Even though 401(k) plans are one of the most popular retirement vehicles that businesses offer, small businesses often shy away from them because they can be expensive and complex to administer. Guideline is our pick for the best 401(k) plan for small businesses because it’s not only one of the most affordable 401(k) options, but also one of the simplest, as it’s a fully managed – or fully bundled – plan designed for small businesses.
Guideline was founded in 2016, and despite being a fairly new company, it has impressive credentials. It’s raised $59 million in funding and was selected by Forbes as one of the 50 fintech companies to watch in 2019. It has more than 6,500 clients and more than $1 billion in assets under management. It partners with leading online payroll, HR and benefits provider Gusto to provide retirement plans for its clients.
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Many small businesses cite expense as one of the reasons they haven’t sponsored a retirement plan, particularly the 401(k). Guideline has low, transparent pricing for both you and your employees; you can view its rates on its website. One of the best things about its pricing is all the fees that it doesn’t charge:
- No advisory fees
- No AUM (assets under management) fees
- No custodian fees
- No third-party administration fees
Here’s what you, the employer (and plan sponsor), can expect to pay for Guideline’s 401(k) plans:
- Setup fee: $0
- Monthly base fee: $39 for Startup Plan; $99 for Prime Plan
- Monthly participant fee: $8 per participating employee
- Plan termination fee: $250. Also called a service wind-down fee, it covers the costs of shutting down a plan and transferring assets. Every plan provider charges this fee, and this amount is lower thanaverage for it.
Incidental plan sponsor fees: You may be charged some fees for nonstandard services on a per-event basis. For example, an ACH chargeback or reversal costs $50. You can view a complete list of fees on the company’s website.
Plan participant costs: Here’s what plan participants can expect to pay with a 401(k) plan from Guideline:
- Mutual fund expense ratio: 0.06% on average. This fee is deducted directly from participant portfolio assets.
Incidental participant costs: Fees that plan participants may be charged per event include the following. You can view the full list at the website linked above.
- Loan application: $100
- Loan maintenance: $75 per year
- Distribution or refund, including hardship withdrawals: $50
- Required minimum distribution (RMD): $50
Guideline offers traditional, Roth and safe harbor 401(k) plans, and it’s a full-stack solution that does the heavy lifting on ERISA compliance for you. This is an important consideration for a 401(k) plan, because you don’t want to risk liability or incur fines for being out of compliance. You also don’t want to spend more time and money hiring and overseeing additional companies to handle plan administration, record-keeping and advisory services.
Here’s a sampling of what Guideline has to offer, including more details on the compliance services it includes with its plans.
Fiduciary support: As mentioned above, Guideline serves as investment manager, plan administrator and record-keeper. It acts as your ERISA 3(16) and 3(38) fiduciary. It also takes care of compliance, reporting and nondiscrimination testing.
- With your account, you receive access to a sponsor dashboard that shows service fee invoices and information about your plan’s participant enrollment and investments, contribution activity, and distributions.
- In addition to nondiscrimination testing to make sure your plan doesn’t favor highly compensated employees, Guideline conducts annual contribution and additions limit testing to verify that contributions are within legal limits and coverage testing to confirm that employee eligibility requirements aren’t too restrictive.
- Guideline is bonded, which satisfies ERISA’s fidelity bonding requirement.
Account setup: The rep we spoke with told us that it takes just a few minutes to set up your account online, but after that, there’s a 30-day waiting period that allows eligible employees to opt out of the plan. Guideline provides a training webinar for your employees.
Payroll integration: Guideline syncs with many payroll providers, including ADP, Gusto, Square Payroll, Paychex and QuickBooks Online. This allows the company to automatically process contributions and notifies it when you hire new employees so they can be added to your plan.
Investment options: Plan participants can choose from Guideline’s six managed portfolios or build their own investment portfolio, with options from more than 40 index funds from low-cost providers like Vanguard.
Fund research tools: Plan participants fill out risk-tolerance questionnaires to help them find the best option for their situation. The company’s website has a full, interactive menu of the mutual funds you can choose from if you prefer to build a custom portfolio.
Advisory services: As the investment advisor for your plan, Guideline provides six managed portfolios that have a blended fund expense ratio of 0.06%. It doesn’t charge any fees for this service.
Reporting requirements: The IRS requires you to submit a 5500 form for 401(k) plans, and Guideline files it for you at no additional cost. This is only for contributions you made to your Guideline plan. If you had a previous plan, you’ll need to work with its administrator for that portion of the filing.
Loans: A plan participant can take out a loan against their 401(k), but it cannot exceed 50% of the vested account balance. The minimum amount is $1,000, and the maximum is $50,000. There are fees for this service.
Rollovers: Plan participants can roll over their old retirement savings accounts into their new Guideline 401(k) account. Roth IRAs can’t roll over, but most other plans types can. These are some of the accepted account types:
- Traditional and Roth 401(k)s
- Traditional and Roth 403(b)s
- Traditional and Roth governmental 457(b)s
- Traditional IRAs
- SEP and SIMPLE IRAs
Withdrawals: Plan participants with qualifying hardships may be eligible to make hardship withdrawals from their accounts.
Guideline’s customer support is available by phone, email and chat from 6 a.m. to 5 p.m. Pacific time. When we called the company, posing as a small business owner looking for a retirement plan, our call was picked up promptly. The rep we spoke with was friendly and forthcoming with information about costs and how the plan works. He followed up with us by emailing a quote and links to key information on the website almost immediately after the call.
The company’s website has a searchable knowledgebase with extensive information on 401(k)s, with sections for employers, employees and advisors. It also has a blog with articles and company information.
Guideline lacks a mobile app, but the website is mobile-friendly, so plan participants can still check their dashboards from their phones or tablets.
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