Ascensus Acquires Vanguard’s Small Business Retirement Plans

Ascensus, the largest player in the retirement investment space, announced it will acquire many small business retirement plans from Vanguard. This will bring the total number of Vanguard plans that Ascensus will service to almost 280,000.

Vanguard isn’t selling the employer-based 401(k) plans it administers. Rather, it’s divesting some of its small business retirement plans.

This deal, expected to close in Q3 of this year, includes solo 401(k) plans, multi-SEP IRAs and SIMPLE IRAs. (Vanguard will continue to service one-person SEP IRAs at this time.) These are all cousins of the traditional and Roth 401(k) and IRA. They typically are reserved for small businesses or solopreneurs.

As part of the announcement, a Vanguard representative says administering these plans “increasingly requires deep specialization, and we believe business owners and their employees will be best served by an organization with significant expertise and scale.”

Vanguard is one of money expert Clark Howard’s “three favorite children.” He recommends Fidelity, Schwab and Vanguard as the best investment companies.

Clark’s Take on the Vanguard/Ascensus Deal

If you invest via one of the accounts Ascensus is buying from Vanguard, what should you think? For now, Clark recommends cautious optimism.

Fees are the biggest factor in evaluating any tax-advantaged investment account. Clark wants you to keep your total annual fees (administrative costs plus investment expense ratios) below 0.5% for workplace 401(k) plans.

Although it isn’t cheaper across the board for every investment, as a whole, Vanguard is the least expensive company for investing.

That’s a helpful benchmark to keep in mind for these similar account types, although it isn’t a pure apples-to-apples comparison. Instead, Clark says, make note of your current fee structure under Vanguard’s care. Watch to see if Ascensus raises rates.

“Ascensus has handled our company 401(k) plan for years, and we haven’t had problems,” Clark says. “However, it is always better to have a direct account with Vanguard.

“It’s possible that Ascensus could raise administrative fees in the future. We will watch this transition closely and update you if we notice a pattern of problems or complaints.”

If you own a small business, it’s a good time to consider implementing your own solo 401(k), SEP IRA (solo or multi if you have employees) or SIMPLE IRA. Read our guides that I linked to earlier in this article to discover which choice is right for you.

Investing through a tax-advantaged account gives you a major advantage in accumulating assets for retirement.