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Teacher88

School District Third Party Fees?

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Just to summarize...  In 2012 my district dropped Vanguard, Fidelity and a few others from our "approved" list of 403 providers.  I teach in central New York and we are required to use the third party provider known as OMNI.  I became fascinated/obsessed with saving for my retirement in 2013.  It became my mission to bring back Fidelity and Vanguard to our approved list.  It has been an uphill battle to say the least.  I joined my unions negotiating committee and was successful in bringing back those two companies in our contract, so I thought.  The district agreed to the contract but instead of allowing us to invest directly with Fidelity/Vanguard they are making us go through Aspire.   That was NOT the intent of the contract but because the wording of our contact does not specifically say we want to invest directly with them, technically they have honored the contract.  After a few heated emails to my personnel director and almost getting myself in trouble I decided to take a step back and regroup.  She did tell me that if I could find some companies that will not cost the district any money then we could discuss the options in the future.  

I called Vanguard and had a nice conversation with them.  They made it very clear that they do not charge the school district a single penny.   Yes they charge $5 per month per person, however that fee is usually passed along to the employee.  The district has the option of picking up that $5 fee but it is their choice.  I sent an email to my personnel director with this information and she never responded.  That got me thinking.  

Does anyone know if the third party provider, OMNI, charges the district a fee for their service?  If they do, then I would have to assume that the companies on our approved list have agreed to pay that fee for the district in order to get on our list.  I plan on calling OMNI but I am thinking they are not going to willingly give up this information. 

Thanks for any responses.   

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I think you are running into the almost universal problem of school districts not having a budget that allows any generosity. The district needs OMNI’s help with 403b compliance and that comes at a price. The high fee providers can afford to pay OMNI’s fee for the school district. Aspire says that the $40/year fee partly goes to pay the TPA fee. So the teacher pays the TPA. Somebody has to!

If you haven't, you might talk to Fidelity. I believe they have agreed to pay the TPA fee in some cases. Perhaps because Fido has lots of expensive mutual funds available, they are willing to take a chance that not everyone will buy only low-cost index funds. Fidelity's Premier index funds are as low-cost if not lower-cost as Vanguard's.

I can understand that it’s frustrating to not be able to use Vanguard or Fidelity directly. If it turns out that neither is available, I suggest you count your blessings and accept Aspire’s access to Vanguard and Fidelity. In my opinion, their added 0.15% fee is not worth loosing sleep over. However, if insomnia is a problem, there is Security Benefit’s NEA Direct Invest, with Vanguard Admiral funds with no annual fee if the balance is >50k ($35/yr if <50k). I can’t remember if we’ve discussed Direct Invest with you, or not?

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I already have a 403b set up with the NEA Direct Invest.  My concern is how much longer NEA will be offering this plan.  I have m ROTH with Fidelity and I think they are a great company.  If it was an option I would like to move my 403b over to them as well.  I also contribute to the NYS457 plan which has some good options.  I realize Aspire is not awful, but if I could simply go through Fidelity directly that would be my choice.  I spend quite a bit of time at the bogleheads website and have learned quite a bit.  It was actually from a post a few days ago on that forum that led me to this forum.

When I call OMNI what I want to know is if there is any way for the teacher to pay the fee to be able to invest with Vanguard/Fidelity.  I tried calling them three times so far today and all I get is an answering machine...

 

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Teacher 88

Self directing with Aspire into Fidelity index funds can be done for minimal additional cost . Just do it. I understand you would prefer directly investing with Fidelity but with Aspire you get pretty much the same thing. As Krow said an additional .15 yearly administrative fee is not going to hurt you all that much if you stick with their rock bottom cost index funds.  I understand your concern but remember in the wonderful world of 403b plans everyone pays a little more.  And, pretty much  everything else you have available  outside of Aspire and Direct Invest on your provider list will cost you much more . You are in a good place.

Tony

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My district uses OMNI, and we have Vanguard on the list. One of my contributions every month is $3 less than the other, so I assume that the fee you are mentioning is being passed on to me. I am happy to pay it. 

I recognize that this is not helpful to your situation, but I hope it is helpful to know that there is precedent for getting done what you would like to do. 

Let me know if there is anything I can do to help.

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I understand that Aspire has "reasonable" fees of .15% plus $40 a year.  But if I have $250,000 in my 403b, that is $415 a year in fees which I think is high, especially since I am doing all the work. When I retire and I have much more than that in my account I may be looking at $1000 a year in fees.  If i was with Vanguard I would only have to pay $60 a year plus the expense ratios of the funds.  Or am I looking at this wrong?  Fortunately I am using the NEA Direct invest so this is not really an issue.  My big concern is if and when the time comes that the Direct Invest fund is no longer supported by the NEA.  

