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Tampa Gator

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  1. Remember that Vanguard is chaning their line up with their target retirement accounts around June 30, 2006. They are adding another 4-5 funds, such as 2010, 2020, 2030, and 2040 to complement the 2005, 2015, 2025, and 2035. In addition, they are making the funds slightly more aggressive with a different asset allocation. From Vanguard's web site: VANGUARD TO EXPAND TARGET RETIREMENT FUNDS Allocation Path to Be Modified on Existing Funds VALLEY FORGE, PA, March 20, 2006 – Vanguard filed a registration statement today with the U.S. Securities and Exchange Commission to expand its Target Retirement Fund series by adding five funds. The new funds will feature target retirement dates at 10-year intervals (2010, 2020, 2030, 2040, and 2050), and will complement Vanguard’s six existing offerings (2005, 2015, 2025, 2035, 2045, and Income). “Vanguard® Target Retirement Funds have become increasingly popular among individual investors and retirement plan participants. Shareholders are attracted to the simplicity and convenience of having a professionally managed, diversified portfolio of stocks and bonds in a single fund,” said Vanguard CEO John J. Brennan. “The introduction of five new funds will enable investors to select a fund that more closely matches their investment time horizon.” With the new funds, Vanguard’s line-up of Target Retirement Funds will include 11 no-load, low-cost offerings in a range of asset mixes developed for investors in their 20s through 70s-plus. The funds are a series of broadly diversified “fund-of-funds” that gradually reduce stock exposure and increase bond exposure as the targeted retirement date approaches. Vanguard is also changing the asset allocation models of the Target Retirement Funds: The existing funds’ current asset allocation path will be modified to provide increased exposure to equities over a longer period of time. The result will be a larger equity allocation of roughly 10 to 20 percentage points, depending on the fund. For example, the Target Retirement 2035 Fund will change its equity allocation to 90% from its current 80%. Vanguard Emerging Markets Stock Index Fund will be added to each of the funds (representing roughly 1% to 2.5% of assets), further diversifying their exposure to international markets. Vanguard European Stock Index Fund and Vanguard Pacific Stock Index Fund will be added to the Target Retirement 2005 and Income Funds. In aggregate, international stocks will represent 10% of the 2005 Fund and 6% of the Income Fund. “While the changes in the portfolio construction will result in modestly higher risk profiles for the funds, we believe that shareholders will benefit from broader equity diversification and higher return potential.” Using methodology developed by Vanguard’s Investment Counseling and Research Group, assets in Vanguard Target Retirement Funds are invested in a combination of the following Vanguard mutual funds: Vanguard Total Stock Market Index Fund, Vanguard European Stock Index Fund, Vanguard Pacific Stock Index Fund, Vanguard Emerging Market Stock Index Fund, Vanguard Total Bond Market Index Fund, Vanguard Inflation-Protected Securities Fund, and Vanguard Prime Money Market Fund. The funds, which have grown to more than $10 billion in assets since their introduction in 2003, offer a distinctive approach that reflects Vanguard’s investment philosophy. In particular, the funds are distinguished by: An emphasis on indexed investing, which brings the advantages of minimal turnover, broad diversification, and reduced manager risk. The use of a combination of stocks and inflation-protected securities to preserve purchasing power during retirement. Costs that are well below average, with the funds featuring weighted expense ratios ranging from 0.21% to 0.22% versus the 1.18% expense ratio of the average balanced fund (Lipper, 2006). The five new Target Retirement Funds, which will require a minimum initial investment of $3,000 for taxable and IRA accounts, are expected to have similarly low expense ratios
  2. I am meeting on Wednesday with my current local TPA that is charging $7,000 now and would raise his fee slightly to go with Vanguard under Small Business. I want to see what limits this option has. From what I can tell, there might be some limitations. As for Fidelity, sounds like it is the easist option, but everyone is saying my TPA services won't be that good especially with my calculated formulas. That opinion is not only from this board, but others as well. In fact, I asked Fidelity if they forgot about the fact that my plan is cross testing and they came back and said the fee is now $8,500 instead of $7,000. This would be a bundled service, which most people are saying not to do. They also owed me a quote and were over a week late and getting me the proposal. I like Fidelity as a second option, but I don't have a good feeling about their TPA. If I have to augment Fidelity with a more qualified TPA their costs are going to go up from $8,500 plus the other TPA and my costs will