Vanguard Sold Your Small Business Retirement Plan. Now What?
Vanguard Sold Your Small Business Retirement Plan. Now What?
On April 16, 2024, Ascensus announced their acquisition of Vanguard's Solo (Individual) 401(k), Multiple Participant SEP (Multi-SEP), and SIMPLE IRA Plans business. This move presents an opportunity for plan participants, including small business owners, to reassess their retirement plans. Participants were notified that they have until July 12, 2024 to decide whether to automatically move to Ascensus or explore other options. This decision, while significant, offers questions about fees, services, and support. So, the question arises: is this a beneficial move for small business owners or is it time to shop elsewhere?
Compensation and Fees
To start a comparison, we must consider how much we can expect to pay for the plan. According to Vanguard, "Ascensus will assess a $20 annual fee per participant, for trust and custody services. Account service fees will be $25 per mutual fund for SIMPLE IRAs and $20 per fund for Individual 401(k) and multi-participant SEP-IRAs. Participants who terminate an account with Ascensus after January 1, 2025, will be assessed a $25 account termination fee."
Elsewhere on the Ascensus website, they state that when a plan investment option does not pay Ascensus at least 0.25% (25 basis points) annually, Ascensus will charge individual participants the difference (up to $250). In other words, if you have $100,000 invested in a fund that does not provide kickbacks to Ascensus, you will pay that $62.50 quarterly fee directly.
Ascensus has implementation fees, annual base fees, annual custodial fees, and trading fees. If you are transitioning from Vanguard, where your fee was only $20 and waived if you had at least $50,000 in qualified assets, this might come as a shock.
Participant Education
Fees are only one way to evaluate a 401(k) provider. Understanding how much support is available to you and your employees is also important. Some providers have an educational library with articles, blogs, podcasts, videos, calculators, webinars, and personalized tools to allow participants to compare their situation to others. You may have seen Vanguard's education website, which has personal finance topics and video modules. They also have a Retirement Outlook to analyze your retirement income gap. Ascensus's participant education appears limited to blog articles with answers to frequently asked questions.
Investment Options
Vanguard 401(k) plans have 13,000 investment options. Whereas, the Ascensus individual 401(k) offers 54 Vanguard investment options, with 12 of those being target date funds. Having fewer choices is not necessarily a bad thing. Perhaps you've seen the menu at Denny's restaurant and felt overwhelmed by all the options. American Funds has fewer options with only 40 at last count. If you are looking for more options, consider a plan with open architecture like Voya, with more than 17,000 available funds, or Vestwell, with more than 50,000 from which to choose.
Administrative and Conversion Support
How much help will you receive from 401(k) plan recordkeepers range from a dedicated partner or account manager to a general support line. At Vanguard, you may have been assigned a dedicated relationship manager, payroll integration, via Payroll360.
When all the accounts at TD Ameritrade converted to Charles Schwab in 2023 after that acquisition, customers experienced long wait times to reach customer service. If you decide to transition to Ascensus from Vanguard, you can expect to encounter similar challenges in reaching a person at Ascensus with questions in July or August.
Are There Better Options?
Every three years, the investment team at Hurlow Wealth Management Group runs a benchmarking study, think Consumer Reports for Retirement Plans. Ascensus did not make the list in 2022, the last time this analysis was performed, but yes, there may be better options.
If you would like an assessment of your small business retirement plan, contact the advisors at Hurlow Wealth Management Group. For over two decades, their advisors have helped small business owners and plan sponsors find and maintain the right retirement plan at the best price. Schedule a FREE consultation today.