As a part of your retirement plan, your employer may have selected to offer Self-Directed Brokerage Accounts (SDBAs) to employees. This article serves as a guide to SDBAs, including an overview of the feature and some frequently asked questions.
Self-Directed Brokerage Accounts in the Vestwell Portal
What is a Self-Directed Brokerage Account?
A Self-Directed Brokerage Account allows employees participating in the plan to move funds from their 401(k) plan account into a brokerage account, providing the flexibility to invest in a broader range of assets, such as individual stocks, options, bonds, and other investment vehicles, beyond the standard offerings within the retirement plan. Vestwell has partnered with Charles Schwab to offer SDBAs via their Personal Choice Retirement Account (PCRA) offering.
Does Vestwell Offer Self-Directed Brokerage Accounts?
Employers may or may not choose to offer SDBAs as a feature in their retirement plan. If you are wondering whether your employer has selected this offering, please check directly with them or by emailing us at help@vestwell.com.
How Do I Navigate My Self-Directed Brokerage Account Through the Vestwell Portal?
If your employer has allowed for SDBAs to be included in your plan, you will see a tab in your Vestwell saver portal’s “Investments” page titled “Self-Directed Brokerage.”
Setting Up Your Self-Directed Brokerage Account
To participate in your SDBA, you will need to have a minimum vested balance of $8,000. For a reminder on vesting, please visit this article. To begin the setup process, you will need to create a Charles Schwab account and transfer your funds to that account. Charles Schwab is the investment institution that maintains the account. For more information on this offering through Charles Schwab, please visit this informational overview.
Note: By enrolling in the Schwab Personal Choice Retirement Account (PCRA), your account will incur an annual fee of $100, billed in equal monthly payments of $8.33 for each month in which you maintain a balance in your SDBA account. Please allow up to three business days for your Schwab account information to appear in your Vestwell account portal. Contact help@vestwell.com if your account is not displaying in your Vestwell portal one week after submitting your application.
To begin, navigate to the “Investments” page in your Vestwell saver portal. Then, click on the tab titled “Self-Directed Brokerage.” From here, select the button that says Open an Account with Schwab.
Upon clicking the Open an Account with Schwab button, you will be brought to the Charles Schwab website where you will be prompted to enter your:
-
Retirement Plan ID - To locate this number, navigate to the “Investments” page in your Vestwell saver portal, then click on the tab titled “Self-Directed Brokerage.” Your Retirement Plan ID is the 6-digit number listed beneath “Registration ID.” You may easily copy this number by clicking the
icon.
-
Plan Access Code - To locate this number, navigate to the “Investments” page in your Vestwell saver portal, then click on the tab titled “Self-Directed Brokerage.” Your Plan Access Code is the 4-digit number listed beneath “Access Code.” You may easily copy this number by clicking the
icon.
- Social Security Number
Enter your Retirement Plan ID, Plan Access Code, and Social Security Number. Then, click Submit and proceed through the Schwab account opening process.
Your Vestwell portal will display the following once you have successfully set up your Charles Schwab account.
To fully utilize your account, you must transfer money into your Schwab account.
Transferring Funds to Your Self-Directed Brokerage Account
To transfer funds to your Self-Directed Brokerage Account, you must have a minimum vested balance of $8,000 in your Vestwell retirement plan. In addition, your employer can limit the percentage of your total retirement plan balance that you can transfer to your SDBA. The standard limit is 50%, but this may vary if your employer has instructed us to impose different limits.
To transfer funds to your SDBA account, begin by clicking the Transfer Money button on the “Investments” page in your Vestwell portal. Then, choose the transfer type, and select Transfer to SDBA.
Next, type in your transfer amount into the “Transfer Amount” field. Note: You may only transfer up to the balance stated in the “Available for transfer” section above. Then, click Continue.
Review your transfer details. If you would like to proceed with the transfer, select the Submit Transfer button.
The funds will take two business days to appear in your Charles Schwab account.
Transferring Funds From Your Self-Directed Brokerage Account
To transfer funds from your Self-Directed Brokerage Account back to your retirement plan, you must have sufficient available cash in your SDBA. We cannot transfer securities between the SDBA and your retirement plan account. To generate sufficient cash for any transfer, you may need to sell holdings in your SDBA. These sales can only be initiated by you. Vestwell, your plan’s advisor, and your employer do not have any discretion or authority over the investments in your SDBA.
To transfer funds from your SDBA account, begin by clicking the Transfer Money button on the “Investments” page in your Vestwell portal. Then, choose the transfer type, and select Transfer from SDBA.
Next, type in your transfer amount into the “Transfer Amount” field. Note: You may only transfer up to the balance stated in the “Available for transfer” section above. Then, click Continue.
Review your transfer details. If you would like to proceed with the transfer, select the Submit Transfer button. The funds will take up to 2 business days to appear in your Vestwell account. Once they arrive they will be invested according to your current investment election.
