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Michael Coal

403b Vendors Recommandation

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Hello,

I am a teacher in an elementary public school in Illinois. Recently our school district is offering us 403b plans with the following providers:

Brighthouse Life INS (Metlife CT/Travelers)

Lincoln Investment Planning

Roth - Brighthouse Life INS (Metlife CT/Travelers)

Roth - Lincoln Investment

Roth - Valic

Roth - Voya Financial (Reliastar)

Valic

Voya Financial (Reliastar)

I have been teaching for 15 years and I am planning to do so for 7 or 8 more. I am in a position where from now on I could contribute the maximum amount of money per year in a 403b plan ($18,500) and also for a Roth which if I am not wrong is around $5,000.

It is not an easy job to gather information about these providers and their plans to better decide the best option.

What would you do? Any advices / ideas?

Any contribution is greatly appreciated,

Thanks

 

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Welcome Michael

, Looks to me like you have several subpar choices. First of all stay away from any insurance company 403b plans . Secondly, might you have a 457 plan available to you? If you do that might be a way out of your mostly awful choices in your 403b. I googled and came up with  your state 457 b and it has Vanguard as a choice. If you qualify for it, it might be the way to go. Otherwise you might have to decide between Voya, Lincoln Investment planning ,or maybe Valic. Valic does offer an non insurance lower cost option in some districts. You will have to decide. Depending on how much you save a year, you might be better off just investing in a Roth IRA outside of a 403b and a taxable account with Vanguard or Fidelity Index Funds which are fairly tax efficient. If you are married your wife qualifies for a Roth too. You can then pick low cost index funds with Fidelity or Vanguard which would be a superior option. $6,500 a year is the current allowed.If you are under 50 its $5,500.00

First things first see if you qualify for your state 457b plan. I think someone from Illinois once said teachers don't qualify for it but I would call them and check. If teachers do, it would be easy to persuade your school system to initiate its introduction onto your provider list. Frankly if you can't get better choices on board like Vanguard, Fidelity or maybe even Aspire i would just go the taxable route and the Roth route and skip the 403b.

enrollment%20brochure.pdf

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Here in NJ, Lincoln Investments offers a Participant Directed Platform that offers a large selection of Vanguard Admiral Funds.  You can check to see if they offer that in Illinois.

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A thread on the Lincoln Investment Participant Directed plans, with links to the Boglehead thread where the plan was first mentioned:

 

Another recent thread on this board:

 

As you’ll read, Lincoln Investment does not put out any information on this plan. As far as I know, the account application form contains the only information on this plan. You need to call up a Lincoln Investment regional office to find out if your school district is allowed to use the Participant Direct Platform. If so, they will email you a link to a PDF of the application form. A local rep may know about the DIY plan and who you should call, although there’s been reports of that not being the case. The plan seems to have started in NJ and is apparently available to all districts there. There are districts in IL that are allowed to use it, so it’s worth you checking it out.

If you send me a private message with your email address, I’ll email you a link to an out of date application form. That would allow you to look over what little information is available, except for possible recent changes. Whether the annual fee is $60 or $35 seems to have changed (or maybe not?).

If you find that are not allowed to use the Participant Directed plan, Lincoln Investment also offers an expensive mutual fund based 403b/457 plan called Premier Platform. It includes a number of low-cost Vanguard funds but adds 1.25% to Vanguard’s fund’s expense ratio. There’s also a $60 per year Admin Fee.

Vanguard Total Stock Mkt Idx Investor, ER 0.15%

Vanguard Total Intl Stock Index Inv, ER 0.17%

Vanguard Total Bond Market Index Inv, ER 0.15%

I would use the expensive Premier Platform over that of your other vendor, MetLife. I would expect MetLife's fees to be even higher that those of the LI Premier. Because you plan to continue teaching for only about 7 more years, the longer-term negative effects of high fees are considerably reduced. You can max out both the 403b and 457 plans in both LI plans. When you separate from your school district, you can roll over both of these plans to a very low-cost IRA with Vanguard!

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Michael,

I second the 457 option. It appears to be the lowest potential option you have, given your list.

