think that 42% in stocks is conservative by any measure given how volatile this type of portfolio would be in various types of markets, and how...

[litovskyassetmanagement]

I would skip the SIMPLE also because it has to be run for a full year, so you can't make changes during the year until the following year. For 2022 you...

[litovskyassetmanagement]

For owner + spouse, yes, solo 401k would be perfect....

[litovskyassetmanagement]

I'm assuming that you have no employees in your office? If the answer is yes, and you are the only one employed, solo 401k is fine. However, if you have...

[litovskyassetmanagement]

The issue is that the solo plan has very limited options as far as plan provisions and eligibility, so even before the employee becomes eligible to join...

[litovskyassetmanagement]

The analysis can be done, typically it is a side by side taxable vs. tax-deferred comparison that looks at the total cost of one vs. the other with opportunity...

[litovskyassetmanagement]

There is no specific percentage that can be used for this. Here are some considerations:
1) The higher your tax brackets, the lower this % can be...

[litovskyassetmanagement]

With maybe a handful reps for thousands of clients, don't expect to have anyone help you with anything. They also won't be advising you on anything (as...

[litovskyassetmanagement]

This is a potential affiliated service group which is much more complex than a controlled group. The big question is, how exactly the 1099 job is related...

[litovskyassetmanagement]

So a 1099 is usually excluded from both 401k and SIMPLE. However, depending on the ages of your employees relative to yours there could be different considerations...

[litovskyassetmanagement]

This could be a situation for a MBR 401k, so instead of doing the above they can just contribute the entire $25k as voluntary after-tax and convert to...

[litovskyassetmanagement]

He's talking about MBR 401k plan. This absolutely does not apply to your situation. I've explained the differences in detail here:

https...

[litovskyassetmanagement]

This is actually bad information, and here's why. They are taking AUM fees, converting everything to a fixed fee, and then calculating an average fee...

[litovskyassetmanagement]

CB plan allocation looks like it is really aggressive. CB can potentially be expensive as well. So 0.87% includes expense ratios for all funds? This is...

[litovskyassetmanagement]

Yes, if you can get everything in after-tax in such a way as to pass all the tests (with staff contributing after-tax), that works out for the owners...

[litovskyassetmanagement]

Non-highly compensated employees. This limitation is explained here in more detail:
https://www.whitecoatinvestor.com/me...or-roth-with-e...

[litovskyassetmanagement]

4) The ability to use "self-directed" investments should you so desire (harder)

-This one is actually pretty easy to do in a participant-directed...

[litovskyassetmanagement]

Good question, it is a lot more fundamental than just picking the funds. Here's my take. The first link is more basic, while the second one has a lot...

[litovskyassetmanagement]

Ok, so I would definitely convert a pooled 401k to a participant-directed one if you have more than one owner/partner as your goals might be different....

[litovskyassetmanagement]

First thing you need to do is get copies of all advisory contracts the plan signed with service providers. Much is disclosed there. Next you should get...

[litovskyassetmanagement]

Unintented consequences of being a large fund company. Another reason why TDFs should not be held in taxable accounts.

https://www.inves...

[litovskyassetmanagement]

Get a copy of the participant fee disclosure from the plan sponsor. See what their fees are in detail. I've seen fees this high, but it is very rare/unusual...

[litovskyassetmanagement]

If you join a group, you might actually be in a great position to contribute to another DB plan if the group has one (or is willing to set one up) without...

[litovskyassetmanagement]

One reason American Funds 401k plans are still popular is because there is usually a single expense ratio that covers all of the plan costs, so participants...

[litovskyassetmanagement]

A CB plan is first and foremost a tax shelter. You won't be able to get any higher return there than the crediting rate due to rules that tax the excess...

[litovskyassetmanagement]

Having spent a number of years working with TPAs, I would never want to be anywhere near that type of responsibility. A TPA is like a highly trained doctor,...

[litovskyassetmanagement]

How big is your employer? You should be talking to the owners/partners if this is a medical practice. If your employer has an HR department, it is probably...

[litovskyassetmanagement]

EF is a problem because they are a huge service provider that is no better than the other ones listed in the original email. They are highly problematic...

[litovskyassetmanagement]

This is the type of situation where you should consult an ERISA attorney because facts and circumstances matter. From this information it is impossible...

[litovskyassetmanagement]

I spoke with a TPA regarding this type of issue and it looks like your TPA did it correctly, form 5500 will not have any information on the prior plan,...