Here is another thing to think about.  When I retire I will get $95 for each sick day I have saved up.  That will amount to almost $30000.  The money has to be deposited into a 403b according to our contract.  Now granted that would only amount to $45 in fees with Aspire, but none of my colleagues understand that.  They are currently paying fees of around 5% for an AXA account(or similar), which means when they retire they will be losing around $1500.  I do my best to educate those that actually want to learn about their retirement, but I can count them on one hand.  

Edietel:  Does your district offer the P3 garbage funds like mine?  With an additional option for Vanguard?  Or do you have a list of all funds available to you, both good and bad?  

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I say don't worry so much. Sometimes we get involved in every minute detail of our investments that we miss the big picture. You are doing well in your savings. Aspire is a pretty good deal. When I was younger I was paying 2% and I am still a millionaire today. I say keep your costs as low as possible . After that I say damn the torpedoes and keep saving and you will be just fine. I am not dismissing your concerns but I think you are doing well . 

Tony

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13 hours ago, Teacher88 said:

Edietel:  Does your district offer the P3 garbage funds like mine?  With an additional option for Vanguard?  Or do you have a list of all funds available to you, both good and bad?  

Hey Teacher88,

Yes and no. You can check out what my district offers here. If you'd rather cut to the chase, I'll attach a screens of the list below. There is a lot of garbage in there, with some pretty good options as well (Aspire, Vanguard, TRP, TIAA). You won't find anything anywhere that says there is a $3 monthly fee to use Vanguard (trust me, I've looked), but my first contribution every month is $3 less than the second one. When I contacted my Human Resources Manager about the fee, she told me that it happens to her as well and she was surprised just like I was. Vanguard knows nothing about this monthly deduction, so it seems pretty clear to me that OMNI is taking that $3.

Like I said, I've heard enough people on this board say they would be happy to pay to use Vanguard that I am feeling fine with it. Damn the torpedoes, right tony?!?

If there is anything I can do to help you get Vanguard on the OMNI list in your district, just say the word. If there is any push back in your district or with the folks at OMNI about adding it, you can let them know that Bedford School District in Bedford, NH has figured out how to do it, and it doesn't cause headaches for anyone (unless losing 3 bucks a month gives you a headache...)

Good luck!

Screen Shot 2018-04-02 at 10.06.10 AM.png

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Yes Damn the torpedoes. You younger folks( I am 63 and I am assuming you all are younger) are miles ahead of were I was with my choices. We all want perfection and there is nothing wrong with that. I am glad you all are looking after that fee component because so many teachers don't. But most teachers in 403b land don't get perfection but some of you are close. Direct Invest is good, Aspire is good. If Direct Invest disappears ? Transfer your money to Aspire.

Like the Rolling Stones song says

No, you can't always get what you want
But if you try sometime you find
You get what you need!!!
 
Some other lyrics from the song which you may interpret as you wish:
But I went down to the demonstration
To get your fair share of abuse
Singing, "We're gonna vent our frustration
If we don't we're gonna blow a fifty-amp fuse"

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4 minutes ago, tony said:

Yes Damn the torpedoes. You younger folks( I am 63 and I am assuming you all are younger) are miles ahead of were I was with my choices. We all want perfection and there is nothing wrong with that. I am glad you all are looking after that fee component because so many teachers don't. But most teachers in 403b land don't get perfection but some of you are close. Direct Invest is good, Aspire is good. If Direct Invest disappears ? Transfer your money to Aspire.

Like the Rolling Stones song says

No, you can't always get what you want
But if you try sometime you find
You get what you need

Who are these "Rolling Stones" that you speak of? 

;-)

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Edietel: thanks for the info.  I am in central NY.  My district has pretty much turned its back on bringing back Vangaurd and Fidelity unless we use Aspire.  Our business administrator will not even return my emails.  When she was hired about 4 years ago I had a meeting with her.  I actually had to explain to her how the 403b worked, I knew at that time I was doomed.  I was able to convince her to make the NYS 457b plan available to us.  I was literally the only teacher in the district using it, 99% of my colleagues did not even know what it was.  

Tony:  I am 42, started teaching 2002.  I have about 16 years ahead of me.  I invest about 15 percent of my salary, my wife does the same.  My goal is to have a million when I retire it just seems like such an impossible feat.  15 years is not a ton of time.  Fortunately my wife is 8 years younger than me, so I will keep her working for a while after I retire!  I know this sounds awful but it was the death of my financial adviser that opened my eyes to the world of investing and fees.  They replaced him with a girl who told me she was a weather girl on the news before she decided to try being an adviser.  I dropped them the next day, bought a few books and discovered bogleheads.  

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