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Review: Employee Fiduciary 401(k)

Employee Fiduciary is a low-cost 401(k) provider. Employee Fiduciary offers affordable 401(k) recordkeeping and third party administration, and has a variety of investment options for plan sponsors to choose from. The company was founded in 2004, and has carved out a niche serving small businesses looking to offer retirement plans at an affordable cost. This provider is probably best for cost conscious companies that do not yet offer a 401(k) plan, or that have under $3 million in assets and under 50 employees. It does not offer payroll integration, so administering a company with over 100 employees could be more administrative hassle.

 

Employee Fiduciary has several important differences from traditional small business 401(k) providers.

 

Unique Features of Employee Fiduciary vs. Traditional 401(k) Vendors

 

 

  • High degree of fee transparency: Unlike many traditional 401(k) providers, who intentionally make it hard to understand the full price of the retirement plan, Employee Fiduciary clearly outlines what the retirement plan will cost, both to the plan sponsor and the employee.
  • Virtually no employee fees: Unlike most 401(k) providers, who charge asset based fees to the participants, Employee Fiduciary does not seek to make a lot of money out of the employees’ savings.
  • Likes small business plans: This provider is happy to serve companies that do not yet have plans, and companies that have plans in the hundreds of thousands of dollars. This is different than most traditional providers, who only want to work with companies that already have millions in 401(k) assets.
  • Good for solo 401(k)s: Most of the traditional, and startup 401(k) providers, do not like to offer solo 401(k)s – but Employee Fiduciary will offer low cost solo 401(k) plans as well as plans for businesses with employees.

 

Employee Fiduciary's Pricing

 

Employee Fiduciary charges the employer a set, annual fee and another fee that will scale as the company has more employees. Employees are charged a small asset based fee, plus any fund fees. The pricing below is for a regular 401(k) plan, not for a solo 401(k):

 

  • Employer fees: $1,500 annual employer fee, plus $30 per year for each employee over 30
  • Employee fees: 0.08% of assets – note that this does not include the fund fees, which can vary widely. Employee Fiduciary does make it possible to offer low cost funds, which will help keep the employee fees lower, but you can assume that the fees will be at least an extra 0.12% of assets per year.
  • Optional Employee fee: 0.10% of assets for a 3(38) fiduciary (see the next section); this is generally a good idea unless the plan sponsor is working with an advisor.
  • Setup fee: $500 for a new plan, $1,000 for a conversion plan (an existing plan moved onto Employee Fiduciary)

 

 

Fiduciary Protection

 

The base offering is only for the recordkeeping services, custody, and the third party administrator (TPA). There is no investment or administrative fiduciary with the base offering.

 

For an extra 0.10% of assets, usually paid by the employees, Employee Fiduciary’s subsidiary “Frugal Financial Retirement Plan Services, LLC,” will act as a 3(38) investment fiduciary. This means that Frugal Financial is responsible, and takes legal liability for, choosing and monitoring the investment options in the plan. This is probably a good option for plan sponsors who do not have an investment advisor or who are not really comfortable making investment management decisions.

 

This provider does not act as a 3(16) ERISA administrative fiduciary, meaning that they do not take on the legal liability for signing the Form 5500 for the Department of Labor and ensuring that the fund is perfectly administered. This liability will stay with the plan sponsor, and specifically the individual signing the governmental paperwork.  

 

 

Feature Overview

 
 

Employee Fiduciary 401(k)

 
Client Size Small businesses and startups with 1 to 500 employees, including companies without any retirement assets (startup plans)
Investment Options

Large number of investment options
Target date funds

All in Cost Overall low cost; details below
Fiduciary Coverage 3(38) Investment Fiduciary (optional) for an extra fee of 0.10% of assets
Payroll Integration No
Pricing Details

Employer fees: $1,500 base fee to company, plus more if have over 30 employees

Employee fees: 0.08% of assets, plus fund fees

Overall Employee Fiduciary can be a very low cost provider if the right funds are in the investment lineup

Setup Fee $500 for a new plan, $1,000 for a conversion plan
Employee web experience Mediocre
HR portal Mediocre
401(k) Recordkeeper Employee Fiduciary
Mobile app? No

 

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Employee Fiduciary Overview

 

Employee Fiduciary’s CEO, Eric Droblyen, is a strong believer in providing non-conflicted investment services to 401(k) plan sponsors and their participants. He has written extensively about how investment advisors and retirement industry providers should provide conflict-free investment advice and investment offerings at a low cost. Employee Fiduciary is known as a low-cost, no-frills leader in the 401(k) space.

 

 

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