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magmason

Who Decides 457 Vendors?

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Hi, 

I'm a teacher on the Central Coast in California nearing retirement.  I would like to maximize my ability to save in retirement accounts this year and next, and would like to open a 457(b).  The only vendor listed for my District is Planmember Services, which I do not want to use.  We have an array of choices for a 403(b), and I'm currently using Calstrs Pension 2.  I'd like to use them for a 457(b) account, but when I contacted my district benefits office to find out how to get them added to the list, I was told that the district has no say in choosing vendors, and that TSA Consulting Group, which is our TPA, determines which vendors to use.  I suspected this was misinformation, and when I called TSACG, they confirmed my suspicion, and insisted that my district decides which vendors to use.  

I would like to have an informed discussion when I approach the district.  Can someone help me out with some guidance?

Thank you in advance.  Very frustrating.

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Of course you are correct that the school district has the responsibility for their list of 403b and 457 vendors. Starting at 403bcompare.com, I found the CA law that applies to this: https://leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?lawCode=EDC&division=1.&title=1.&part=13.&chapter=39.&article=

If I were you, I would go back to the HR office and explain that the TPA told you that the lists are the responsibility of the district. If you talk nice, and maybe ask to see a supervisor, you’ll make headway. Once HR admits that they control the lists, you can find out if there’s a procedure for adding a vendor. 

Because you want to add the CalSTRS Pension2 to the 457 list, it should be easy because it’s run by the state teachers pension organization, and it’s already on the 403b list! Of course it’s possible that someone has a conflict of interest in keeping PlanMember the only 457 vendor?? Hopefully not. Even if that is the case, if you are persistent, you should be able to get Pension2 457 added. It’s probably more likely that the HR person you spoke to is just misinformed. 

If you post your request on the 403b board, you’ll get more comments. This sort of thing happens with the 403b vendor lists frequently. Folks (including me!?) forget to check the 457 board because there’s not much activity on it. 

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Inform your HR department that TSA consulting group will add Pension2, they need a decision from the district. Thus, ask to talk to the person who makes these decisions of which choices are included in the 457(b) plan. Be very nice because the district HR people are incredibly fragile.

Years ago I was such a threat to western civilization for merely asking to have Vanguard or Fidelity on the 403(b) list, that when I came into the office there were always two people to talk to me, never one they were so terrified. Even on the phone! I kid you not. So be NICE! :- )  

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Krow36, thank you for the link.  I guess I don't know how to read it, because I can't figure out which part of the law stipulates that the district decides what vendors to use. Could you point me to a specific section?  And isn't this referring to STRS rather than to a district? 

Sschullo, thank you for the advice. I can never quite wrap my head around why people whose job is to help people get the resources they need, have to behave as if any question is a huge bother to be swatted away. I always have to be super persistent to get any answers.  And I don't have much time left to save money in an additional fund, so I want them to move faster than they're accustomed to, I'm sure.  :)

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I just found this in a NYT article about vendors and 403(b)s.  So it seems there IS such a thing as having the TPA make decisions, even though TSACG said my district has that authority.

"Some public school employees may find that their district handed over the task of administering their plan to third-party administrators like Omni. In some cases, these firms may serve as gatekeepers, determining which investments employees have access to. Sometimes, they may only accept 403(b) providers that will absorb administrative fees; not surprisingly, the higher-cost purveyors are the most willing to cover them."

https://www.nytimes.com/2016/11/05/your-money/403-b-retirement-plan-tips.html?_r=0

 

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17 hours ago, magmason said:

Krow36, thank you for the link.  I guess I don't know how to read it, because I can't figure out which part of the law stipulates that the district decides what vendors to use. Could you point me to a specific section?  And isn't this referring to STRS rather than to a district? 

 

You are right—that law doesn’t seem to address the question of who determines the providers on the employer’s 403b list, the district or the TPA. I guess your quote from the NYT article explains it—the district may delegate the job to the TPA. Scott Dauenhauer, CFP, (ScottyD on this forum) in his book Wild West, Providing Fiduciary Advice to Public School Employees explains the many conflicts of interest that TPAs can have. 

Regardless, you have to work with both the TPA office and the HR office. If you continue to talk (nice) to them, I think they will realize that your quest to add a CalSTRS Pension2 457 option is very reasonable. Neither office wants to be accused of having a conflict of interest. There may be a procedure to add a provider, and in some districts it involves the union. Shine some daylight on what’s going on! Yes, it’s pathetic that a teacher has to be the one to work this out—as if you didn’t have enough to keep you busy already?? (I’m a retired teacher.)

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