Company SEP, do I have any options here?

[Maxburn]

Last year my company (small) ended their 401k (too much work apparently) and went back to SEP IRA. It's with Edward Jones and we are in the process of opening the account now.

I specifically told the advisor I wanted low expense ratio funds and they came back with funds with a total average in the 0.57% range with a high of 1.08 and a low of 0.16.

Additionally Edward Jones charges 1.08% on the first $250,000 ($81) and some sort of "minimum fee adjustment" of $39 totaling $120 a year. For them to deal with me I guess.

Can I tell my company I'd rather go with Vanguard? How would I even go about doing this? Could I handle this myself?

A year or so you all helped me realize how much Ameraprise was ripping me off and I moved everything to Vanguard where I'm averaging around 0.078% expense ratio. I paid their FA to get me set up and then I cut him loose. I have a traditional IRA, Roth and a general money market fund there.

 

[OldShooter]

... I specifically told the advisor I wanted low expense ratio funds and they came back with funds with a total average in the 0.57% range with a high of 1.08 and a low of 0.16.

Per the new DOL rule, your advisor is required to act as a fiduciary. I would simply tell him/her what funds you want in your account or set an upper limit like 20bps for domestic and 55bps for international and, if there is pushback, ask to talk to his/her compliance officer. Also specify that funds must be based on broad market indices like the Russell 3000 and ACWI. NOT the S&P 500 or other sector funds. Finally, check the funds selected to make sure they do not have 12b-1 fees. Acting as a fiduciary he/she should not be able to screw you this way, but tigers don't change their stripes overnight. If you find 12b-1 fees definitely talk to Compliance.

Additionally Edward Jones charges 1.08% on the first $250,000 ($81) and some sort of "minimum fee adjustment" of $39 totaling $120 a year. For them to deal with me I guess.

Can I tell my company I'd rather go with Vanguard? How would I even go about doing this? Could I handle this myself? ...

As far as the company is concerned, you'll have to ask them about changing their plan to VG. It would be in the best interest of employees, including the top people who will make this decision. But people don't like to admit mistakes, either.

Unless you are trying to capture a match, there is probably no reason that you need to participate in the plan at all. That's the easiest way to ditch Eddie before he screws you. If there is a match, Eddie's wrap fees and expensive funds are simply an offset to the match. Instead of a 6% match you may net only a 4.5% match but, hey, it's free money.

 

[Maxburn]

Per the new DOL rule, your advisor is required to act as a fiduciary. I would simply tell him/her what funds you want in your account or set an upper limit like 20bps for domestic and 55bps for international and, if there is pushback, ask to talk to his/her compliance officer. Also specify that funds must be based on broad market indices like the Russell 3000 and ACWI. NOT the S&P 500 or other sector funds. Finally, check the funds selected to make sure they do not have 12b-1 fees. Acting as a fiduciary he/she should not be able to screw you this way, but tigers don't change their stripes overnight. If you find 12b-1 fees definitely talk to Compliance.

I'm obviously not on your level. I just simply googled the fund code they listed and looked for "expense ratio" to see what I found for the amounts listed in OP.

As far as the company is concerned, you'll have to ask them about changing their plan to VG. It would be in the best interest of employees, including the top people who will make this decision. But people don't like to admit mistakes, either.

I don't have the knowledge to convince them of this, I suspect there is some good old boys club situation going on here anyway and wouldn't really ingratiate me to them.

Unless you are trying to capture a match, there is probably no reason that you need to participate in the plan at all. That's the easiest way to ditch Eddie before he screws you. If there is a match, Eddie's wrap fees and expensive funds are simply an offset to the match. Instead of a 6% match you may net only a 4.5% match but, hey, it's free money.

It's not a match, just part of compensation. The money I control is all going to VG.

 

[Onward]

There's no match in a SEP IRA. All contributions come from the employer. So you should stay in the plan and the get the free $$, even if Edward Jones then rips you off (typical for them) on the custody/mgmt end.

Also, your company's contributions to your SEP are deductible on your tax return.

 

[MooreBonds]

Also, your company's contributions to your SEP are deductible on your tax return.

Incorrect. This is traditionally a corporate expense that the company deducts from the corporate income tax return.


