Does anyone have recommendations re good 401k provider for a small business ?
Question:
Thanks!
Vanguard.
Fidelity Investments offers 2 types of small business retirement options: the SIMPLE-IRA and 401(k).
For 2006, the SIMPLE-IRA allowed up to $10,000 employee deferral, with matching employer contribution of up to 3% (not to exceed $10,000). T
For 2006, the 401(k) allowed up to $15,000 employee deferral, with employer contributions of up to 100% of salary; maximum 401(k) contribution (employee and employer) could not exceed $44,000.
Both plans have additional amounts allowed for employees age 50 and over.
I recently researched this for my own potential business plans, but postponed those plans when a good employment offer fell into my lap.
Citistreet. Available through a Smith Barney advisor or Citistreet themselves.
Ok, this is where I do some shameless self promotion...letting you know up front I'm a TPA so disregard if you want.
You need a TPA not a 401k provider. A TPA will help you design your plan so that YOU receive maximum benefit. There are people out there in companies YOUR SIZE that are putting away 45,000 into their retirement this year without having ANY out of pocket contributions going to their employees. The employee portion is funded almost entirely with the tax savings that you receive from funding the 401k. Ex. You make 200k a year. You have 9 other employees who make an average of 50k. Assuming you have 3 of them who are 17 years younger than you, you can put away the 45k for yourself by contributing 5% of their pay for each of them. Total obligation is 45 for you and 22.5 forthem for total of 67.5k. Assuming you're in 30% tax bracket that's you get a 20k tax break for the contribution. So you've got a 45k contribution for you that cost you 2.5k for the rest of the staff. If you have your spouse working with you/for you then the advantage is even greater. Why limit yourself to the same contribution level as your employees. Why not get 50-70% of your contribution...it's your company isn't it? You took the risk in starting it, shouldn't you get the benefit? Isn't getting 60% of your total contribution worth doing a little more research? Isn't it worth more than .35% lower expense ratios??
Maybe due to the makeup of your employee base, this plan may not work for you...but point is the investment providers such as Vanguard, Fidelity, Citistreet aren't going to do that work for you but a TPA will. You will never know if it works if you contact Vanguard. And, a typical TPA will only cost you about $1,800 per year. Last thing...TPA will STILL be able to get you into those providers.
If you're not interested in putting away that much...then a 401k may not be what you need. A SIMPLE 401k or a SIMPLE IRA may suit your purposes. But your plan and it's investments should be driven by how much you want to put into it and what you want to invest in not by how low the expense ratios are. Expense ratios are only part of the equation.
bottom line...talk to a TPA. They can help you.
But, you're spot on in avoiding load funds...make sure that the investments you choose do not have those. And, they also shouldn't be comprised of PORTFOLIOS such as target maturities..Those are drains to the pocket book.
T Rowe Price
More Questions & Answers...