be close to Pension Specialists $14,000-$16,000. Fidelity has also not gotten me references and it has been over 2 weeks that I asked for them. Yes, 45% in cash is poor, and we will try to change that with education, index funds, and target retirement funds. I saw that right away and was like wow. I have one 41 year doctor in 95% cash. Pension Specialists ($14k to $16k) actually seems like the most professional TPA is I decided not to stick with my local TPA and go with Vanguard Institutional. Much more expense, but they seem to be the most professional with a proposal in less than 2 weeks, references right away, e-mail reponses quick, etc. I will keep you all updated as I hope to get closer in the next 2 weeks because my target is a reommendation to my Board on March 20th. This is tougher than I first thought it would be. Keep the suggestions coming if you have any thoughts. Thanks, John (aka Tampa Gator)
  3. I am posting this question about 401k plans here because the site has been helpful to me in the past. Here is my situation: * Started as the CEO of a 11 docs general surgery group almost 5 months ago * Our current plan has expensive and poorly returning AIM funds. We pay AIM through our high fees and lousy returns. * We pay a local TPA $7,000 a year to deal with our plan * Our plan has about $2,700,000 with about 40 participants that includes 11 docs * 11 docs each get max of $42k per year and the employees get a 3% match and 3.5% profit sharing contribution * I like being able to offer my employees either Vanguard Target Retirement Funds or Fidelity Freedom Funds since we don't have anything similar to that with AIM now * I have 45% of my employees including docs invested in cash with AIM earning 1.70% over the last 5 years * I have conviced my Board of Directors to make the switch and I am just trying to make a recommendation to them on March 20th I got quotes from 4 companies and here is a background on each one Vanguard Institutional - Because we have less than $5 million in our account we have to use one of Vanguard's own TPAs they worked with called Pension Specialists based in California (I am based in FL). However, their annual charge is over $15,000 a year. In addition, we have to use their 401kMax.com web site and not go through Vanguard's site directly. Customer service is also not through Vanguard but 401kMax.com. I love Vanguard and love the fees and index funds. Pension Specialists references check out pretty darn good. I also have to pay $1,500 a year for an annual education to my employees (2 days), Fidelity Direct - Fidelity offers the entire package of funds and TPA through their company. They have a flat fee of $7,000 for TPA services, but of course higher fees than Vanguard. However, when I stack up Vanguard vs. Fidelity funds it seems like the Fidelity Funds have higher returns (I know about past results). However, I don't know if Fidelity will give us good customer service since we are so small and deal with my cross-testing and profit maximization for my docs. Fidelity promises great education and I think it will be pretty decent with coming out one time a year. Fidelity does offer a few index funds that I can utilize to cut costs down, but there bond funds and retirement money market funds are no where near vanguard. However, it seems vanguard doesn't have a great performing actively managed funds. Bank of America - I did this for 2 of my docs and it was terrible. Two crappy offers that totally pushed me away from them. One was a dam annuity. Current TPA - My current TPA is saying he can stay our TPA and go through Vanguard Small Business Services. He can't go under INstitutional because he can't offer daily valuation, trustee services, etc. However, he doesn't help with picking funds, keeping up with my fiduciary responsibilities, etc. In addition, because it is small business if we go below $3,000 on a fund our company get charged a fee. I think this plan is for really small companies. Any opinions. I want to go with Vanguard, but it seems too dam expensive compared to the Fidelity option. Most people cut on HR people selecting plans, but when you are small company the options limit you considerably because the big companies don't want to take you own. I can see how it is confusing for HR people that don't have this type of background. It is confusing for me and I am an MBA and CPA that is very interested in retirement plans. Thanks, John (aka Tampa Gator)
  4. I would stay away from all 3 of those companies most likely. I have first hand knowledge of the Principal group. They do have good customer service, but as MIA-MD said they are going to have Variable Annuities wrapped in the plan and it is going to cost you an arm and leg in expenses. I assume it is the same with Wacovia and Prudential. Can't you give a call directly to Fidelity / Vanguard to see if there companies can handle your plan. It sounds like it messes up by having the DB plan as well. However, could you get your 401k/403b attorney to see if there is way to split the plans up in some manner or merge them into a DC plan? There has to be other options. Thanks, John (aka Tampa Gator)
