Author Topic: Multi-employer 401(k) plans as alternatives to small business/solo 401(k)s  (Read 756 times)


  • Bristles
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This question could go in either Entreprenurship or Investor Alley.

Those of us who do freelance work or have small businesses can shield our income from taxes, either now or in the future, by shoving it into 401(k) plans. Unfortunately, this can get complicated.

Solo 401(k)s can be had for minimal fees, but cause difficulties if you add an employee. They also don't have fully creditor protection and produce moderately heavy paperwork/compliance requirements.

Small business 401(k)s can be had for moderate prices, are designed to let you add an employee, and have full creditor protection. Unfortunately, they produce heavy paperwork/compliance requirements.

Enter multi-employer 401(k)s. They are run for groups of companies. They can be cheap due to economies of scale, it is easy to add an employee, they have full creditor protection, and the operator of the MEP does all of the paperwork.

The trick is finding one with an organization that you can join easily. Does anyone know of any decent MEPs with broad bases of membership?


  • Pencil Stache
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MEPs have issues that standalone 401(k)s don't. For example, getting out of an MEP can apparently be a pain in the butt because you can't just terminate your piece.

Have you looked at something like Guideline? It gets good reviews on Bogleheads. From what I understand they take care of almost all the paperwork and compliance for you for a relatively low, easy to understand price: $8/mo/employee plus Vanguard's expense ratios. No additional custodial AUM fee. They take care of the paperwork, including testing and the 5500EZ preparation.

I've been campaigning to use them at my employer which currently doesn't offer a 401(k) at all. Hopefully sometime this summer we'll finally get it set up.


  • Handlebar Stache
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  • Posts: 1250
  • Age: 59
  • Location: Redmond, WA
    • Evergreen Small Business
Two comments:

For the reasons you mention, I've often counseled people to look at a SEP as the "first" option... and then if they ever need to cover employees to look at a Simple-IRA. BTW the thing with a Simple-IRA once you have employees is that the extra cost of the 401(k) eats up any advantages of the larger pension fund contribution you get with the 401(k).

Another thing to be aware of? This new Sec. 199A deduction for some small businesses potentially replaces the traditional employer pension plan. I posted a blog article about how this works here: Sec. 199A changes retirement planning