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Help want out AXA 403 B Tax Sheltered Annuity

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1 hour ago, MoeMoney said:

The reason why Vanguard and Fidelity aren't easy to add is basically, they have been "blacklisted" by the large Third Party Administrator (TPA) from the approved vendor's list thereby making them nearly impossible to get added on.

I've always suspected they were blacklisted but was never sure. 

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13 hours ago, MoeMoney said:

The reason why Vanguard and Fidelity aren't easy to add is basically, they have been "blacklisted" by the large Third Party Administrator (TPA) from the approved vendor's list thereby making them nearly impossible to get added on.

I know most people come to these boards for help picking out a 403b/457b, but a subset of those people will go on to lobby their district for reforms. I don't want that subset of people to be unnecessarily discouraged from lobbying for the very best vendors. I think some of these claims about Vanguard/Fidelity being difficult to add are now outdated.

I have zero data to suggest that Vanguard and Fidelity have been blacklisted by TPAs. In fact, all of the data I have suggests otherwise:

  1. TSA Consulting Group is a massive Third Party Administrator. They might even be the largest, look at all the districts they serve. TSA Consulting Group has not blacklisted Vanguard and Fidelity because both are available in districts throughout my state and I'm unaware of any district asking for Vanguard or Fidelity and being told no.
  2. As far as I know, a Third Party Administrator has absolutely no power to blacklist anybody. The Third Party Administrator serves at the pleasure of the school district and must do what they're told to do by the school district.
  3. Many years ago (maybe 10ish?) there was some kind of regulatory/requirements issue that led to Vanguard (and possibly Fidelity) being dropped from many vendor lists. As far as I know that issue wasn't created by a Third Party Administrator and both Vanguard and Fidelity are now in full compliance with whatever this issue was.

Anecdotally, I want everybody to understand that I was able to get both Vanguard and Fidelity added to the vendor list of OCPS (FL). As far as I'm aware, my only hurdle was to convince the district that it is in their best interest to add Vanguard and Fidelity. As far as I know, once they made that decision they faced no regulatory/blacklist/etc hurdles in adding Vanguard and Fidelity. It was simply a matter of wanting to add Vanguard/Fidelity, not overcoming obstacles once that desire was in place.

Having said all of that districts will tend to rely on the "expertise" of a Third Party Administrator and generally speaking (certainly in the case of TSA Consulting Group) the Third Party Administrator will be inclined to speak favorably about high-cost/unethical vendors and unfavorably about low-cost/ethical vendors. That is a hurdle you'll have to overcome. However, I have a hard time imagining that hurdle is lowered for Aspire and their 0.15% fee when the Third Party Administrator could show favoritism to plans like Plan Member Services' Elite plan, which charges roughly 2%.

...bottom line, if you're going to work towards reform then push for Vanguard and Fidelity first and foremost and only settle if you truly need to (I don't think you'll need to).

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Ed

I am sure you are right the landscape is changing.Perhaps they were never blacklisted but something sure was discouraging them. Back in the day  it was problem getting them on. More likely it had to do with them not agreeing to something like you mention. Vanguard can be very picky and probably there was a fee involved that they did not like.I do know Vanguard never actively lobbied or promoted themselves while the insurance companies were always front and center.  I totally agree we should push for the best choices to be included in these plans . Still others like Aspire , Lincoln,  etc are viable alternatives to the trash most school systems harbor on their 403b plans. The other part of the equation is getting the investors to recognize the difference between a good choice and a bad one. Vanguard won't be out there shaking hands , buying pizza, and kissing butt to get the sale. Also during my active years I heard so much bashing of Vanguard by the other players in the 403b market. Obviously they felt threatened by Vanguard . That doesn't help when the salespeople are actively and unprofessionally discouraging investors . I agree too when you say TPAs are probably less inclined to put companies like Vanguard front and center.

 

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Three years ago our school district set up an after school meeting designed to explain 403B's to employees.  Only about 1/3 of eligible employees at our district participate in a tax deferred plan, so I guess our administrators wanted to promote participation.  Our district had recently started to use a Third Party Administrator, so someone from the TPA office came out and presented a power point and discussion.  Very basic presentation; just  the differences between pensions, social security, and tax deferred plans, but it was a useful thing for newer employees to see. One of the slides of the ppt. showed the names and logo's of a bunch of the vendors that were approved; all the usual annuity companies like Valic, AXA, Horace Mann, etc.  Vanguard and Fidelity were not included in the ppt. presentation, even though I had noticed on our schools website (in very small print) that they had been added to the approved vendor list.  I was very excited to see this addition of low cost vendors to our list because I had Roth and taxable accounts with Vanguard already, and was in to the Boglehead style of investing.  When it came time for Q and A following the presentation, I asked "I notice Vanguard is now on our approved vendor list, even though you did not include it on the list on your power point, so are they an approved vendor?"  There was about 5 second awkward pause as she appeared to ponder my question.  Then her response was simply a very cold, "They are on the list."  I have no idea of what her issue with Vanguard was, but she definitely didn't want to talk about them.