  5. I was on this board about 2 years getting help with removing VALIC from my company's 403b plan. Unfortunately through a ton of work, I was unable to convince my boss to make the switch. It wasn't ultimately his fault, but more of various political reasons tied to the University of South Florida in Tampa. Thanks for everyone who helped me back then. The good news is I am now the CEO (3 months) of a general surgery practice in Tampa Bay and I am in the process of making the switch from AIM investments with high fees to Vanguard. Vanguard is coming in during the beginnning of February to make the presentation, but I am pretty sure that this will be an easy one with the my position and the support that I already have from my head doctor. I can't wait to final have a change made that will help all the employees of the company, including the 12 physicians. I know they are all going to appreciate, especially the physicians considering they put over $40k into their accounts each year. Thanks, John (aka Tampa Gator)
  6. gschech: Why don't you get in touch with TIAA-CREF to get a request for proposal (RFP). Without comparing VALIC to something its making your quest harder. VALIC will not budge a millimeter unless they know your company is serious. You need to prove that TIAA-CREF can offer the same personal service to your company's employees for about 1/10 of the cost. I know they offer costs that are a million times better than VALIC. IN addition, from others that I have spoken to they say the personal service is great from TIAA-CREF. Once this happens VALIC should then get a little nervous about potentially losing your company's business. You need to scare VALIC somewhat. Otherwise they are never going to lower any of their costs. If you try to push Vanguard or Fidelity you might get some friction from your company saying we can't get the personal service. This depends on what your company wants. If they want comparable service go with TIAA-CREF and if they want low costs go with VANGUARD. You might want to get your company to bring in a consultant (AON or Hewitt) to show your point. Nevertheless, TIAA-CREF should be able to confirm your believes about VALIC's high costs to your boss. I am going through the same exact thing right now and its been a HUGE battle but I feel like I am actually getting somewhere. Good Luck and DOWN WITH VALIC!!!!!!!!!!! Don't give up!!!!! Tampa Gator
  7. Gary: That $10 million limit could be made up. I am meeting with VALIC next week and I will be asking the same types of questions and then we can compare our notes. As for the reduction in his commissions. Hmm, he is happy and your 250 employees (guess) are told to bend over. Oh well. Lets hope it works out for both of us. DOWN WITH VALIC!!!!!!!!!!!!! Tampa Gator
  8. I was looking at the old message 403bwise msg board to understand more and found this message. I Know I was going to talk to VALIC about this no-load option through their parent company, however, do VALIC employees actually get this plan and not the M&E Plan? Sorry for being so persistent. Thanks, Tampa Gator Author: Joel Date: 3/10/2003 1:58 pm PDT Joepa---Due to being eaten up by the posting ghost I have responded to your previous remarks as a new thread. Rest assured that Valic could use its own funds with its high costs for its own employees' retirement plan-----but no one would contribute!! Saying that Valic must offer different funds is like saying that Macys cannot offer to sell its merchandise to its employees. TIAA-CREF uses its own funds for its employees' 401(k) plan. All Valic (the queen of the load) particpants who do not have a no-load alternative like the Vanguard should inform there employer's CEO of the fact that the Valic offers only a no-load platform to its employees. It is an outrage for ANY EMPLOYER, non-profit or for-profit to offer only a loaded platform. Such policy shows the utter contempt the employer has for its employees! Peace, Joel L. Frank
  9. Daniel: Per you below: If you can get VALIC to reduce their M&E or better yet convert (without surrender charges) the entire plan out of the group annuity contract & into VALIC's Mutual Fund Platform (under which you could offer low-cost index funds & non-proprietary funds from Fidelity, Vanguard, T.Rowe Price, DFA, etc.) that would be a great alternative. HOW CAN I GET INFO ON THIS ACCOUNT AND TO DETERMINE ITS TRULLY AN OPTION SO WHEN I MEET WITH VALIC I CAN BE INFORMED INSTEAD OF THEM BLOWING ME OFF. I CALLED VALIC, BUT FOR INFO LIKE THAT THEY WANT YOU TO TALK TO THE LOCAL REP AND I DON'T WANT TO DO THAT. IS IT TRULY REFERRED TO AS "VALIC'S MUTUAL FUND PLATFORM"???? Thanks, Tampa Gator
  10. Exactly, in my report I recently finished, I documented that both Money Market Accounts were providing negative returns as of June 30, 2003. People think this is a safe investment, but little do they know that the high expenses eat up the low money market returns. VALIC's response in my thinking is that they would say if someone wants a money market tell them to go into the Guaranteed Account. Isn't this process fun!!!!!!!!!! It sucks, along with VALIC!!!!!!
