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Pat B

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  1. Hi Pat, Factual and not very encouraging. But then again, asking pros to change is asking for nothing. You are right, us educators must start saying no to high fee products. In the meantime, let me paraphase JFK on his famous speech about putting a man on the moon by the end of the 1960s. When I heard that, I was only 14-15 but I remembered vividely how impossible that adventure seemed at the time. We are not asking 403b reform "because it is easy, we are doing this because it is hard" to offer a fair plan for all envolved. The status quo is currently ripping teachers off and they don't know it. Its not ethical and its not sustainable. Never give up by just waiting to see what happens. Steve Steve, I do believe there are enough solid professionals on all sides actively trying to make things better. It will be interesting to look back in 5 or so years and see how things look. The frustration for those on the business end trying to provide service models that are different than most of the current models that you struggle with is getting buy in and understanding. To your point we keep being active and help to create change in a positive motion. Not giving up on the fight,,,,yet.
  2. This is the beauty of evolution, challenges, denial and how we all adopt or choose not to. In the overall 403b market there are high fee products (for the majority), administrative needs (for all) and regulatory requirements (for all). In this market there is a majority of employers (based on past non requirements) who have yet to fully accept their responsibilities, want outside companies to provide service at a small cost (and at times you will get what you pay for) and have to balance an employee base that can be unclear in their wants. In this market there is an overall employee base that does not understand 403b is an employer provided benefit and plan, a split between those that believe strongly in controlling fees (which unfortunately may still be a minority) and those that follow the lead of others, and resistance from employees to fairly share in the cost of a retirement benefit. If only there was a world where employers understood the benefit they are offering, the responsibilities associated with that offering, that they are not staffed to fully administer the plan, where employees appreciated the benefit being offered by the employers, understood it as a benefit offered and not a given right, appreciated the employer who provides fairly (which does not automatically mean lowest) expensed investment options and lastly that it was not a crime that a business providing services be paid fairly and not expected to give it all away. Oh wait there is, just not in this market. Let us see where evolution takes us over time or watch how the fight to live in the past prevails.
  3. Pat B

    Consultant Says:

    Is that number low? Time will tell as the IRS and others delve into looking at these plans and how they are coordinated. A lead effort and commitment is still lacking from many plan sponsors. It is changing slowly, but there are still plenty of sponsors that buy into the "don't worry about it" we (TPA's, legal counsel, advisor's, unions, etc) will take care of everything.
  4. Or it is simply just an answer that is disliked. If that is the case that certainly does not invalidate the answer. There have been similar thoughts expressed for years by those whom work (not invest) with Vanguard whether it be a school, TPA, or advisor and the theme is fairly consistent. Vanguard is at times neither cooperative nor knowledgeable to 403b and its requirements. The answer of "it's my way or no way" is a standard sentiment given out and that is not an answer either...
  5. Is it over simplifying it to say they have gained and kept assets with little effort beyond "low expense ratios?" I doubt they are shelling out a bunch of time and/or money on training those that service a niche market, which to them 403b is. They'll train on what is the majority of their business; non-qual and qual plans, 403b gets short end. I do not see that changing anytime soon, so the plodding continues, but hey low expense ratios.
  6. Pat B

    Tiaa-creff

    I have just a few quick observations. In working with this provider from an administrative point of view firsthand, they are not the most efficient, in fact they can be quite the challenge to work with. They tend to have issues such as incorrectly posting participant funds, not posting funds at all, not taking responsible line when these errors occur and I have heard plenty of similar stories in regards to movement of monies. Low expenses are important, but they sometimes come at a cost. This certainly does not justify the other end of the spectrum either, expenses just to generate revenue. One actually may prefer reasonable costs with a good service model than lowest cost with poor service model. I would also say that though Steve may not feel there is a financial bias through the site and I tend to agree, like everything in life there is bias. In this case it is the inference being made by his statement of all so called "good" advisors. I would at least disclose the personal bias that is being made and often is in some of these posts. That bias being advisors are bad, greedy, self interested people, which I tend not to agree with as a blanket policy. Just my two cents,,,
  7. Pat B

    403b Termination

    Hi PatB, I didn't get an official answer to who owns the contract but I think it's the individual employee. I learned what the non-profit company is going to do to get around the "seperation of service" issue is to terminate all employees, and let the for profit company (who bought the place) immediately rehire everyone. Then we are technically seperated from service from the non-profit and can rollover the money without surrender charges. Does this sound like a legitimate way to handle this problem? Thanks, Francis Francis: You need to review the terms of your contract to determine if surrender charges are due if you withdraw the funds after the plan is terminated. While dsistributions are permitted under a 403b plan under the regs upon separation from service, the insurance contract will state whether surrender charges will be imposed if funds are withdrawn after the plan is terminated. I agree the contract dictates if the surrender charges are assessed and what they would be, and insurance companies are not in the business of letting them slide. I'd be curious to hear intruder's or others views that even if the non-profit "terminates" all employees they still have little no recourse to force you to move your monies. For example, lets take all other factors away and assume you simply terminated employement on your own. You would not be obligated to move your monies unless you choose to in this arrangement, your employer has no say. Now move to current circumstance, I think your employer new or old has no ability to make you move your monies. Therefore they do not have a terminated plan, in the IRS' eyes. Let's see what other thoughts are on the subject,,,,
  8. Pat B