 

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1 hour ago, MNGopher said:

I have no idea of what her issue with Vanguard was, but she definitely didn't want to talk about them.

If this isn't public knowledge we (the 403b/457b community) should dive into exactly why Third Party Administrators promote high-cost vendors and diminish low-cost vendors.

  • Do Third Party Administrators get a cut of the profit generated by high-cost vendors?
  • Are folks at the Third Party Administrators paid off in a more "under the table' fashion?
  • Is it a more subtle physiological flaw, similar to how doctors are more likely to prescribe a medication if a pharma rep takes them out to a single dinner (something that essentially has no monetary value to a highly paid doctor)?
  • In the same way folks from Wall Street go back and forth between Wall Street and government positions, do folks from these vendors go back and forth between the vendors and the Third Party Administrator?

I can observe that the Third Party Administrators are behaving exactly as a corrupt player would, but I'd like to know the exact nature of the corruption? In my view, this is what would have made for a good entry in the New York Times series on 403b/457b plans.

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4 hours ago, EdLaFave said:

I know most people come to these boards for help picking out a 403b/457b, but a subset of those people will go on to lobby their district for reforms. I don't want that subset of people to be unnecessarily discouraged from lobbying for the very best vendors. I think some of these claims about Vanguard/Fidelity being difficult to add are now outdated.

...bottom line, if you're going to work towards reform then push for Vanguard and Fidelity first and foremost and only settle if you truly need to (I don't think you'll need to).

 

Absolutely a great point Ed. I did use "air quotes" because they are not officially blacklisted, as far as I know, anyway. Our TPA is huge, OMNI, and they work for our district. But if you ask the district for any changes, better choices, or any questions for that matter, they close their mouths and refer us to OMNI. They take, or want, no responsibility for the vendors on that list, unless pushed, like in our district to get Aspire added. 

But things change, staff changes, and perhaps answers change, so it is worth looking into getting Vanguard and Fidelity added again onto OMNI approved vendor list, as Ed pointed out. 

Here is the direct wording from OMNI's website. From what I see, the committee makes up the criteria for selecting the vendor and one of the criteria is for that vendor to pay OMNI expense fees. Vanguard and Fidelity refuse to pay or pass on those fees, thus keeping them off the list of approved vendors. 

Quote

Since its initial unveiling in 2011, interest in OMNI’s Preferred Provider Program (P3) has been truly exceptional. The P3 Advisory Committee organized key aspects of this exciting new service model that is revolutionizing the relationship between employers and their 403(b) providers. 

Here are the steps taken to develop the program:
 

  • Advisory Committee made up of School Business Officials hire National Consultant to Develop Request for Information (RFI).
  • Committee identifies over 80 criteria to evaluate Service Providers on.
  • RFI Application sent to over 200 Service Providers.
  • Advisory Committee evaluates and scores responses from Service Providers.
  • Most major Service Providers meet or exceed criteria in RFI.
  • Service Providers awarded P3 status enter into an agreement with Omni to pay for Plan Administration expenses associated with their active accounts in Districts.
  • Approximately 90% of all major Providers participate in P3.

 

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I just asked OMNI how I can get appointed onto their P3 Advisory Committee. Stay tuned....

Ed, good point. I seem to remember Tara mentioning the TPA's in the article. Perhaps we can get her to dig deeper as you suggest. Great idea.

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50 minutes ago, MoeMoney said:

if you ask the district for any changes, better choices, or any questions for that matter, they close their mouths and refer us to OMNI. They take, or want, no responsibility for the vendors on that list, unless pushed, like in our district to get Aspire added. 

This is a huge problem. Ultimately districts do not care about retirement plans and prefer to outsource that work to a Third Party Administrator. I think my reform effort was successful because I got the school board chairman to care. I think our job boils down to getting people to care and I really wish we could convince employees to care because that would change everything.

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On 7/22/2018 at 8:10 PM, MoeMoney said:

Sounds like JAM's best option is Lincoln Investment, as long as it's self--directed and no one prey's upon participants to get a FA/sales rep to manage.

