I just read about a relatively new version of a 401(k) designed for small businesses that employ only owners and their spouses. Allows you to contribute up to $40k. Anyone have any personal experience or strong opinions about this? The info I have came from http://www.pioneerfunds.com/uni_k/benefits.jhtml

Thanks

Something smells with this plan...and here's why...

1) I don't see detailed documentation on the plan on their site just a brief faq that doesn't say anything about fees.

2) Not one index fund

3) Take a look at some prospectuses since those will most likely be the only funds you have to chose from and look at their fees. Two funds for example the bond and large cap growth, Class A has 4.5 and 5.75% loads and 1.2 and 1.5% expenses. The bond fund expenses are absurd IMO and large cap growth are not much better.

I just took a brief look. I would suggest you look deep beneath the covers on this one.

HTH

op2s, you asked:

<< I just read about a relatively new version of a 401(k) designed for small businesses that employ only owners and their spouses. Allows you to contribute up to $40k. Anyone have any personal experience or strong opinions about this? The info I have came from http://www.pioneerfunds.com/uni_k/benefits.jhtml >>

Pioneer is apparently operating as administrators of a qualified contribution plan using their own set of mutual funds and calling the plan the Uni-k. Actually you can set this kind of plan up just about anywhere, as this simply has to do with the changes made back in 2001 under the Economic Growth and Tax Relief Reconciliation Act. The new rules allows a business with an “owner only” to contribute substantially more to a combination of a Profit Sharing Plan . . . .AND a 401(k) plan. You might find the following article helpful:

http://www.msnbc.com/local/ESJ/A147125.asp?0LA=ajq9n&cp1=1

Thanks,

That is exactly what I wanted...to separate the actual plan from a particular administrator. I'm new to this and trying to understand the options before rolling several old SEPs, IRAs, and 401(k) plans into something new and trying to take a little more control of it.

Is there a good place to compare the companies that set up and administer these plans? I assume that they do have to be administered by some third party.

Is it possible to have one set up, but still maintain control of where the money is invested? I was thinking of doing a mix of Vanguard indexed stock funds.

Is there a good place to compare the companies that set up and administer these plans?<<<

Try TD Waterhouse

op2s , you asked:

<< That is exactly what I wanted...to separate the actual plan from a particular administrator. I'm new to this and trying to understand the options before rolling several old SEPs, IRAs, and 401(k) plans into something new and trying to take a little more control of it.

Is there a good place to compare the companies that set up and administer these plans? >>

No.

In terms of plan administrators, there can be all sizes of businesses that do this kind of thing. As a consumer, you shop and compare as you would with any service you might buy.

<< I assume that they do have to be administered by some third party. >>

No. These Individual (k) plans can be self administered and self directed. . . or you can choose to hire an administrator at a cost that would typically be much lower that other types of plan administration because of its simplicity. But one would probably want SOME guidance, probably through one's tax accountant or some other tax expert.

<< Is it possible to have one set up, but still maintain control of where the money is invested? >>

Yes, you can self direct it.

<< I was thinking of doing a mix of Vanguard indexed stock funds. >>

There's probably someone at Vanguard that can offer some assistance regarding these Individual (k) plans.

There's probably someone at Vanguard that can offer some assistance regarding these Individual (k) plans.

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Sadly, this does not appear to be the case. My wife is starting to finally see some revenue in her sole proprietorship, and I just did some looking around for "solo 401k" providers. Almost all of them are high fee products, either via the plan costs or (more commonly) loaded funds and other overpriced investment options. The only reasonable choice I found was Fidelity. They appear to be the only one of the large, low cost brokerages that ofer solo 401ks. When I spoke to the rep yesterday, I was told that the only fees that they charge are minimum account balance fees and whatever the cost of the funds you choose. I would imagine that you could probably find a very cheap Fidelity index fund or funds to do the job. I ordered the paperwork to check it out, but this looks like the best way to go.

brewer12345 , you wrote:

<< There's probably someone at Vanguard that can offer some assistance regarding these Individual (k) plans.

