How do Schwab Personal Defined Benefit Plans Compare to Emparion Cash Balance Plans?


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I know that Schwab has a personal defined benefit plan. How does that plan compare to Emparion cash balance plans?

Schwab has a good defined benefit plan product. We use them as investment custodians all the time. But we believe that our defined benefit plans are a little bit better than Schwab‘s for the reasons noted below.

First, when you set up a plan with Schwab, you are “captive” with them. This means that you have to use their investment platform for their investment products. With our plans, you can use any investment provider.

In fact, you can open up accounts with different custodians as long as they’re held within the same plan. With Schwab plans, if for some reason you don’t like the Schwab investment platform down the road, then you are stuck with them.

Second, we structure our plans to have a little bit more funding flexibility. Their plans come with relatively narrow funding ranges, and our plans will typically give you a wider range between minimum and maximum contribution in a given year. This gives you the ability to make a higher contribution in years with higher income and, of course, a lower contribution if you had a bad year.

Schwab approaches these plans like a typical defined benefit plan administrator. This means that they are compliance-focused. The compliance aspect is important and a crtical function of an administrator.

However, since we are a carveout of a CPA firm, we can also help you with tax structuring. Many plan administrators tell you what you can do, but they don’t always give you advice on the best way to structure a plan for maximum tax deferral.

We try to tell you how to do something rather than just tell you what you can do. This is no knock on Schwab because they operate like a typical administrator. But our goal is to save you money in taxes, which is why people set up these plans in the first place.

Overall, we offer a better pricing structure. Schwab’s typical pricing is $2,200 for set up and annual administration is $1,750. So at first glance, their annual administration is cheaper, while we are about $1,000 cheaper on set up.

But many people miss the fact that if you have a profit-sharing plan with your 401(k), they charge an extra $750 for that. It’s because these plans must be cross-tested and additional work is involved. However, we don’t charge any add’l fees for a 401(k) plan cross-testing.

When evaluating a defined benefit plan administrator, look at the whole picture. This includes fees, communication, plan design and structuring, and ongoing support. I understand that some of these issues are complex upfront and many administrators are not very transparent. But there’s a lot of good information to help you make your important decision.

While we believe we have a better plan structure and design, we enjoy using Schwab as an investment custodian. In fact, we have a rep that we use there who specifically helps us set up plans on their investment platform. We can typically have the custodial account opened in 24 to 48 hours. Schwab will also give you various investment choices, and they will be comparable to other platforms, like Fidelity and Vanguard.

We have attached below a Schwab fee schedule for you to review. Many of their other add-on fees are comparable to ours and other administrators. You might want to make sure that there is not an updated plan fee.

Paul Sundin

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