The reason why Vanguard and Fidelity aren't easy to add is basically, they have been "blacklisted" by the large Third Party Administrator (TPA) from the approved vendor's list thereby making them nearly impossible to get added on. Like Tony said, reasons are hard to explain but include refusing to pay or pass on the administrative fee that the TPA's and/or vendors charge. Aspire passes on the fee in the form of the 0.15% fee whereas big players like AXA bury it in their other excessive fees. That is my understanding of it, at least, where I am from, Long Island, NY. I tried to add back Vanguard and Fidelity but was turned away in a heartbeat but Aspire was a relatively easy pitch that was added at the one time of the year when the school board approves changes to the 403b lineup.

The state-sponsored 457 is the best option for dollars beyond the $5500 (Roth) IRA, as Ed pointed out, where I am but each state and plan is different so you must ask your HR or business dept. or post questions here. The ability to access your 457 funds when you sever service is more valuable than having to wait until age 591/2 regardless of employment status.

JAM, while it's great to think about your options, don't try to do it alone. Ask your district the right questions and act, based on your options. 

 Little update 

September 14th 2019 I can transfer money penalty free from axa.
My Axa 
1.34 %mortality/expense
1 %average sub account 
Total - 2.34 %
 I spoke with my HR about adding vendors suck as Vanguard and Fidelity this was the response 
Thank you for the information but at this time we are not soliciting new
vendors for the 403b plans.”
 
I responded by asking nicely again and who else I could speak with 
response
 “At this time the Business Administrator is not adding any new vendors.  We
have three vendors available.”
 
If I go with:
LincolnInvestment Participant Directed Platform..  The goal is to be in control without an advisor correct?  
Should I go into all low cost vanguard mutual funds if offered ?   What else is recommended ?
 
thanks 

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Jam,

I’m a NJ teacher who signed up for Lincoln Investments PDP.  

Yes, you’re in control without an advisor.  You will complete all the paperwork necessary to transfer funds from your old 403b( if that’s a step you’re taking) and, opening your account with Lincoln.  When I completed this process I was in contact with a representative from Lincoln who was very helpful in walking me through some of the steps in the process BUT...he was not an advisor.

The Lincoln PDP provides you with a large selection of Vanguard Funds including Target Date Funds.  I personally used Total Stock Market, Total International and Total Bond.  I figured out what allocation was best for my personal investment goals by visiting the Vanguard website and using their questionnaire(sorry I don’t have a link)  I also asked questions on sites like this and the Bogleheads forum and read through many posts.  

 

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Jam

1 hour ago, JAM said:
“At this time the Business Administrator is not adding any new vendors.  We
have three vendors available.”
 

This is BS. Talk to the school board about this either one on one or offer to do a presentation in front of school board if you feel brave enough. Your business administrator is basically a bookkeeper and has no authority to make that decision.

 

1 hour ago, JAM said:
LincolnInvestment Participant Directed Platform..  The goal is to be in control without an advisor correct?  
Should I go into all low cost vanguard mutual funds if offered ?   What else is recommended ?

You know the answer.Yes you do it all yourself.  Either low cost Vanguard index funds or low cost Fidelity index funds or the equivalent target funds tapped through Lincoln . Both  would work. Stay away from anything else unless you want to do the Vanguard life strategy funds. Read each fund's goals and objectives before investing. Target funds make the most sense if you are a hands off type of guy. Its so easy and you will do well.

You could try and add Vanguard (directly) Fidelity (directly) or maybe even Aspire which is similar to Lincoln direct. 

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1 hour ago, JAM said:
My Axa 
1.34 %mortality/expense
1 %average sub account 
Total - 2.34 %

That really is horrible!! You are funding someone else's retirement along with your own.

Vanguard Target funds fees: about 0.15% more or less

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1 hour ago, JAM said:
September 14th 2019 I can transfer money penalty free from axa.
My Axa 
1.34 %mortality/expense
1 %average sub account 
Total - 2.34 %

If you’re paying 2.34% in fees then it probably makes sense to pay the surrender fee and get out. That of course depends on the surrender fees and the fees of the vendor you’d be going to. 

 

1 hour ago, JAM said:
I spoke with my HR about adding vendors suck as Vanguard and Fidelity this was the response 
Thank you for the information but at this time we are not soliciting new
vendors for the 403b plans.”

You probably need to talk to more people and keep pushing. Talking to people in person or at least on the phone is helpful. Although, my first question would be, “when will new vendors be solicited?” Apparently here in OCPS (FL) they only make changes to retirement plans once every five years.

1 hour ago, JAM said:
The goal is to be in control without an advisor correct?  
Should I go into all low cost vanguard mutual funds if offered ?

The key is to use low cost, total market, index funds to cover US stocks, foreign stocks, and bonds. You can do this with a one fund portfolio (i.e. target date funds or fixed allocation funds like Vanguards LifeStrategy funds) or with a three fund portfolio (i.e. individual total maket funds for the 3 main asset classes). You can do this using any number of institutions such as Vanguard, Fidelity, and so forth.

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