************************

Sadly, this does not appear to be the case. My wife is starting to finally see some revenue in her sole proprietorship, and I just did some looking around for "solo 401k" providers. >>

You don't need to look for a “provider.” You can set these up yourself, as they can be self-directed. The assistance I was referring to was not that of being a “provider” but of some simple information and maybe providing the few forms it takes.

<< Almost all of them are high fee products, either via the plan costs or (more commonly) loaded funds and other overpriced investment options. >>

No doubt all these “providers” are taking advantage of this opportunity to sell their goods. The point is of course, you don't need them to set up and administer an Individual (k) plan.

<< The only reasonable choice I found was Fidelity. They appear to be the only one of the large, low cost brokerages that ofer solo 401ks. When I spoke to the rep yesterday, I was told that the only fees that they charge are minimum account balance fees and whatever the cost of the funds you choose. I would imagine that you could probably find a very cheap Fidelity index fund or funds to do the job. I ordered the paperwork to check it out, but this looks like the best way to go. >>

Sounds like Fidelity might be a good choice as they seem to be offering to administer such a plan at a very low cost . . . .??? But you don't need them to do that if you choose. :-)

No doubt all these “providers” are taking advantage of this opportunity to sell their goods. The point is of course, you don't need them to set up and administer an Individual (k) plan.

*************************

Maybe I am missing something here, but I was under the impression that you needed a custodian to hold the assets for you in the form of a solo 401k account, no? Last time I asked Schwab, for example, I was told that they do not offer such services. It isn't the administration you'd be getting from Fidelity, it is the asset-holding services, at least as far as I understand it.

Not all providers offer the UNi-K, Solo-k, Single-k plan design.
Pioneer, Oppenheimer, Alliance, T.Rowe, Hancock, and I believe Fidelity offer them. You will be limited to their funds if going direct to them
You do need to have a Plan document, and you will need to file an IRS Form 5500EZ once assets reach $100k. If you want open architecture to buy anything you want Scwab offers them, or you contact a local pension administrator, and they should be able to set you up with a document.
You can get to $41k in a SEP IRa as well without needing the document and the 5500ez. THe Single k allows for 25% contributions just like the SEP, however, in the Single K you can then contribute an additional 13k. That is provided the 2 amounts (25% plus 13k do not exceed $41k.)
You can also borrow from a Single k, you can not borrow from a SEP.l
www.individualk.com for more info

Bill

brewer12345, you asked:

<< Maybe I am missing something here, but I was under the impression that you needed a custodian to hold the assets for you in the form of a solo 401k account, no? Last time I asked Schwab, for example, I was told that they do not offer such services. It isn't the administration you'd be getting from Fidelity, it is the asset-holding services, at least as far as I understand it. >>

OK, I see what you're asking here. Like with IRA's and other plans, an organization does have to have a plan to handle the accounting and paperwork for such a plan. But this doesn't necessarily mean there's any real “administration” of the plan going on like you might see in other qualified plans. And not every investment provider provides these or the same things. So, to get what one might really want, using a some pension administrator might be a good place to go as some administrators don't charge much for these.

My wife and I have had a "solo" 401K for two years now. Our plan is a combo product in that one company handles the investment services part and another handles all of the necessary IRS/DOL paperwork. In our case, the investment provider is SafeCo and American Express handles all of the paperwork. We pay a flat annual fee of $150 for our plan and generally our share of the paperwork amounts to checking, signing, and mailing all the forms that AmEx prepares for us. Pretty simple...

SafeCo offers us a decent choice of mutual funds, but will also allow for direct investing in almost anything via a deal they have with ShareBuilder. Most of the funds they offer are of the type that carry higher load fees, but they waive all loads for transactions within the 401K account. They even have a nice online portal where you can view your account, change investment options, and any of the other common things you would do with an investment account (statements, transaction history, etc.).

By the way, you will need an "administrator" for a solo 401K. As with any 401K plan, you have to do annual compliance testing for the IRS and the DOL. Granted, as a solo 401K owner you are only going to be covering 1-2 people and this type of testing is a joke, but it is still required by law.

Cali4en