  11. 1. Yes, you can add Vanguard/TIAA-CREF or any mutual fund or annuity as these are the permitted investment choices under 403(b) regs. You are not adding a plan, you would be adding funding instruments as alternatives to VALIC under your current plan. THANK YOU. THAT IS WHAT I THOUGHT. I am troubled that you report that the contracts are between VALIC and participants. This does not jibe with the fact that your plan involves (significant?) employer contributions and would thereby likely be deemed an ERISA Plan. Natural questions following include: By what authority did participants enter into these contracts? How are the contract parties identified in the contract? How are the participant accounts titled? Does the Plan Document allow contracts between participants & a vendor? Is there any contract between VALIC & your company? Or service agreement? I JUST FOUND OUT ON FRIDAY IT WAS UNDER ERISA FROM OUR HR DIRECTOR. AGAIN ALL PARTICIPATIONS GET A 6% CONTRIBUTION (NOT A MATCH). MY PROBLEM IS THAT I STILL HAVE NOT SEEN A CONTRACT BETWEEN THE EMPLOYEES AND VALIC. I BELIEVE THAT ALL EMPLOYEES ENTER INTO THIS CONTRACTS VOLUNTARILY. HOWEVER, I GUESS IF EMPLOYEES DON'T CONTRIBUTE ANY MONEY ON THEIR OWN THEY STILL HAVE TO SIGN A CONTRACT WITH VALIC FOR THE 6% EMPLOYER MATCH. I DON'T THINK WE HAVE A SERVICE AGREEMENT WITH VALIC BECAUSE THE PLAN DOCUMENT DOESN'T MENTION ANYTHING LIKE THAT. I ALSO DON'T THINK THERE IS A CONTRACT BETWEEN VALIC AND OUR COMPANY PER THE PLAN DOCUMENT, BUT I AM NOT SURE AGAIN. I NEED TO RESEARCH THIS MORE BUT I HAVEN'T GOTTEN THE HELP I NEED YET. MAYBE THE CONTRACT IS NOT BETWEEN VALIC AND THE EMPLOYEES. I HAVE NOT GOT MY HANDS ON A CONTRACT YET. SEE THE PLAN DOCUMENT SAMPLE BELOW. THE FOLLOWING IS PER THE PLAN DOCUMENT (=COMPANY NAME) HAS ESTABLISHED TAX DEFERRED ANNUITY PLAN FOR THE PURPOSE OF PURCHASING ANNUITY CONTRACTS FOR ITS EMPLOYEES PURSUANT TO SECTION 403B OF THE IRS CODE OF 1986, AS AMENDED. THE PLAN ADMINISTRATOR SHALL BE . THIS PLAN SHALL BE FUNDED EXCLUSIVELY THROUGH THE PURCHASE OF ANNUITY CONTRACTS. ALL PURCHASE PAYMENTS UNDER SUCH ANNUITY CONTRACTS, INCLUDING THOSE MADE THORUGH PARTICIPATING EMPLOYEES' SALARY REDUCTION AGREEMENTS, SHALL BE CONSIDERED PART OF THIS PLAN. THE TERMS AND CONDITIONS OF SUCH ANNUITY CONTRACTS SHALL BE CONSIDERED PART OF, AND SHALL BE CONSTRUED AS HAVING INCORPORATE INTO, THIS PLAN. FOR THE PURPOSES OF THE ERISA, THE EMPLOYER AND THE PLAN ADMINISTRATOR ARE NAMED FIDUCIARIES OF THIS PLAN. THE ACCOUNT ESTABLISHED AND MAINTAINED UNDER THE ANNUITY CONTRACT FOR EACH PARTICIPANT WITH RESPECT TO HIS INTEREST IN THE CONTRACT. THE TERM "ACCOUNT" MAY ALSO REFER TO THE SEPERATE ACCOUNTS MAINTAINED FOR EMPLOYER CONTRIBUTIONS AND ELECTIVE DEFERRALS. The addition of investment choices while keeping VALIC will create administrative complexity and significantly reduce your ability to negotiate the best terms with new providers. This is true with respect to existing plan