Profit sharing/tax shelter finances for a start up company

[Cwadda]

Hi folks,

I'm in need of some advice. I joined a start up about a month ago and am planning on staying long term. The company was founded in 2013 and has grown substantially over the years. Is there a tax advantaged account we could get set up to begin saving for retirement?

I know this is a broad question but I can provide some more details if needed. Thanks!

[Cwadda]

Bump !

[seattlecyclone]

Do you not have a 401(k)?

[Axecleaver]

Are you asking whether the company can establish a plan for its employees, or are you asking what your personal options are in the absence of your company establishing a plan? I set up a 401k for my business, it was not very difficult or expensive. There are some first-year costs associated with plan setup, and some recurring costs for managing the plan. I paid about $1000 for plan setup, $525 a quarter, plus each employee pays $4/month.

I chose a provider who charged a flat rate plus a small fee per employee, rather than a provider who charged higher fees through higher fund expenses. Vanguard offers plans too, but they make more sense once you get over 10-15 employees, and their setup fees were higher ($3500, IIRC).

[Cwadda]

Do you not have a 401(k)?

No, I do not.

Are you asking whether the company can establish a plan for its employees, or are you asking what your personal options are in the absence of your company establishing a plan? I set up a 401k for my business, it was not very difficult or expensive. There are some first-year costs associated with plan setup, and some recurring costs for managing the plan. I paid about $1000 for plan setup, $525 a quarter, plus each employee pays $4/month.

I chose a provider who charged a flat rate plus a small fee per employee, rather than a provider who charged higher fees through higher fund expenses. Vanguard offers plans too, but they make more sense once you get over 10-15 employees, and their setup fees were higher ($3500, IIRC).

Yes, I'm asking whether the company can establish a plan for its employees. Thanks for the info, so a 401(k) would be the way to go?

[seattlecyclone]

Yeah, a 401(k) is probably the place to start.

[Cwadda]

Yeah, a 401(k) is probably the place to start.

Thanks! Any companies to recommend starting one? Ones preferably low fees and starting costs.

[letired]

I worked for a startup that offered SIMPLE IRA's, but they have a much lower allowed contribution threshold, which was frustrating. They are supposed to be more simple to set up though.

[Axecleaver]

Yes, do a safe harbor 401k. Here's the vendor analysis I did when I set mine up in February. I went with myubiquity. They recently went through a major site overhaul which was a total disaster, we couldn't get basic problems solved for weeks. We're only just now coming out of that. Anyway, I'm still there, but I can't recommend them anymore. I would probably go with Employee Fiduciary if I had it to do over again.

Basis points is the extra margin they add to whatever fund they offer - so for example, SurePayroll adds 75 basis points to VTSMX (0.16%) would make it cost your folks 0.91%.

Vendor	Setup	Monthly	per emp	Annual	Year 1	Basis Points
ADP	1500	308	4	3888	5388	0
Surepayroll	1000	87.5	0	1050	2050	75
Vanguard	1000	0	only ppl with balance	3475	4475	0
Ubiquity	595	175	4	2292	2887	5.5
Employee Fiduciary	500			1500	2000	8

[Cwadda]

Yes, do a safe harbor 401k. Here's the vendor analysis I did when I set mine up in February. I went with myubiquity. They recently went through a major site overhaul which was a total disaster, we couldn't get basic problems solved for weeks. We're only just now coming out of that. Anyway, I'm still there, but I can't recommend them anymore. I would probably go with Employee Fiduciary if I had it to do over again.

Basis points is the extra margin they add to whatever fund they offer - so for example, SurePayroll adds 75 basis points to VTSMX (0.16%) would make it cost your folks 0.91%.

Vendor	Setup	Monthly	per emp	Annual	Year 1	Basis Points
ADP	1500	308	4	3888	5388	0
Surepayroll	1000	87.5	0	1050	2050	75
Vanguard	1000	0	only ppl with balance	3475	4475	0
Ubiquity	595	175	4	2292	2887	5.5
Employee Fiduciary	500			1500	2000	8

Sweet, thanks for taking the time to put out all that info. I just have one question: is the annual section per employee or for the entire company yearly?

[Cwadda]

Would it be more beneficial to set up a Simple IRA as it is just my boss and me? The contribution limits are lower but the costs and fees might also be lower as well.

[COlady]

What type of entity is the company? C-Corp, S-Corp, partnership?

[Axecleaver]

"Annual" was an attempt to compare apples to apples, it's basically the monthly fee times 12, plus employee fees. I made this table for my own situation, with 4 employees (including myself). So probably would have been clearer to leave that column out :/ Sorry!