    403b Termination

    Francis, surrender charges are very prevalent in annuity products. In many cases these are either not explained by the selling agent, or not paid attention to by the buyer when explained. Regarding your plan, do you individually own the existing contract? If you do, as opposed to the employer owning your contract, then you can not be "forced" to move your monies. The concept of termination in 403b world comes with several landmines and this is probably biggest. If yours and your fellow employees own the contracts individually, then your employer may have a very difficult task ahead of them to terminate the plan. Seek to clarify who actually owns the contract, my guess is you do. If so you have control not your employer so they can not force you to move the monies thus suffering a penalty. Just a few thoughts and I am sure others will offer their insight.
  9. You are correct, monies prior to 1/1/09 should be fine, no new contributions would be allowed, and an ISA is not needed. Without an ISA and the plan not allowing you to do so you will have no ability to do anything with the "old" account. No contract exchanges into, no hardships and no loans. You will have access to those monies at a point in time when you sever employment or contract exchange them into the plan. This is all under the assumption that your employer and/or tpa have a good understanding of these facets.
  10. I will make a general comment on the theme to your question that many plan sponsors are taking. This theme was occurring long before the economic crisis we all face now. But you ask where I can find "good, inexpensive, advice," these sentiments dovetail with the norm of 403b plan sponsors wanting plan support for "free." Those that are 403b plan sponsor need to make some very hard decisions in the coming years. Those decisions involve either choosing to do it on their own and become the admin experts of their plan capable of answering the challenges put forth by the IRS and DOL. Which you already state "our HR and accounting departments are very thinly stretched already." OR Understand that you get what you pay for and as it has been said by others TANSTAFL (there ain't no such thing as a free lunch). Until plan sponsors make a choice and realize trying to find cheap, easy and fast solutions is not the right direction these issues will continue. I commend you for understanding the past decision methods may not have been in best interest of all. I also can appreciate the challenges faced by non-profits in this economy. I would suggest you start shaking your local tree of advisors; bank, accountant and/or attorney to see if there is a local presence that may be capable of offering objective consult to you. If not there are regional pockets of support. 403b does suffer from a lack of "experts," but there are good resources out there, finding them can be the challenge. You have taken a good step to at least ask the question. You may want to provide those here at least the region you are located, that may shake some other possible resources for you to follow up with. Thank you for allowing me to spring off of your specific question to address what I feel is a real issue for plan sponsors, and that is the hard choices they need to make. Pat
  11. To roll out of your work sponsored plan you must have a distributable event. Those events include severeance from employment, disability, plan termination, reach retirement age. It does not appear any of those are applicable as it appears you are still employed. Most likely the answer is no, but if you ask Fidelity they will most likely be able to provide you with a definite answer.
  12. Pat B

    403b Loan

    First, you certainly should rely on your professional advisors for guidance, ie attorney, accountant as there certainly could be tax ramifications. In general if your plan and vendor allows for loans then proceed with them. Taxes and penalties arise if the loan becomes a distribution. That happens if you default on paying the loan, I believe in most cases if you go more than 90 days without payment the vendor will default the loan. At default the loan becomes taxable and if not of age a penalty of 10% will also be added. The other scenario is if you leave your employer and move the monies thast could lead to a distribution leading to tax and penalty. Will you be staying with your current employer for the duration of the loan? A question you should be able to reasonably answer. With all this said, you ask an excellant question and should do so of your personal, profesionally liscensed advisors you consult with. I hope this helps your direction...
  13. I will add to that theme that signing providers is the easy part. We will all see in the coming years both from a compliance point of view and remittance of funds point of view that some companies over sold what they can deliver. We will see that some companies never had a chance at delivering what they have promised. The shake out will be felt, it will also give rise to others to provide what those currently have no ability to deliver on. The signing of paperwork anyone can do, delivery of real service will the be the real sign of who sinks or swims. Signing with a low fee company and actually providing compliance are two different things. I know a lot about how Omni attempts compliance. That is about all I can say on a public message board. If you want to have a private conversation, perhaps I could expand. If I actually expanded here I'd probably be sued by the end of next week (Yes, you can get sued for telling the truth). ScottyD
  14. Steve, I could not agree more. By no stretch do I think that sd's or any employer should dis-involve themselves. Though some TPA's sell that message, “we will do it all, just trust us.” I absolutely think there must be active involvement on the employer level, as it is the employer's plan. Part of what I am seeing though right now is those er’s looking to stay dis-involved and that is too bad. To your point you then give too much power to an outside party and that is as counterproductive to trying to maintaining all internally. Like in life there should be balance. I’ll let others that know better the structure, but my impression of for example CalStrs program is to act as a partner, not the ruler of the plan. I can speak for my approach, which is most def a partnership. I would rather work with an er that wants to be part of the process and have a role, then just say here do it all.
  15. AP, or is it an argument for having the right people do the job? The one point I struggle with when I see it is certain fervor against having an outside party used to help. In this case the school obviously did not have the internal resources or knowledge to understand the rules, most don't. In this case it does not appear there was assistance, like a CalStrs Comply, Gatekeeper, etc. But the suggestion of using a recordkeeper/tpa seems at times to bring a negative response. I’m at times unclear to why that is. Understand I am not saying a proprietary investment firm providing the recordkeeping services, as that I do not agree with. This will continue to evolve over the years. Compliance is not going away no matter how much we wish it away. And it shouldn’t, there needs to be structure to what we do, I certainly agree with AP that it does not have to be so convoluted, but there is a need. I expect schools to focus on keeping an efficient structure to educate our children, not to know how IRS limits work whether it is 403b, tax rates, etc. Just as I don't expect Joe down on the corner that sells just tires to know how to fix my cars transmission.
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