assets as well as new contributions. AGREE THAT NEW PROVIDERS WANT ALL THE ASSETS AND WILL GIVE US WORSE DEALS WITH ONLY NEW CONTRIBUTIONS GOING FORWARD. HOWEVER, THREATENING VALIC ABOUT PUTTING ALL NEW MONEY INTO TIAA-CREF SHOULD MAKE VALIC GIVE US BETTER RATES BECAUSE THEY WILL KNOW FUTURE MONEY WON'T GO WITH THEM. Are you going to have VALIC provide consolidated financial reporting, or Vanguard or TIAA-CREF? Who will perform compliance testing and provide the 5500 report? Will participants receive multiple, un-consolidated reports? I AGREE AND DIDN'T THINK OF THAT PROBLEM. HOWEVER, HOW DOES THE STATE OF FLORIDA OFFER ITS EMPLOYEES 5 DIFFERENT OPTIONS (TIAA-CREFF, VALIC, ING, ETC). I ASSUME THE STATE TAKES CARE OF THIS THEMSELVES AND NOT THE UNIVERSITIES THEMSELVES. I GUESS I WOULD NEED SOMEONE TO HELP US WITH THAT AND I KNOW OUR HR DIRECTOR IS CONCERNED BIG TIME ABOUT NOT DOING MORE WORK. ANY SUGGESTIONS HOW COMPANIES DO THIS??????? 2. Yes. I would not advocate this approach, but you can effectively force participants to move by removing investment options from the plan that are presently in use. I'd argue that because your plan is an ERISA Plan, you should be eliminating investment choices that do not meet minimum performance standards. To do otherwise will increase employer liability. HOW DO YOU DETERMINE MINIMUM PERFORMANCE STANDARDS. I DON'T THINK WE HAVE ANYTHING LIKE THAT. I'd be careful about differentiating between employer & employee funds regarding treatment of investment choices. Technically, by retaining VALIC, you are going on record that the contract (and all investment subaccounts contained within it) is meeting minimum performance standards for your plan. Does your plan even have an investment policy or established minimum performance standards? - it should. I HAVE NO CLUE UNLESS VALIC IS DOING SOMETHING. I DON'T THINK WE ARE DOING ANYTHING INTERNALLY. 3. If you can get VALIC to reduce their M&E or better yet convert (without surrender charges) the entire plan out of the group annuity contract & into VALIC's Mutual Fund Platform (under which you could offer low-cost index funds & non-proprietary funds from Fidelity, Vanguard, T.Rowe Price, DFA, etc.) that would be a great alternative. I'd pursue this alternative first. (I doubt VALIC has told you about this product available from their parent AGFC) I THINK THIS IS A GREAT POINT. I GUESS I NEED TO QUESTION VALIC ABOUT THE PLAN YOU REFER TO AS VALIC'S MUTUAL FUND PLATFORM. THAT IS THE BEST OPTION. HOW WOULD YOU GO ABOUT ASKING THEM FOR THE BETTER PLAN. THANKS FOR ALL YOUR HELP. BARE WITH ME AS THIS IS NOT MY EXPERTISE AND I AM LEARNING ON THE FLY AND TRYING TO TEACH PEOPLE ABOVE ME SO ITS BEEN HARD. ANY OTHER SUGGESTIONS WOULD BE APPRECIATED. WHAT WOULD YOU ASK VALIC IN OUR MEETING IN A WEEK? ITS MORE OF A GENERAL ANNUAL MEETING AND NOT A NEGOTIATION MEETING, BUT MY BOSS SAID I CAN ASK PRETTY GOOD QUESTIONS TO START THIS PROCESS MOVING. THANKS AGAIN.