Also, check the documentation. Per IRS rules, you do NOT have to keep it at the same institution that it is deposited at. If they are truly hard-nosed and will only deposit it there, simply transfer it immediately to another firm:

(info below from https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-seps-establish-a-sep)

How do I establish a SEP?

There are three basic steps in setting up a SEP, all of which must be satisfied.
...
Set up a SEP-IRA for each eligible employee with a bank, insurance company or other qualified financial institution. The employee owns and controls the SEP-IRA.

....

Can each of my employees choose a different financial institution for his or her SEP-IRA?

Although the law does not require each participant’s SEP-IRA to be at the same financial institution, the institution that offers or administers the SEP may require you to deposit SEP contributions initially into SEP-IRAs maintained at that institution.

My family's company (that I work for) has a SEP IRA plan, and they simply ask each of the employees which firm to make the check payable to for deposit into your SEP IRA at that broker. Then you simply deposit it into that account. The OP's employer should also offer this, but may require all funds to be deposited into one firm to start. However, legally, you are able to transfer them out immediately to another firm.

 

[Texas Proud]

Not sure about Vanguard and SEP, but when I was setting up the company 401(k) they would not talk to me as our balance was too low for them...

Went with Fidelity as they would take on that was less than $1 mill....

 

[DrRoy]

If there is no match in the SEP, skip it and contribute to an IRA (I like Roth) instead.

 

[Onward]

Incorrect. This is traditionally a corporate expense that the company deducts from the corporate income tax return.

My mistake. The business deducts the contribution. I was thinking of a sole proprietor, where the SEP contribution does get deducted against income on the 1040.

 

[Maxburn]

What I was kind of hoping here was they could take the planned SEP contributions and dump them in my existing Roth IRA. Doesn't seem like things work like that though.

Can I move it to my Roth after the fact?

If there is no match in the SEP, skip it and contribute to an IRA (I like Roth) instead.

Exactly what I am doing (I have already max funded my Roth for 18), BUT my company dumps money into the SEP whether I contribute or not. What I specifically don't like is they came back with a selection of medium/high expense funds after being asked for low expense funds, PLUS an apparently mandatory "service" fee of $120 a year.

Not sure about Vanguard and SEP, but when I was setting up the company 401(k) they would not talk to me as our balance was too low for them...

Went with Fidelity as they would take on that was less than $1 mill....

This might actually be the case, we are a little under 60 people at the moment. They might have found out it was too expensive or something but the rumors were it was too much work. Thing is they actually DID this for a year or two. I moved my old EJ 401k to VG IRA when that ended. Now we are going back and I'm a touch more knowledgeable and looking at some details while they are signing us up and I don't like a couple things I see.

 

[MooreBonds]

What I was kind of hoping here was they could take the planned SEP contributions and dump them in my existing Roth IRA. Doesn't seem like things work like that though.

Can I move it to my Roth after the fact?

The SEP IRA is pre-tax dollars. It cannot be transferred to your ROTH. The only way to do so is to withdraw your SEP IRA dollars, pay income taxes and a penalty, then contribute the after-tax dollars to your ROTH. In short, it is not a wise thing to do.

Exactly what I am doing (I have already max funded my Roth for 18), BUT my company dumps money into the SEP whether I contribute or not. What I specifically don't like is they came back with a selection of medium/high expense funds after being asked for low expense funds, PLUS an apparently mandatory "service" fee of $120 a year.

In my post above, I included specific references directly from the IRS' website. Did you read my post and the reference? There should be nothing stopping you from transferring your funds straight out to the Traditional IRA/SEP IRA custodian of your choice. There may be a transfer out fee, which sucks - but as I (again) mentioned before, your employer should be willing to make out the check directly to your SEP IRA custodian of choice, and send the check directly to them.

 

[Maxburn]

Had a couple meetings.

-My employer is unwilling to send the money anywhere else. Again I got the impression "too much work" to deal with everyone's personal choice in this matter.

-Talked to EJ manager and he said these positions that were picked are limited to what's available in the SEP fund but he could look and see what he could do. Will see there.

-I guess my next call is VG to talk about moving to them shortly after it gets deposited.

-Sucks I'm getting roped into an advisor fee for someone I'm probably not going to use and can't fire.