When our company wanted to roll out a 401(k) plan for our employees, we researched a few options. After analyzing the options, the costs and the offerings, we went with Guideline to manage our 401(k) plan for our company. In this Guideline 401(k) review, you’ll learn some of the key features, what the process was like and ultimately why we chose to go with Guideline for 401(k) management for our company.
When we began our process, we got proposals from traditional financial management firms that help small businesses with 401(k) plans. These proposals were very traditional and on average had 3 pages of fees and estimates of fees. For a small business like ours with roughly ten employees, companies were estimating roughly $5,000 in annual costs broken out in all kinds of fees like custodial fees, investment advising fees, payroll integration fees, and more. This was already a red flag for me.
When we began looking at Guideline, I was immediately intrigued by the pricing and not just the low pricing, but the simplicity of the pricing. A $39 per month base fee plus $8/mo per employee. If you need the extra features (which we’ll explain later), you’re looking at $99/mo base fee plus the $8/mo per employee. Even with the more expensive option, we’re looking at $99 per month, plus 10 x $8 = $80 per month. This comes out to $179 per month, or $2,148 per year. This already comes out to less than half of what the traditional financial companies were proposing.
But what about customer service? Perhaps the local financial firm might be more expensive, but wouldn’t it be nice to be able to have someone you can talk to? This is a legitimate question, and our company debated this for a period of time. Two things drove our decision. First, we determined that once the plan is up and running, the need for regular communication is probably really minimal. Second, we determined through conversations with Guideline that the communication was actually rather top notch. While you might talk to different individuals at various times, these people are dialed into 401(k) plans. Compare this to the local financial firm that deals with a wide range of clients for a wide range of services and products. At Guideline, it’s all about the 401(k), so the help is really nice. Plus, with the $99/month plan you get a dedicated person for support and help, so it alleviated some of our concern.
Setting up the plan
As we analyzed what to do with a potential 401(k), we had a few main questions we needed clarity on to ensure compliance and the 401(k) was accomplishing our goals. They were:
- Did we need Safe Harbor to be part of the plan in order to ensure compliance with respect to owners/highly compensated employees and other employees?
- What were our options for profit sharing and was it possible to structure profit sharing to maximally benefit the owners of the company?
- Considering the above considerations, could we still setup a 401(k) that employees were excited to participate in and would see as a great benefit with our company?
Guideline was extremely useful in helping us set this up. First, we determined that safe harbor was indeed a necessary component of the plan and we opted for the 3% non-elective contribution to all employees. This ensured compliance regardless of participation and contribution levels of highly compensated employees and lower compensated employees.
Second, Guideline ran several profit sharing models for us and showed us how various models would result in terms of how much profit sharing went to various groups of employees. It was super beneficial. It showed us that the “New Comparability” profit sharing method was best for us. Note that in order to do the New Comparability profit sharing, this bumped us up to the $99/month plan, which was totally fine.
Once we decided to move forward, we moved to setup the plan with Guideline. The setup process was well organized and pretty easy. As we’ll get into more on the Onboarding portion, the interface is really slick. The plan administrator has a list of steps to take in order to get the plan setup. The only part that we hit a slight snag on was the payroll integration component with our ADP payroll system. There wasn’t a snag in the technical sense, but the instructions Guideline provided there weren’t 100% clear. It required me to ask a few questions. Once I figured it out, it was done, and then we were all set up. Not too painful at all.
Once the plan was setup, the system automatically scheduled invitation emails to the employees. I was able to see when these emails would go out, so I went ahead and announced the 401(k) plan to our employees so that the first time they heard of it wasn’t from something called “Guideline.” Then the Guideline emails went out and provided links to setup your own individual 401(k) options. This is where Guideline really shines. The online interface is just fantastic. It lets you setup your contribution level and set your investment options. You can either go through a series of questions about risk and goals and it’ll setup a simple allocation for you, or you can setup a custom portfolio by assigning allocation percentages to various funds that are offered.
The interface shows how much money you’ll be contributing each pay period based on the payroll integration and the contribution percentage set. It’s just a really simple and intuitive interface that all our employees found wonderful.
Guideline offers a number of Vanguard funds including their super low cost index funds. This was a major plus for me as I did not want a 401(k) plan that forced participants into funds with high fees. That’s super aggravating for me, and was an immediate deal breaker as I searched for our solution.
Overall, I hope this Guideline 401(k) review indicates our very pleasant experience so far with Guideline as a 401(k) provider. The interface is top notch, and Guideline handles integration and compliance in a way that makes us confident we’re running our 401(k) correctly.
We’ll update this review as our experience with Guideline continues.