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BenefitsGeek

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  1. It seemed easier to find out this way. Have you been able to get good info. from the TIAA-CREF Executive Offices? I would suggest an additonal method of getting to the bottom of this issue and that is contacting you employer. Employers, as plan sponsors, can and do have imput with TIAA as to the extent wealth management services are provided to their plan participants.
  2. Steve, thank you for you prompt and thoughtful reply. It made me think about the fact that when I started with my firm almost 20 years ago, hospitals, museums and the like were similar to how school districts are now, and how today they are completely different. So I beleive change is possible if the message of 403(b)Wise and others continues to be repeated over, and over, and over again until someone listens!
  3. I don't work with school districts (we consult for private tax-exempt plan sponsors who 99% of their time choose low-cost providers such as TIAA as their exlcusive plan vendors), so I may be ignorant on the issue, but why is it that despite such articles being published time and time again,and the existence of watchdog websites such as 403(b)Wise, and state AG investigations of vendors in the very area of charging unreasonable fees on annuties (mostly to teacher) ,there does not appear to be much change to the status quo of teachers getting the short end of the stick? I realize some states mandate multiple vendors, but even in states that do not there are similar messes; the two favorable-fee states cited in the article seem to be the exception rather than the rule. Do states just not care about the 403(b) given its frequent status as the supplement to the state db plan? All it would take is one RFP for an exclusive provider (in states that would permit one provider). It just seem's patently unfair that, if you work for a university, hopsital, museum, etc. you are more often than not contributing to a low-cost provider, but if you're a public school teacher, sorry, it is you versus the vendors, with the vendor often winning (and to be fair to the vendors, they are in the business to make a profit (save perhaps for TIAA, but that is another discussion...). Feel free to educate me if I am completely missing the point.
  4. Thanks, Steve. The article summarizing the variouys studies is in the attached link: http://www.tiaa-crefinstitute.org/pdf/rese...dialogue/85.pdf The issue I am referencing is at the begining of page 7. Sorry if I was not articulate about it, this equity investing in taxable accounts and bond investing in tax-deferred accounts is new to me as I always thought that one should diversify among equity and bond accounts in a tax-deferred retirement plan.
  5. Mr. Schullo In placing equities in a taxable account to those who have multiple accounts, what if you have an equity mutual fund that is tax inefficient? Or are we assuming that we are using index funds if we are using mutual funds since tax inefficiency is not an issue? I saw one study that indicates that even for a tax inefficient mutual fund the taxable portfolio was the proper placement, but I am curious as to your thoughts.
  6. Yes, the ETFs that are common in the marketplace are generally NOT 403(b)(7) custodial accounts. Only if the the ETF is regulated as a mutual fund under IRC 851. I thought ETFs were traded on a stock exchange not a mutual fund. Some ETFs fall under the category of UITs, which fall under the definition of a regulated investment company. This would allow inclusion in 403b7. I would imagine it would not be easy to administrate such an arrangement, but it is definitely a legal and viable option, albeit rare.
  7. FYI, ETFs are generally not available in 403(b) plans, as they do not qualify as a a permissible investment under Code Section 403(b) (i.e., they are not 403(b)(1) annuities or 403(b)(7) cutodial accounts/mutual funds)
  8. One of the only reliable predictors of future fund performance is cost, and if we are talking about the standard Equitable Variable Annuity roster of funds vs. the standard Vanguard roster of mutual funds here, the Vanguard funds would be far less expensive, a margin that the Equitable investment options would be hard pressed to overcome. Think of it as a horse race, with the Vanguard horse being allowed to start 2 seconds before the Equitable horse, that's the fee that the Equitable funds would need ot overcome in terms of perfromance. On the index side, it is a margin that is impossible to overcome, because the Equitable Horse would be running at the same speed as the Vanguard horse. On the active management side it is theoretically possible for the Equitable horse to be faster than the Vanguard horse, but probably not enough to overcome the 2-second head start given the fact that the majorty of active fund managers do not outperform their benchmark indices. Of couse, you would need to examine the particulars of your program. Does your plan add fees to the Vanugard arrangement? Is the AXA/Equitable contract in your program available at a lower cost than their standard program?
