Who set up a plan with for a small company

[Guest And another thing ...]

A friend of mine has a small company of about 9 employees. She wants to set up a profit sharing plan and contribute about 50,000 per year in company contributions. Can anyone recommend an institution that caters to small companies to provide a plan document, administration and government filings preparation?

[Guest b2kates]

generally start with the local banks, or insurance agencies. They would salivate for this type of client.

You do not say where the employer is (what city).

Many mutual funds are affiliated with local administrators and can provide a seamless package.

would love to have a client as seemingly straightforward as this.

[Guest And another thing ...]

The company is in Los Angeles.

I'm interested in opinions about which financial institution provides the best value (most seamless package for the least amout of fees) for small plans.

[Guest mr.pension]

AXA Advisors has small plan, full service, programs available. They provide document, multiple company variable annuity contract, and 7/24 phone or internet participant contact as well as signature ready tax forms. Fees are very reasonable.

I am in NY,but liscensed in CA, or you can call the company at (800)528-0204. Obviously you would need to be liscensed throuhg to sell the annuity product.

[JanetM]

For such a small plan - with low start up assets - I would ask the CPA firm handling the other work to take this on. In prior life I did TPA work for CPA firm. For a small plan like this we set up individual accounts at mutual fund house or brokerage firm (we used AIM, Vanguard, Putnam etc. ).

We changed fee for document, and 5500 - as there is virtually not recordkeeping required with individual accounts. Fund company changed small fee per account ($20 to $50) to handle investments.

I would not go with a bank - my experience is that they charge too much for plans of this small size.

[Larry M]

first, recognize my opinion is not without bias...but is based upon bitter experiences.

There are many investment firms available to your friend's company in the Los Angeles area. And all of them will provide plan document, administrative filings and investment opportunities for soft dollars (deducting fees from the assets, rather than charging the client directly).

However, I strongly advise your friend to invest about $1,000 per year to hire an independent fee-based advisor who will make sure the plan document does not, inadvertently, create problems for your friend (for example, the prototype document may require the friend to include persons who are not employed by her company); it may not give her/him the flexibility s/he should have; it may not keep him/her abreast of changes which could benefit or harm theplan; it may not allow investments which are outside the investment firm's family; etc., etc.

In the 40+ years of my practice, the most troubling cases are those where we are brought in to repair the plans originally established by those investment companies (banks, funds, insurance companies) whose primary function is to keep the money. Cleaning up these plans costs much more in fees than the nominal $1,000 per year would have cost.

And, not insignificantly, the advisor can help negotiate a reduction in the investment company's which would more than offset the annual retainer.

[actuarysmith]

First let me state that I am very biased (I am a principal with a TPA). Now that we have that out of way................

In the TPA industry, we almost universally regard banks (and some insurance carriers) as the "bottom of the barrel" in terms of plan admininstration.

The documents are frequently filled out by someone with knowledge of investments (very little qualified plan knowledge), or some young buck right out of school with no practical plan experience.

I agree with the comment that it would be very well worth spending $1,000 (or whatever) to have an independent retirement plan advisor help out.

Further, most banks do not offer anything other than cookie cutter plans. It may very well be that this client (though small) might benefit from a cross-tested / New comp plan. Maybe integrated with a Safe Harbor 401(k).

I would be willing to bet dollars to doughnuts (where did that expression come from anyway???) that you won't come up with that type of plan design working with a bank.

P.S. I am not located in L.A., so I have no personal interest in this particular plan.

[Archimage]

I will have to disagree somewhat with the bank comments. I do work for a bank trust department and have had experience working for other TPAs. The banks located in the southeastern United States that I have done business with have had superior service and professional knowledge that exceeds many TPAs that I have dealt with. However, I have seen banks that outsource everything and those guys are the ones you need to stay away from. They clearly meet the description that actuarysmith has laid out. Every type of provider (TPA, bank, CPA firm) has there bad apples. Just be sure you perform due diligence for whomever you might choose.

[actuarysmith]

Sorry, It was not my intention to offend every person that ever has, does, or will work for a bank. I know I made a blanket statement.

It is true that all potential adminstrators (banks, insurance companies, wire houses, CPA's, and TPA's) all have their "bad apples". They all have their "good apples" as well. Archimage sounds like one of them (good apple! that is..........).