Frequently Asked Questions Self-Directed Brokerage Accounts
- Who should I contact if I have questions about the trading process or the securities available to trade?
- I have transferred funds to my SDBA, can I track my SDBA investments within the Vestwell portal?
- Why is there an error when I try to transfer funds?
- Are there any tax implications when making a transfer?
- Are there any associated fees with having an SDBA?
- Can I transfer only a specific holding within my plan to my SDBA account?
- How long do the transfers take?
- What services does Vestwell provide relating to the SDBA account, and what role does Schwab provide?
Who should I contact if I have questions about the trading process or the securities available to trade?
All questions about the investment decision-making process and general information about the PCRA account can be directed to Schwab's PCRA call center at 1-888-393-7272. A general overview information sheet can be found here. Assets available to trade include all of Schwab's investable universe. Your employer may elect to restrict certain assets.
I have transferred funds to my SDBA, can I track my SDBA investments within the Vestwell portal?
The Vestwell portal will display your current SDBA balance, broken down into investment holdings and available cash. However, to see your specific SDBA investments, please log in to your Schwab account directly.
Why is there an error when I try to transfer funds?
When transferring funds, you must meet certain requirements, outlined below. If these requirements are not met, you will see an error message.
When transferring funds to your SDBA:
- Confirm that your SDBA balance is below the maximum percentage of your total plan balance, as outlined in your portal. The standard maximum is 50%, but your employer may have selected different limits. Please refer to your portal for the specific percentage applicable to your plan.
- Confirm that you have a vested balance in your retirement plan of at least $8,000.
When transferring funds from your SDBA:
- Confirm that sufficient funds are available in the cash (i.e. uninvested) portion of your SDBA. We cannot transfer securities between the SDBA and your plan account. To generate cash, you will need to sell holdings in your SDBA via the Schwab portal. These sales can only be initiated by you, as Vestwell or your plan’s advisor has no discretion over the investments in your SDBA.
Are there any tax implications when making a transfer?
There are no tax implications when transferring between your Vestwell investment account and your Charles Schwab SDBA. When the funds are maintained in either account, they are still considered assets under the umbrella of your 401(k) plan for that purpose. Therefore, they have the same tax treatment as any typical 401(k) plan asset.
Are there any associated fees with having an SDBA?
There is an $8.33/month ($100/year) fee charged to your account. If there is a balance in your SDBA that month, you will be charged. Schwab may also charge fees directly—these are disclosed in your “Brokerage Agreement with Schwab.”
Can I transfer only a specific holding within my plan to my SDBA account?
You may not choose to transfer a specific holding. You may choose to transfer a certain amount. In this case, sales will be placed pro rata across your current plan account, liquidated into cash, and moved over to the Schwab account.
How long do the transfers take?
It may take up to two business days for your assets to be transferred and displayed in the balance of your account.
What services does Vestwell provide relating to the SDBA account, and what role does Schwab provide?
At all times, you, as a participant in your employer’s retirement plan, are solely responsible for making your own investment decisions with respect to your investments in your retirement plan or SDBA. That means that participants are always responsible for selecting and monitoring investments in the SDBA. Vestwell does not provide legal, financial, investment, or tax advice. You may wish to consult your own financial advisor or professional before selecting any investments or making any decisions relating to any of your financial accounts.
As explained in our Plan Services Agreement with your employer, Vestwell’s only responsibilities relating to the SDBA are to:
- Display the balance associated with your SDBA in your Vestwell account portal, in participants’ benefit statements, and in the plan balance shown in plan sponsor statements;
- Process transactions between your retirement plan account and SDBA;
- Process distributions from the SDBA based on the participants’ instructions.
All other services and activities related to the SDBA not explicitly performed by Vestwell are the responsibility of Schwab or the participant. We do not review or take any action to maintain consistency of the investments in the SDBA with the retirement plan’s investment policy statement or other applicable governing plan documents and we will not be characterized as a fiduciary or have any other obligations in connection with the SDBA, including paying any fees associated with the SDBA.
Schwab’s services are explained in the account opening agreement that participants execute with Schwab. Vestwell is not a party to that agreement.
This information is for general education purposes only and should not be interpreted as a recommendation, solicitation, or endorsement of any investment or strategy. All investments have risks, including the possible partial or total loss of principal. None of the information in this communication or anything else provided to you relating to your retirement plan or SDBA should be interpreted as legal, tax, investment, or other professional advice on any matter. We do not make any guarantee or other representation in any way regarding the future value or investment performance of your account. The output of any tool provided to you by Vestwell is a general estimate only, it is hypothetical in nature, it represents one of potentially many different outcomes relating to your retirement plan account, and the actual results, performance, or events relating to your retirement plan account or SDBA may differ materially from the general estimate. Plan participants should consider engaging their own financial professional before making any investment or other decisions relating to their retirement plan. Please refer to the prospectus, plan communications and notices, and other information provided to you for more information about other risks relating to the investments available to your plan.