Small Business Owner Interested in Vanguard Small Business 401k

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Topic Author
jbow44
Posts: 76
Joined: Sat Jan 03, 2015 8:38 am

Small Business Owner Interested in Vanguard Small Business 401k

Post by jbow44 »

So, I bought an established business last year with a business partner and we have 5 fulltime employees. We are interested in offering a retirement savings program to them. I'm very familiar with Vanguard from a Roth IRA/Brokerage account perspective, but as a new business owner and still learning all the complexities of HR, taxes etc., I want to learn more before diving into options that could impact not only my finances but that of others.

My questions:

1. Does anyone have any experience with Vanguard's program? Any insight or should I just call them and talk through it? Should I be looking in a completely different direction for such a plan?

2. Does Vanguard provide advice for investment selections for my employees or is that through another entity? If so, how is that charge included?

3. What is the cost of the plan from an administrative standpoint?

4. Does Vanguard interface easily with most HR firms for pre-tax deductions before paychecks are transferred to employees?

5. Is there an option with this plan for the employee (or me) to make Roth contributions as well as traditional pre-tax?

I'm sure these seem rudimentary but this is a new landscape for me and I always value the things I learn here.
PaulS
Posts: 31
Joined: Sun Sep 15, 2019 8:59 am

Re: Small Business Owner Interested in Vanguard Small Business 401k

Post by PaulS »

Hello
Also look into a different option of Simple IRA with Vanguard. No fees to have Simple IRA for your business.
Only down side Is that maximum you can contribute for yourself is not as big amount as in 401 k and for doing that you have to match 3% of your employees contributions.
I still find Simple IRA is very less expensive to run for small business as compared to 401k
Just another idea to offer retirement to your employees
401k plan for small business sometimes be very expensive and Lot of work. I am not discouraging you from having 401k but just presenting you with another idea.
grayparrot
Posts: 201
Joined: Mon Jan 09, 2012 3:09 am

Re: Small Business Owner Interested in Vanguard Small Business 401k

Post by grayparrot »

I set up a personal 401k at Vanguard a couple years ago for my hobby business, and have made meaningful contributions.
The problem for me is that I want to do a Roth conversion of a non-deductible IRA that I have; as many know, the rub is that conversions must be made proportionally across all your tax-deferred non-Roth IRA balances...which can be a problem.

As I understand it, 401k balances are exempt from these proportional conversion requirements. So, it could be compelling to roll over taxable IRA accounts into a solo 401k (as most institutional 401k plans do not permit IRA rollovers into the plan), shielding those funds from a required proportional conversion of the remaining zero-tax amount.

Unfortunately, Vanguard does not allow such rollovers into their Solo 410k plans, as far as they informed me last year. So, I have transferred the Vanguard Solo 401k to eTrade, which has stated that they do permit rollovers into these plans. However, I have not yet tested this, so..tbd.

I would appreciate hearing from anybody else who has successfully accomplished a rollover to a Solo 401k plan at any provider.
JBTX
Posts: 11227
Joined: Wed Jul 26, 2017 12:46 pm

Re: Small Business Owner Interested in Vanguard Small Business 401k

Post by JBTX »

jbow44 wrote: Tue May 17, 2022 9:48 pm So, I bought an established business last year with a business partner and we have 5 fulltime employees. We are interested in offering a retirement savings program to them. I'm very familiar with Vanguard from a Roth IRA/Brokerage account perspective, but as a new business owner and still learning all the complexities of HR, taxes etc., I want to learn more before diving into options that could impact not only my finances but that of others.

My questions:

1. Does anyone have any experience with Vanguard's program? Any insight or should I just call them and talk through it? Should I be looking in a completely different direction for such a plan?

2. Does Vanguard provide advice for investment selections for my employees or is that through another entity? If so, how is that charge included?

3. What is the cost of the plan from an administrative standpoint?

4. Does Vanguard interface easily with most HR firms for pre-tax deductions before paychecks are transferred to employees?

