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Various Retirement Plan Structures

/Various Retirement Plan Structures

Various Retirement Plan Structures

There are a few different ways we can structure your retirement plan depending on needs and cost – Participant-Directed Account Plans, Pooled-Asset Plans, and Self-Directed Brokerage Accounts (SDBA) Plans.  Each has its benefits and drawbacks.

Participant-Directed Account (PDA) Plans

This is our most popular retirement plan structure.  PDA Plans are generally used for businesses with greater than five participants with an average account balance higher than $50,000.  This structure streamlines the plan as it pertains to contributions and investments in participant accounts.  Investing contributions becomes an automated process with rebalancing being available on a monthly, quarterly, semi-annual, and an annual basis.  Plan Sponsor involvement is minimal after the initial setup.  PDA Plans piggyback on a dedicated Recordkeeper platform.  Recordkeeper and Custodian for these plans are Vanguard Retirement Plan Access (VRPA).  A Third-Party Administrator is also required.  While most small business start-up plans may not fit the ideal profile for a PDA Plan initially, this will change eventually as plan needs and assets grow with participant enrollments, periodic contributions, and positive investment returns.

For new plans, FPLCM charges a discounted rate 0.70% of plan assets till assets reach $357,000.  After reaching that threshold, fee structure automatically switches to $2,500 + $200 per participant.  FPLCM also charges a one-time setup fee of $2,500 + $100 per participant regardless of the plan assets.

VRPA charges an annual fee of $2,750 (unbundled) and $3,850 (bundled) that includes up to 15 participants.  Click here for additional details.

Pooled-Asset Plans

Designed for smaller businesses with fewer than five participants with a one or two high-income earners.  For this type of structure to pass compliance, all participants must have similar risk profiles, as this is will be a single brokerage account with one asset allocation.  We will work with the plan trustee(s) to design an Investment Policy Statement that is suitable for the plan based on plan demographics.  Plan account can be established as either Schwab or Fidelity.  Contributions, investing, and rebalancing must be done manually by FPLCM.  Unlike the PDA Plan structure, there is the possibility that contributions will be in cash for a short period of time before being invested.  A TPA is required and will also act as the Recordkeeper for the plan.

FPLCM charges an annual fee of 0.70% of plan assets with a minimum fee of $2,500 and a maximum annual fee of $5,000.  Also charge a one-time setup fee of $2,500.  Click here for TPA fees.

Self-Directed Brokerage Accounts (SDBA) Plans

The most robust plan structure designed to cater to the needs of multiple high-income earners.  Each participant will have his or her own SDBA.  FPLCM will work with each participant to design an asset allocation that is suitable.  SDBA’s can be held at Schwab or Fidelity.  Also, private funds can be made accessible (restrictions apply).  Contributions, investing, and rebalancing must be done manually by FPLCM.  If all employees are highly compensated (income greater than $130,000 for 2021 and greater than $135,000 for 2022), Mega Backdoor Roth is a viable option.  A TPA is required and will also act as the Recordkeeper for the plan. 

This type of plan is costly to maintain.  FPLCM charges an annual fee of 0.70% per participant ($1,000 minimum per participant), with a one-time setup fee of $2,500 + $500 per participant.  Click here for TPA fees.