[litovskyassetmanagement]

So she changed the entity from solo to LLC, this is fine, usually amending the existing plan document (rather than setting up a new plan) is sufficient,...

[litovskyassetmanagement]

You had a prior plan, you set up a new plan, you merge the old plan with the new plan so that there is continuity. This is done by restating the plan...

[litovskyassetmanagement]

This all should be on the fee disclosures you get as the plan sponsor each year. Not all advisers will be forthcoming to disclose things they don't have...

[litovskyassetmanagement]

Old thread, but since bumped, I'll attempt an answer. Usually when you take a pension distribution, there is a whole schedule of options (annuities),...

[litovskyassetmanagement]

Medical practices are run by partners. You don't have an HR department, and partners come and go all the time so you don't have the necessary knowledge...

[litovskyassetmanagement]

Here's another issue. When a partner uses their personal adviser as the plan adviser, this is can result in a breach of plan sponsor fiduciary duty as...

[litovskyassetmanagement]

There is no such thing as average. You need to get pricing proposals and cost comparisons, and use a calculator such as this to compare fees side by side:...

[litovskyassetmanagement]

While the fees themselves don't look higher than average, there are a number of things to consider:
1) Are your 401k/CB advisers acting as an ERISA...

[litovskyassetmanagement]

There is no issue with Fidelity funds on its own. For example, Fidelity charges 5 bps to buy Vanguard funds on their platform, so if a plan is on Fidelity's...

[litovskyassetmanagement]

This one is actually easy. Many advisory firms make it harder than it has to be. The best plan has the following features:
1) No AUM fees of any...

[litovskyassetmanagement]

Actually, there is a 401k service provider that sells 401k plans to dentists, they offer a bundled platform so one can't bring an outside adviser to it....

[litovskyassetmanagement]

It is not surprising that 3(21) is talking about revenue sharing and offsets. There is never a need to have a fund that does this so this conversation...

[litovskyassetmanagement]

It really depends on how big your group is and how much assets you have. If you have zero assets, 0.19% might be fine, if you have $50M in assets, this...

[litovskyassetmanagement]

Avoid in an ERISA 401k at all cost. You can buy real estate in a solo 401k/IRA. The cost can be quite high, you will need a service provider that also...

[litovskyassetmanagement]

Not for W2 income. You must have 1099 income to make it happen. And no, you can't channel W2 income into an entity and make it into 1099, that won't ...

[litovskyassetmanagement]

For a practice this size, it is possible to have such fees. They are indeed really high. There is no reason to have fees this high, and chances are, this...

[litovskyassetmanagement]

This might be more of an internal bank rule governing advisers who work for it than a general rule, these advisers might be registered as brokers (so...

[litovskyassetmanagement]

Yes, but if you have had your entity for 3 years, you can potentially have a SEP where only you are contributing for 2 years without any staff contributions....

[litovskyassetmanagement]

The 3 out of 5 years applies to you as well, so if you do NOT fit the 3 out of 5 rule yourself, you can't exclude employees. That's the first thing. So...

[litovskyassetmanagement]

While annuities are not as common these days, it does happen from time to time, whether there is an annuity or just a record-keeping charge that is very...

[litovskyassetmanagement]

Actually, you can still open a non-safe harbor 401k. It would probably be better than a SEP at this point. Your deadline for opening a 401k plan for 2021...

[litovskyassetmanagement]

Here are some articles I've written on the topic that might be of interest:

http://whitecoatinvestor.com/how-to-...r-practice-ret...

[litovskyassetmanagement]

There are a number of other provisions to look at such as cross-tested profit sharing and possibly others, so once the employee works 1000 hours in 2023...

[litovskyassetmanagement]

So does Schwab, but I actually wouldn't use either because both are much more expensive in most cases than, say, Ascensus (provided there are enough assets...

[litovskyassetmanagement]

Several observations on this.
1) I really like this adviser for his honesty, even if he's not an adviser but a self-described broker. This means...

[litovskyassetmanagement]

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...

[litovskyassetmanagement]

Good to know that mysolo401k is not a good service provider, I had no idea other than what I've been told by others, I wouldn't be surprised by this....

[litovskyassetmanagement]

EF is cheap but not free ($500 + 8 bps), and they are clueless (just like mainstream providers) when it comes to giving advice. That's the reason I avoid...

