Jump to content
Sign in to follow this  
Ken

New 457 Plan

Recommended Posts

Our District is thinking of starting a 457b plan. We are being asked by vendors to make this an exclusive arrangement. What are the advantages/disadvantages of only allowing one provider to control our 457 plan?

Share this post


Link to post
Share on other sites

Hi Ken,

 

Theoretically, the advantage of one vendor is that that one vendor was forced to compete with other vendors to win the business. In doing so they lowered costs and increased services. Plus when you move to a single vendor environment you can move from a sales environment (multiple vendors vying for business) to an education environment (one vendor has the business and can concentrate on education). Below are some stories on the single vendor approach which may be of interest.

 

Survey: Road to DC Happiness Includes Fewer Investment Options, Advice (free login)

 

The Fewer the Better

 

Can There Be Too Much Choice In a Retirement Savings Plan?

 

Dan Otter

 

 

Share this post


Link to post
Share on other sites

Right now we don't have a vendor. We have multiple vendors at the ready.

Thanks Dan, these articles were very valuable.

Ken

Share this post


Link to post
Share on other sites

The articles all regard 401k plans. In the case of a 401

k plan, I agree that it makes sense to limit options. However in the case of the 457 plan it is comparing apples to oranges. The articles referred to investment options not vendors. 401k plans only have one vendor.

 

However with a 457 plan, you may want to have multiple vendors for a number of reasons. First, from a HR political standpoint, many of the participants already have 403b accounts and will want to have both their 403b and 457 accounts with the same vendor. Second by limiting the choice to one vendor, the district may end up having to defend its decision in court. Third, there is no cost for the additional choices.

 

That being said, if you district is big enough to negotiate a special low cost deal, it may make sense to go with one vendor.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

×
×
  • Create New...