  12. We meet with VALIC in about 1.5 weeks, but I think they know we are coming after them based on what my HR Director told me. However, I have some questions now knowing that the contracts are between VALIC and each one of our employers. 1) Can we add a second plan such as TIAA-CREF/VANGUARD to the fold which would allow employees to select between VALIC and TIAA-CREF/VANGUARD? We can't force employees to roll their money since the contracts are between VALIC and them. In addition, employees would have to pay surrender fees. 2) Can we force employees to move their EMPLOYER contributions over to the new plan? This will upset VALIC more if we threaten them with this. I would assume VALIC will be willing to lower their M&E fees if we threaten to use another vendor along with them. This is because employees will learn that TIAA-CREF/VANGUARD is much cheaper than VALIC. I also assume the only VALIC gives up or lightens the Surrender fees if we decide to only stay with them. Any ideas on being more prepared and how to be ready for questions like the ones above? I will probably think of more questions and I will post them later. Thanks, Tampa Gator
  13. gschech: Reviewed the 25 page document with my CEO today. He was quite impressed and thought I should write some articles for our industry journals. Nevertheless, my CEO and I are meeting with our HR director Friday to go over some questions we have regarding the contracts and asset allocation by funds and by employer/employee. We meet with VALIC in about 2 weeks, but that is just the normal annual meeting. However, unaware to mine and my bosse's knowledge the HR director gave some of my preliminary info to VALIC so I guess they will be somewhat prepared. We might also get our internal legal advisor involved in the next few days as well as an independent party such as AON or Hewitt to assist us a little to confirm my initial report. Don't know how it will go, but I think over the next 2 weeks to 2 months we should get far. My boss told me today that I should be the one that reviews all our different programs, such as life insurance, disability insurance, etc from now on. Thanks, Tampa Gator (John)
  14. Per my conversation with Vanguard you can actually get them to offer more funds then just Vanguard funds. I believe you can also get funds from Janus, Strong, etc. Make sure to ask them this question. As I have been going through the bid process, Vanguard keeps telling me this. In addition, I don't think there is any risk with only offering Vanguard Funds to your employees. Many employers do this and I actually think if they are quality funds its better. Too many fund options for employees is not a good thing. As long as the funds offered are quality (like a Vanguard) I think its better. We have 67 funds in our VALIC 403b plan and I can't stand it and that is why I want it changed. Check out this link from Vanguard that explains too many funds is a bad option. https://institutional5.vanguard.com/VGApp/iip/Research?Path=PUBRR&File=RetResTooMuchChoice.jsp&FW_Activity=ArticleDetailActivity&FW_Event=articleDetail IN addition, when you say Vanguard can't offer you the same services what do you mean? The only thing I can think of is having some rep visit your site to help employees. However, are these reps really worth much other than making employees feel better. Vanguard can offer you good phone service, some special seminars on site, web education, etc. I like TIAA-CREF from what I see, but I think Vanguard's costs are a lot lower than TIAA-CREF and offer more options. No knock on TIAA-CREF as I believe they aren't far below Vanguard. Just stay away from VALIC. Thanks, John (aka Tampa Gator)
  15. I posted this on Vanguard's (www.Diehards.org) and wanted everyone here to see it as well: 403b for the State of Florida Community Watch Tampa Gator | 07-28-03| 07:34 PM| Total Replies: 2 As you all know I am trying to push my company to make a switch from VALIC to Vanguard, TIA-CREF, or Fidelity due to high expenses. My employer is related to a University in Florida, but we are not employees of the state system. I said before we have about $20million in employee's assets in our plans and VALIC is charging us about 1.05% above fund fees (M&E) fees which equates to about $200,000 a year versus having Vanguard for a full year only charging $30k (per quote). My boss asked me to dig into the university's system and I did. Its an optional retirement plan (ORP) that employees can choose to do. They also have a traditional DB plan. However, their 403b gives them 5 choices of companies in order of most popular (VALIC, TIA-CREF, AETNA, Met Life, and Jefferson Financial). I got a hold of one of these contracts today with VALIC through the state and these employees get charged the same amount us we do. Digging more is that all decisions are made in Tallahassee and the plans are pushed down to the Universities. Therefore, the State bargains with VALIC and not each State University individually. Well I guess that state employers are paying an arm and leg also. But most distirbing is too think how much DAM money VALIC is making off the state employees. WOW!!!! We are talking probably well over $1 Billion in employee assets (no clue). Take that times an extra 1.05% per year. WOWWWW!!!!!!!!!!!!!!!!!!!!!!!!!! I hope I can get mine changed at my company and then even help the state learn more about it at our university level. Thanks, John (aka Tampa Gator)
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