[litovskyassetmanagement]

Yes, if employees are hired it is a completely different ballgame. So if the answer is yes, then I would recommend setting up a 'regular' 401k with a...

[litovskyassetmanagement]

Usually there isn't age requirement for opening a solo 401k, but you do need to check with the service provider. I believe Vanguard's plan document does...

[litovskyassetmanagement]

Several observations:
1) At 50 years old, you are fine to invest in a CB plan, it will beat a taxable account over 10 years. If you are in the 35%...

[litovskyassetmanagement]

This 'revenue' is not much at all in the grand scheme of things given that only a relatively small number of people doing these types of conversions....

[litovskyassetmanagement]

Previous version of this allowed conversions for 10 years until 2032 if I remember correctly. When you make a Roth conversion, you can end up in those...

[litovskyassetmanagement]

There is very little revenue from closing this 'loophole'. They are going after this 1 billionaire who bought company stock in their Roth IRA and it grew...

[litovskyassetmanagement]

This will apply to those with tax-deferred portfolios of $2M and higher (more so for those with higher amounts). There is nothing confusing about this....

[litovskyassetmanagement]

Oh, I'm not in the camp that says the sky is falling, this is just a bill right now, so I can guarantee that what comes out will be different (as it always...

[litovskyassetmanagement]

They proposed higher tax rates on taxable accounts for 'high earners':

https://www.fool.com/investing/2021/...-the-proposed-...

[litovskyassetmanagement]

My article explains the numbers:

https://www.whitecoatinvestor.com/me...sa-401k-plans/

Roth conversions...

[litovskyassetmanagement]

I was responding to "if you're a high-earner these changes do almost nothing to prevent long term wealth accumulation"

I believe...

[litovskyassetmanagement]

I would start with a good SEO-optimized website, social media (facebook), google listing, reviews, etc. Having good visibility is always the best first...

[litovskyassetmanagement]

https://www.whitecoatinvestor.com/me...sa-401k-plans/

MBR 401k and Roth conversions can result in the savings to the...

[litovskyassetmanagement]

The main idea behind a retirement plan for a medical office is to provide benefits to the owners. The staff comes along for the ride. As long as the numbers...

[litovskyassetmanagement]

You are correct, I should have said 'Multi Employer Plan' instead of adopting employer. This is possible to do now. But it is a burden and the extra cost...

[litovskyassetmanagement]

There is an option to include 1099 contractors in a 401k plan document, but it is almost always set to 'no'. In order for them to offer this plan to a...

[litovskyassetmanagement]

These numbers seem reasonable, but you are correct, very few know how to properly analyze cost vs. benefit properly. For your situation it looks like...

[litovskyassetmanagement]

I've read this article, and his math is suspect. The numbers I get are very different from his. One thing he does not take into account is the cost of...

[litovskyassetmanagement]

An easier way to calculate how much to convert is to subtract current age from 72, and to divide the total amount by the number of years, and this would...

[litovskyassetmanagement]

Net profit, W2 does not have to go higher than $290k. You probably mean CB plus 401k since DB and CB plans are nearly the same (usually CB plans are chosen...

[litovskyassetmanagement]

https://www.cnbc.com/2021/10/19/here...ntil-2032.html

They want...

[litovskyassetmanagement]

This article addresses some of the key aspects of setting up a website (including SEO):

https://www.physicianonfire.com/web-design-propo...

[litovskyassetmanagement]

The first thing to do is to step back a bit, and ask yourself this question: is a 401k the best plan for your practice? The answer is not obvious unless...

[litovskyassetmanagement]

You do not have to have an adviser, there is no law that says that you do. Most issues arise from administrative mismanagement, not necessarily investments...

[litovskyassetmanagement]

That wasn't the original question though, but yes, Cash Balance plans can allow you to contribute beyond the 401k maximum. Despite what might be written...

[litovskyassetmanagement]

It is most often funded by employer, that's why it might look like a pension plan, but employees are able to direct investments, which makes it a DC plan...

[litovskyassetmanagement]

SIMPLE is a good startup plan, and in some cases SEP can work depending on whether you plan to hire staff going forward or not. A 401k is probably going...

[litovskyassetmanagement]

Yes, it is very easy to compare fixed fees with AUM fees using the calculator Tim mentioned (that we've developed specifically for this purpose):
...

[litovskyassetmanagement]

Several observations:

1) Does your spouse work elsewhere, and if so how many hours? If she works full time at another place, in that case...