Others may have different experiences than I - it's just that in all of the plan takeovers I have worked on (100's) I would have to say that in general, the bank plans have had the most "issues".

I am certain that there are some banks out there that do a great job.

BTW, I would also make the same comments about payroll companies. Ironically, many potential plan sponsors typically think of thier bank or payroll company first when deciding on a new plan.

I don't want to come accross as sour grapes - I am just reacting based upon my experiences. All things being equal, TPA's in general are the top banana! (lol)

All this talk about fruit is making me hungry. Since it is lunch time, I am going to get me a fruit salad!

[IRC401]

The original post stated that the plan would be a profit-sharing plan. It did not state whether there would be 401(k) contributions or individually directed investments.

If there will be only profit-sharing contributions, the way to keep the costs down is to not have individually directed investments and to find a local CPA ot third party recordkeeper to handle the work. On second thought, find a local CPA or third party recordkeeper well outside of LA; they should be cheaper and more competent.

[actuarysmith]

The original post may have said profit sharing only. If the owners objective is to maximize tax deductions while minimizing outlays on the staff, a safe harbor 401(k) with new comparbiilty cross testing provisions may be exactly what they need. In fact, the owner may be the only one that contributes to the 401(k) portion. Usually this approach results in the least number of dollars going to the staff, as compared to just a profit sharing plan - new comp or not.

Without trying to sound like a sarcastic, smart aleck,-One of the reasons to hire an independent advisor is to figure what they need to meet their objectives - not necessarily what they come to you asking for.... most plan sponsors are not aware of what the code and regs really allow you to do.

They normally get all of their ideas from places like Money Magazine - BTW, I am not knocking Money Magazine. I just use that as an example. The point is, the basis of all of their knowledge is a 3 paragraph article in some magazine, coupled with what their brother-in-law who is a stock broker told them once a long time ago...........

Sorry, I know I am rambling. However, I also know that there are a very large number of people reading this that can relate..............

My apologies to anyone I may have offended. That is not my intention at all.

I will go back to eating my fruit salad now....................(see earlier post)

[Guest Factster]

The payroll provider may also offer a good, cost-competitive service for documents, form preparation, and other required records for 401(k) and profit sharing plans. This is an easy way for a small employer to establish a retirement plan because most of the employee data is maintained in payroll records. It reduces some of the administrative paperwork for the employer.

[Demosthenes]

I know that this is anathema to those who get paid for administering plans, but for 9 participants and 50k annually, I'd look at an e provider like Emplanet, ExpertPlan, GoldK, or Teamvest to name a few. Even Fido has an e solution.

They're simple, inexpensive, and a no brainer to set up. Most have a range of funds you can select from and are fully bundled solutions.

A little work with Morningstar to pick a range of funds, some time on a web site setting up plan provisions, and instant Plan!

For the record, I don't work for any of the above nor do I have a financial interest in any of them.

[RCK]

Back to the original question: we have a well-intentioned employer who wants to provide a plan for her employees. So this should be viewed as a long-term commitment, which means that the employer is going to end up having it for, say 10 years, and spending $500,000 on the plan. I doubt that if she had to spend that much on a capital expenditure, she would not get expert help to make the decision. The same logic applies here.

My full disclosure: not in LA, currently employed by plan sponsor, formerly with Big 5 Audit firm, and before that with local TPA.

RCK

[Guest wtitus]

You probably already received more info than you wanted on this topic...but if you're a glutton for punishment, here's my 2 cents.

There is a firm that provides package of TPA, Trustee and investment advisor for very low cost, all internet enabled enrollment, educational material, the works.

I have recommended and utilize this organization as a registered investment advisor for my small clients. I receive no commission, and am a fee-only advisor.

The important thing to remember is setting up these accounts with as little cost as possible. Usually most mutual fund companies and insurance companies will have fairly high admin. expenses related to their funds, some may even charge a load fee and/or commission on investment products. I have also noted a buried asset based fee that is usually deducted from NAV and consequently participants and trustees are not likely to see it. That is three levels of cost. One client I am working with is paying almost 4% just for the priviledge of providing the company business (obviously your investments need to significantly outperform the market to make up for this...).

If you're still looking, let me know.