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BruceM

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  1. The employer is responsible for the operation of the plan, so you should probably head up the chain starting with the HR department of your current employer. Most of the larger school districts have hired compliance companies to ensure their plan does not run afoul of contribution rules, to include the timing of salary contributions, which, at least for qualified plans, must be made 'promptly', but never later than the 15th of the month following the month of salary deferral. Not sure if 403(b) plans must comply with this rule, but it seems reasonable they would. Perhaps contacting the IRS may prove helpful, as they are the ones who do the audits. BruceM
  2. This is a guess on why VG is not participating as a vendor on many 403(b) plans. The new requirements for 403(b) plans require the plan have information sharing agreements with all vendors. VG, like Walmart, runs on a fairly thin margin. They make their profit on volume. Building the backoffice for info sharing with, say, 10 other vendors, simply builds in a layer of expense that VG would have trouble paying at their level of fund expenses. Just a guess, as my querries to VG have provided nothing but vanilla answers. BruceM
  3. I agree with Intruder. The 403(b) plan "May" allow your mother to establish an inherited IRA and roll the balance directly to it, and then begin her required minimum distributions from it. But if the plan does not allow this, then she'll likely be stuck with whatever payout rule the plan has. Intruder..question: If the plan does not allow for transfer to an inherited IRA in 2009, but begins a life payout, do you know if the beneficiary can require the plan balance to be rolled to an inherited IRA in 2010, or will the new inherited IRA required option starting in 2010 only apply to those who become beneficiaries that year? BruceM
  4. And note that the expense ratio reported by the fund will likely not include all expenses. A relatively recent report I read on insurer-based investment offerings showed that actual expenses were usually double the reported expense ratio. If you Google "403(b) expenses" you can probably find it. BruceM
  5. A TPA is not necessary, but compliance monitoring is. One of the primary reasons the IRS is requiring school districts to have a written, compliant plan in place by Jan 1, 2009, is because some school districts were simply turning the keys over to the vendors to administer and oversee the 403(b) accounts, which is not unlike the farmer turning over the keys of the chickencoop to the well dressed fox. In short, it puts the plan back where it belongs....on the desk of the school district manager/supervisor and holds them accountable. Here in the Portland area, most of the large school districts have hired an independent compliance company to oversee the creation and administration of their 403(b)'s. Now, there's nothing that says a school district employee cannot monitor contributions, distributions, loans and hardship withdrawals, but unless its a large district that can afford to hire such a person (or tack on the FTE's to existing EEs), this service will likely be contracted out....the question is, to whom. I don't know of anything to prevent insurers from doing this, but my guess is that generally, they don't want to (there's more money to be made through product sales than this stodgy, boring compliance work), and if they do so without their products (e.g. on a Vanguard or Fido platform), like AIG, they'll charge substantially for it. BruceM
  6. BruceM