  9. You will also want to make certain that these are mutual funds offered by Fidelity directly, as opposed to Fidelity Advisor funds which add a layer of expenses and are sold only through brokers (though even the Advisor funds might be the least expensive of this bunch).
  10. Is anyone aware of any low cost offerings from the five vendors involved? My experience (albeit limited) wiht these vendors is that they are among the most expensive in the industry, but I know that vendors are always providing new offerings, so i certianly have an open mind about this. If these products are indeed high cost, I would woner why the IBC, which its presumed purchasing power, could not have obtained a true low-cost offering
  11. Why could an SD not find a single provider that was both low cost and high service if it were large enough? Could it not use its collective purchasing power to extract a deal from a single provider? In the ERISA 403(b) market, such a single vendor approach is commonplace, with both insurance and mutual fund companies (including the no load companies) offering low cost investment arrays along with excellent services such as onsite meetings if there is enough contribution flow to make it worth their while.
  12. Thanks for everyone's informative thoughts; this dialogue has been very helpful in educating me about the advantages and challenges of a single vendor SD plan, and I appreciate everyone taking the time to respond. To clarify, I was not stating that onsite representation from no-load mutual fund companies was common in a mutliple vendor SD environment. What I stated was that it was common in a single vendor 403(b) plan of some size (generally 500 employees and up, though I have seen smaller organizations obtain such representation as well depending upon the circumstances). And for larger nonprofits, often the mutual fund companies will offer as many onsite visits as the insurance and other financial services companies. And, even among the insurance companies, the investment offerings consist of low-cost mutual funds; I have not seen a vendor propose variable annuities or mutual funds with added charges in the exclusive provider marketplace for several years now. Admittedly, this is mostly an ERISA environment with employer contributions, but I have also worked with religious organizations with elective-deferral-only plans (churches are non-ERISA unless they affirmatively elect ERISA), and the results are largely the same if a single vendor is used. All of the vendors put their best foot forward in an RFP process if they know that they will be the exclusive provider going forward. And indeed, if many SD'd choose to go with one vendor (I am getting the sense from these posts, however, that this is far from a trend, especially in the short term), it will present a tremendous opportunity for some vendors who are used to pricing in an exlcusive environment and can pick up significant amounts of 403(b) business.
  13. Can anyone explain to me the advantages/disadvantages of a single vendor approach for School District 403(b) plans? I work in the ERISA 403(b) marketplace, where single providers are common, and low cost providers (e.g. Fidelity or similar) are the rule among mid to large size plans (500 employees and up). Among these plans the issue of onsite vendor representation is moot, as most all vendors (including the no load mutual fund providers) will provide onsite reps to meet with participants. However, even after reading some of the articles on the 403(b)Wise website, I must admit to still being unfamiliar with the reasons why SD's would be resistant to such plans. Are many SD's too small to obtain decent value in a service provider even with consolidation? If so, can't they band together to obtain a low cost vendor? Or is the 403(b) such a low priority for school administrators that they are too busy to give it a second thought and have no budget to hire a consultant to give it a second thought? Forgive me if my questions seem naive as someone who does not work with school districts.
  14. I beleive that some of the fund families (Fidleity comes to mind) make it somewhat easier for you by actually providing the brokerage commission in the SAI as a percentage of the average fund assets for the year, so the percentage can easily added to the expense ratio. Also, do index funds generally incur less brokerage commissions than actively managed funds, since there would ostensibly be fewer trades and hence less commissions? Finally, since brokerage commissions are not included in a fund's expense ratio, are the also not accounted for in the returns net of expenses disclosed by fund families (in other words, do I need to deduct the brokerage commission from the "net" return in order to derive the actual return of a mutual fund)?
  15. I was only stating that you cannot equate the standard of care that is required of an employer for a 403(b) plan with the standard of care required for a payroll deduction IRA, since the IRS does not equate it; via these 403(b) regs, they are clearly stating that the employer (or its designee) has many responsibilities; there are no similar regs. for payroll deduction IRAs. Regardless of the fiduciary argument, more employer responsibiltiy = more potential employer liability in my book, whether as a fiduciary or not.
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