To Pay or Not to Pay Fees from Solo-k Plan Assets

Solo-k Plan

Here are some of the things to keep in mind when considering whether or not to pay investment advisory fees from Solo-k plan assets: 

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Paying Fees from the Solo-k plan has Reasonability Implications.

 Are the Fees Reasonable?  In deciding to pay advisory fees from Solo-k plan assets, you need to assess whether the fees are reasonable.  If fees are based on a percentage of assets, the Solo-k plan’s asset growth may cause the fees to cease being reasonable. Consider benchmarking the fees against those of other advisory offerings every few years.

 

Consider your Goals and desired Return over the long haul.

A $500,000 account balance will have an account that is worth approximately $350,000:-- $150,000 less after 20 years if the Solo-k plan’s investments are invested with just an extra 25 basis points (.25%), assuming an annual 7% rate of return.  Is the $150,000 additional cost worth it? 

Deduction for Company Paid Solo-k plan Expenses. 

A Solo-k plan Sponsoring Company may deduct the Solo-k plan expenses that it pays.  You should take into account the value of the deduction in assessing the cost of paying Solo-k plan expenses.