Very interesting situation and wondering if anyone has walked through this recently, had solutions or knew of a successful story:


The business currently has 2 employees. After the first of the year, employee number 3 & 4 will more than likely added. Running through the process, what are the solutions for 401k style retirement accounts?

I am specifically looking for a reasonable priced 401-k for small business. Who is offering something like this?

Thanks for any direction as I know there are a wealth of experts on here.

How big do you think you'll become? We have a SEP IRA.

By year ends
2018: 3-5
2019: 4-7
2020: 6-10
2021: 8-12
2022: 11-15

SEP IRA is what you want.

I'm an enrolled agent that does tax prep, payroll, and writeup for small businesses.  My clients range from $100 thousand to $30 million a year in revenue, with most under $1 million.  Staff size ranges from 1 to 40, with most being under 10.  

Of all those clients, only two have a 401K plan, and they are on the larger side of things.  The problem with 401K plans is that they can be expensive to setup and maintain.

Most of my clients use SIMPLE IRA plans, and a smaller number use SEP IRAs.  

SEPs can allow for large contribution amounts, but the contribution percentage must be the same for all employees and most employers don't want to contribute 25% of an employee's wage to a retirement plan.  


You need to find an accountant and an investment adviser that will communicate with each other so they can properly advise you.

  Go to Vanguard and get a small business 401(k).

Short update and more information:

Ok after talking with employee number 1, we outlined what is imporant to us and then the employees:
1) Max out 401-k moneys. Currently both employees are maxing out $18k per year as the goal is to put 20% of income into retirement annually. non-negotiable.

2) In time, the company will more than likely be generous with matching as well as using bonus/profit sharing into the plan

3) Employee #1 and #2 exceed the AGI for IRA contributions. This makes having a SIMPLE ira not ideal as then the remaining ~$6k would be double taxed into a non-deductible IRA or just straight mutual fund purchases. Does this sound correct?


Talking with two different firms, as recommended and preliminary pricing for small business 401-k. Which would you do? Which is better short term and which is better long term?

2018, we'll be starting with zero balance but end of year should be $36,000 minimum:

Option 1 small business 401k:

$500 Setup fee
$1,600 Annual Base fee plus $40 per participant and .08% plan assets
Annual advisory fee: 0.45% of plan assets

Option 2 small business, up to 15 employees:

$3,450 annual fee for up to 15 employees
$1,000 setup fee or $1,500 transfer of plans
No %'s annually taken

Thoughts? or other IRA directions/solutions? More information needed?

Is one of those options Vanguard (just curious)?

Yes, one of the options above is Vanguard.

They are currently running our individual401-k program. We won't be able to use that program once employee comes online, unfortunately.

Vanguard overall is very nice, easy interface, expenses are fantastic with many options for shares as well as high quality. In fact, we have moved everything we own over to them, all IRA's etc and individual accounts. Consolidate it in one location as we have that much confidence in them.

We didn't check with all the players in the game regarding pricing or options: schwab-fidelity etc.

But now I am wondering if I should check with a multitude of options?

It looks like many people are getting in the small business 401-k game. I suspect automation, technology and the internet has made this possible. This is allowing the commission based fees to start creeping down. Almost commodotizing the 401k industry.


Hmmm I came across these guys. Their fees are some of the lowest out there. Cheap sometimes isn't what we are looking for. What am I missing?

https://www.employeefiduciary.com/401k-plan-pricing/

Business owner with about 14 employees here. We looked into a 401 and the annual fee is around $3K. We went with Simple IRA (Schwab) and are very satisfied.

There is no limit on income with regard to deductibility of simple iras. Regular ira yes, simple no. We have 5 employees and use a simple. I wish I was able to contribute more. I looked at a sep and was a participant in one years ago but it has two main problems. The plus of a sep is you can contribute a huge amount but the downside is the percentage has to be the same for everyone. As the business owner I pay myself a reasonable low salary and take my income as distributions in order to minimize SS taxes. The only way I can get a large sep contribution is by either having a huge salary which means getting hammered on SS or by contributing a huge percentage which means I am forking over a ton to employees. I like my employees and take care of them and match their simple contributions but I already pay them above the going rate and adding 25% to that for a beefy sep contribution isn’t in the budget. Besides most my guys are short sighted and would prefer a large paycheck today than more retirement so they would rather see a raise than a huge sep contribution.

I have looked a little into the 401k and the fees and complexity of it just seems like to much for our organization.

More information for you as the newer 401-k's are much more affordable. Based on your comments, my option 1 (see below) might be perfect for you. You can stash $18k this year and $18.5k next year for your contribution and then you as the employer can do $18k and possibly up to $36k to yourself without having to match the same to the employees. The money will stack up fast as the fees will be low. Considering .45% @$100k is still a small number

Option 1 small business 401k:
$500 Setup fee
$1,600 Annual Base fee plus $40 per participant and .08% plan assets
Annual advisory fee: 0.45% of plan assets
This was "Americas best 401-k" out of Phoenix. They gave us a nice proposal which we've got when we are ready to pull the trigger. Very professional and easy to work with.

Contribution limits per IRS
https://www.irs.gov/retirement-plans/401k-plans-deferrals-and-matching-when-compensation-exceeds-the-annual-limit