Next, I would contact Aspire and your Third Party Admin (TPA) if you have one. Find out how you or they would go about adding them to your platform. For an annual fee of $40 (I think that's what it is, as of this moment) and an additional low basis add-on, you would be able to buy Vanguard at their low ER.

Good luck. It would be helpful to post your findings!

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Thanks all of you for your contributions. I am checking the 457 option and also will be meeting soon with a Lincoln Investment representative in Illinois.

I'll post my findings soon !

Again, thanks for your help.

 

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You will not need a representative from Lincoln if they offer the Participant Directed Platform.  Just keep this in mind when meeting with the rep.  The PDP is done completely on your own.  Anything he/she wants to sign you up for should be examined carefully.

Best of luck!

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4 hours ago, jebjebitz said:

You will not need a representative from Lincoln if they offer the Participant Directed Platform.  Just keep this in mind when meeting with the rep.  The PDP is done completely on your own.  Anything he/she wants to sign you up for should be examined carefully.

 

Jeb is correct. Don't sign up for anything going through an advisor as you may not get what you think you are getting. If you by-pass the advisor you are likely to pay less for your investments. Please report back here before you do anything. I don't have experience with Lincoln but with Aspire if you self direct the account you save a bunch on the expense ratio. I would imagine its the same with Lincoln. Chances are if you build a 3 fund  low cost index  portfolio with Vanguard you really can do without an advisor. I hope you read this before you sign anything.

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Jebjebitz and Tony make a very good point. The Participant Directed Platform (PDP) doesn’t use a rep, it’s strictly internet based. A rep doesn’t want you to use to use the PDP, and probably does want you to use the Premier Platform or another expensive plan. I doubt that a rep has the authority to give you the PDP application form PDF. You should make an effort to talk to or email a Lincoln Investment regional office.

If you do find out from a higher-up that the PDP is not available at your district, the Premier Platform should be compared to VALIC's offerings. Be sure and not sign up for an annuity based 403b. VALIC has both annuity-based plans and mutual fund based plans. Some of the latter plans have fees that vary with the size of the district. Whoever you communicate with, you should just get information---don't sign a contract. 

It would be worth your while to spend some time checking out the four 403b offerings on the 403bcompare.com website. It will make you aware of the fees that the four venders charge, even if the plans sold in your district may be slightly different than those sold in CA. The website is run by the CA state teachers pension system (CalSTRS).

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Illinois teachers aren’t allowed to use the Illinois Deferred Comp plan. I’ve called multiple times to verify this and to try and figure out why not. The short answer is that Illinois teachers aren’t considered state employees, they employed by the local school board/district. 

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2 hours ago, grw said:

Illinois teachers aren’t allowed to use the Illinois Deferred Comp plan. I’ve called multiple times to verify this and to try and figure out why not. The short answer is that Illinois teachers aren’t considered state employees, they employed by the local school board/district. 

I find this perplexing. Very few school systems in Virginia have the 457b option yet I was able to get it through the powers that be to be  implemented in our district easily. I guess we are state employees in Virginia but not in Illinois. Yet it doesn't seem to matter as most  Virginia school systems have yet to discover that this superior , low cost, salesman free option is available.Thats very sad. Regardless if you are a state like Virginia were teacher participation is low or in Illinois where teachers are not considered state employees even though their pensions are supervised  and paid by the state, this whole situation is ridiculous and just goes to show what a terrible state the 403b world for teachers is.  You salespeople reading this must be smiling and licking your chops, you have the power not the teachers.

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I am not allowed either to use CalPERS which is the California state employee pension plan, because I am a teacher too and I have a teachers pension plan, CalSTRS. So my teacher's plan has two great offerings, 457b and Pension 2. Now somewhere in Illinois, teachers have a pension plan. Call them. 

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Yes, all teachers have a pension plan covered under the state ran Illinois TRS. However, the only options for 403b are what each district decides to make available, usually insurance companies. 

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45 minutes ago, grw said:

Yes, all teachers have a pension plan covered under the state ran Illinois TRS. However, the only options for 403b are what each district decides to make available, usually insurance companies. 

But why can't teachers have the same 457 plan given to other state employees?  Seems like many state 457 plans have competent leadership and decent plans but teachers are at the mercy of local incompetent 403b supervision.

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