5. Is there an option with this plan for the employee (or me) to make Roth contributions as well as traditional pre-tax?

I'm sure these seem rudimentary but this is a new landscape for me and I always value the things I learn here.
A full fledged 401k plan for 5 employees isn’t going to be cheap.

https://skylinefinancialnw.com/wp-conte ... hedule.pdf

Also look into Ascensus, Employee Fiduciary and Guideline. There are different levels of service in terms of how much help you want in terms of employee advice, administration or fund selection. It’s going to be kind of pricey for 5 employees.

A Simple plan would be a lot cheaper but wouldn’t allow as high of contribution limits.
Topic Author
jbow44
Posts: 76
Joined: Sat Jan 03, 2015 8:38 am

Re: Small Business Owner Interested in Vanguard Small Business 401k

Post by jbow44 »

Good information.

Thanks!!

:beer
JBTX
Posts: 11227
Joined: Wed Jul 26, 2017 12:46 pm

Re: Small Business Owner Interested in Vanguard Small Business 401k

Post by JBTX »

grayparrot wrote: Tue May 17, 2022 10:52 pm I set up a personal 401k at Vanguard a couple years ago for my hobby business, and have made meaningful contributions.
The problem for me is that I want to do a Roth conversion of a non-deductible IRA that I have; as many know, the rub is that conversions must be made proportionally across all your tax-deferred non-Roth IRA balances...which can be a problem.

As I understand it, 401k balances are exempt from these proportional conversion requirements. So, it could be compelling to roll over taxable IRA accounts into a solo 401k (as most institutional 401k plans do not permit IRA rollovers into the plan), shielding those funds from a required proportional conversion of the remaining zero-tax amount.

Unfortunately, Vanguard does not allow such rollovers into their Solo 410k plans, as far as they informed me last year. So, I have transferred the Vanguard Solo 401k to eTrade, which has stated that they do permit rollovers into these plans. However, I have not yet tested this, so..tbd.

I would appreciate hearing from anybody else who has successfully accomplished a rollover to a Solo 401k plan at any provider.
I had heard vanguard solo 401k now accepts roll ins.

viewtopic.php?t=339757

The vanguard solo 401k is not what OP would be interested in. It is for single owner and spouse if employee.
Last edited by JBTX on Tue May 17, 2022 11:09 pm, edited 1 time in total.
JBTX
Posts: 11227
Joined: Wed Jul 26, 2017 12:46 pm

Re: Small Business Owner Interested in Vanguard Small Business 401k

Post by JBTX »

jbow44 wrote: Tue May 17, 2022 11:00 pm Good information.

Thanks!!

:beer
Google small employer 401k in this forum and you’ll get some good info. I helped my wife’s employers switch a few years ago for a 30 person company. We went with Vanguard/Ascensus. Seems like the pricing was comparable to the link above. They also hired an advisor to help set things up for about $5000. Not cheap but they make good money for a small company and didn’t want to screw with it.

I think Guideline was the cheapest, but it is pretty simple and all online. Employee Fiduciary was in the middle.
clarity82
Posts: 3
Joined: Tue Aug 17, 2021 9:05 pm

Re: Small Business Owner Interested in Vanguard Small Business 401k

Post by clarity82 »

We use Guideline for our company with 12 FTEs. Highly recommended.
annied12
Posts: 51
Joined: Thu Jan 21, 2021 4:34 pm

Re: Small Business Owner Interested in Vanguard Small Business 401k

Post by annied12 »

I own a small business. I know that Vanguard is cheap, but it’s knock is that it is non-responsive. I have my Company’s payroll and 401k with Paychex and could not be happier. It is relatively cheap and the reps, although constantly changing, try to answer questions within two hours (this is a Paychex rule). I also added a self-directed account feature to the 401k for my investments for $15/month, which allows me to invest in anything that I want.
annied12
Posts: 51
Joined: Thu Jan 21, 2021 4:34 pm

Re: Small Business Owner Interested in Vanguard Small Business 401k

Post by annied12 »

You may also want to explore a PEO option as well since it could significantly lower your health insurance costs. If you do look for a PEO, look for a smaller one since it will be more cost effective than one of the larger ones. Unfortunately, this takes time. If you have an insurance broker, he can help
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