    Vanguard

    Guys...there's an easy answer to this...don't contribute to the 403(b) As long as your AGI is under the annual maximum ($105,000 married filing jointly for 2008), you can deduct all or part of your TIRA contributions. Otherwise, make the full contribution to your Roth IRA For additional contributions, set up a taxable account and simply make your annual contributions there. Yes, its not tax deductible, but you have full control, you can keep your annual expenses to an absolute minimum (if you wish) and much of the future gain at withdrawal will be capital gain instead of ordinary income. In the end, there probably won't be much difference in terms of tax savings and expenses, when compared to those EXPENSIVE insurance 403(b) plans. BruceM
  7. Lets carry this a step further.... Owning or not owning a company's stock has nothing to do with its ability to make a profit....owning or not owning its products has everything to do with it. "Socially Responsible Investing", in my view, is like religion: It does not require rational or objective thinking and it is not required to respond to the querries of skeptics. It is a matter of faith and/or beliefs that transcend logic. And like religion, SRI sounds good on the surface, but on deeper exploration of what's really going on, it makes absolutely no logical sense. And evil wrongdoers??? If one stood phycially before a million informed investors and held up a placard with the name of ANY company, within minutes, there would be a few screaming voices, clamoring and clawing towards you to tell you how immoral, corrupt and evil this company is, and how no one should invest in it....EVER! As long as SRI remains a faddish clique, that's just fine....individuals may do what they wish with their own money. But they can't control mine.... BruceM
  8. The real eye-opener here is not so much the absolute dollar figure of fund fees collected....but what per-cent of the average earnings on one's investment account is going to the middle men. 30%? 40%? Higher? And the middle-men include the mutual fund, the sales rep, the TPA and in the case of M&E charges, the insurance company. Anyone know of any objective study that looks at expenses this way? BruceM
  9. Since I do this stuff for a living, let me offer a summary to the former replys 1. If you are an 'active participant' in your employer sponsored defined contribution plan, the deductiblility of your traditional IRA (TIRA) will be subject to Adjusted Gross Income (AGI) limits, depending on whether you file single or jointly with your spouse. 2. 'Active Participation" for a DCP simply means money was added to your retirement plan, whether you did so through salary deferral or your employer contributed or you received forfeitures from other plan participants who left the employer before being fully vested in the employer's contributions. And as mentioned, you will be considered an active participant in your employers Defined Benefit Plan (pension plan) whether you elect to participate or not (although I can't imagine why anyone would elect NOT to participate) 3. 457(b) plans do not count as retirement plans for purposes of 'Active Participation'. 4. If you are not an 'Active Participant', there is no AGI limit on the deductibility of your TIRA contributions. 5. If you are an 'Active Participant' and your AGI exceeds the deductibility limit but not the Roth IRA contribution AGI limit, you should only contribute to the Roth, not the Traditional IRA. BruceM
  10. Judy To carry the after-tax savings a couple of steps further..... The way I did it was to simply set up a monthly allotment to my Fidelity account. This takes care of the payroll deduction so I don't have to think about it and I don't 'miss' the income. I thought long and hard about the tax-deductibility I would be missing....but I really didn't see this as an issue. The tax I wouldn't have paid was simply added into my household income during my working years. In other words, for most, the savings simply increased their lifestyle a bit. By cutting back my lifestyle by that amount and adapting to it, I had that much less of a lifestyle I had to support in retirement. And besides, I made up for part of this in the deductibility of my traditional IRA contributions...well....up until our household income exceeded the IRA deductibility limit. One other point that should be addressed. Retirement $$ held in employer sponsored retirement plans are protected from all creditors except former spouses and the IRS for tax liens....taxable accounts are not. So if one decides to use taxable accounts for retirement savings, they need to make sure they have adequate liability insurance for their auto, RV and Home...and probably an inexpensive minimum $1MM umbrella policy. This makes good sense anyway, but a necessity if one saves in taxable investment accounts. Over the years, the 403(b) fees I didn't pay have added considerably to my taxable account savings, where I invested exclusively in index funds or ETF's...and a target date retirement fund at the end of my working years. But I do so enjoy only paying 5% Fed tax on just part of my withdrawals in retirement :-) BruceM
  11. Why? With the growing expenses of operating a 403(b) plan and the 'haircut' the TPA's and expensive MF's typically take from your account, you may be better off ignoring the 403(b) and make after-tax contributions to tax efficient ETF's or Index MF's, while holding the tax inefficient bond or dividend funds in your IRA. Do your own calculations, but the tax favored withdrawals, full liquidity and lack of any minimum required distributions in later years make taxable account investing a viable and often preferred alternative. BruceM
  12. Intruder: The SS WEP always speaks of a PENSION from an employer who does not contribute to SS as causing a reduction in one's SS benefit. Might you know, how about non-pension retirement benefits? I mean, what happens if the employer who does not contribute to SS contributing to a 403(b) plan, or a non-govt 401(k), or a profit sharing plan or any other defined contribution plan? Would the accumulation of these accounts for the benefit of the employee who is eligible for SS benefits from >40 quarters of employment from another employer, cause a reduction in the SS benefit...or must it be a defined benefit plan? BruceM
  13. I'm sympathetic to your concern about TPA + MF management + MF Admin + 12(b)-1 fees + annual account and custodial fees + MF hidden fees that don't show up in the expense ratio such as soft money fees, internal MF transaction costs and market-moving bid-ask spreads for small company stocks. This raises the question of whether an employee would be better served to direct the same contributions into a taxable account through payroll deduction and invest in a portfolio of diversified ETF's with periodic (annual?) rebalancing. Due to the regular transaction costs of purchasing ETF's, the employee could simply direct the monthly payroll deductions to a MM fund and then each year, make the ETF buys. Or if done monthly, purchase index MF's from a MF that offers a broad selection such as Vanguard or TR Price. Disadvantages of this approach: after tax contributions, no creditor protection (so adequate liability insurance is a must) and a requirement of self management and self discipline Advantages: tiny fund fees (except purchasing/selling transaction costs), full liquidity and favorable capital gains/qualified dividend tax treatment. Which would be the better option? Only your spread sheet knows. BruceM
  14. Because this is your own retirement benefit from SS, and not as a dependent or widower, I believe you'd be under the rules of the 'Windfall Elimination Provision', which will reduce your SS benefit based on the 'pension' you'd be receiving from your current non-profit employer who does not withhold SS tax. But the SS regs constantly refer to your non-profit 'pension', which it sounds like you don't have, but instead have a compulsory salary deferral of 15% that accumulates in a defined contribution plan, which will provide you with a lump sum that you can transfer to your traditional IRA when you separate from service? I'm not sure how this would be converted into a 'pension', unless SS has a formula for this. In any event, as previously suggested, you might want to give them a call to discuss how your SS benefit would be calculated, at 1-800-772-1213. The SS website discussing the Windrall Elimination Provision can be seen at http://www.ssa.gov/pubs/10045.html BruceM
  15. If your new employer is a non-profit organization, then it should not have accepted the transfer, which makes me think your new employer is a government job. But if the 457(b) would not accept qualified plan transfers, why would it take the transfer after tax? But in any event, can't you just reverse the transfer back to your former employer's 401(k) or even to your traditional IRA? Providing the distribution is not directed to you, I'm not sure why it would matter that the transfer was held-up at another plan, as there is no limit or tax implications on agent-to-agent transfers. Did your 'advisor' check with your new employer's TPA prior to the transfer? BruceM
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