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Follow Up To Lausd's New Benefits Program

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August 4, 2003

 

Brian Clelland

Director, Benefits Administration

Business Services Division

LAUSD

 

Dear Mr. Clelland:

 

The announcement and the promotion by the Benefits Administration Division of LAUSD’s new “Voluntary Benefits Program” that thousands of LAUSD employees and I received by mail was a surprise. LAUSD had a policy that it would not promote individual companies. Apparently, this policy has been changed. I welcome any new development that helps employees with their financial needs. The brochure was very glossy and beautiful with plenty of colored pictures. I was impressed but not necessarily the reasons that you may think resulting in this admittedly lengthy letter.

 

LAUSD’s Excellent 403b Benefit Plan

 

Your endorsement of these companies in the brochure prompted me to write yet another letter to ask LAUSD again to publicize your stepchild benefit plan—403b. For years now our 403bAware group, an unofficial group of Los Angeles educators, who support 403b reform, conduct workshops on financial education and urge our colleagues to supplement their CalSTRS via the 403b, have been petitioning LAUSD to publicize the terrific 403b benefit. Yes, I am very pleased to report to you, the Superintendent, UTLA, the Board, the new CFO, Ken Gotshch and entire Benefits Administration staff that LAUSD has a very good 403b tax-deferred retirement savings program. This letter will also be sent to the LA Times, Daily News, WSJ and Scott Burns of Dallas morning news who writes frequently about educators’ benefit plans.

 

Pets Are Great, But….

 

So, what is the problem you are surely to ask? Unfortunately, few of my colleagues know about the 403b program. We do not need another “new benefit program” especially when 403b program is deliberately ignored, simultaneously you actively and purposely promote an optional pet insurance plan. ARE YOU SERIOUS? With the threats of significant cutbacks or increased premiums of our current medical/dental/vision benefits, you tell us with a straight face that we have until August 22 deadline to enroll in the pet insurance program! You must be joking. But, thank you for the information anyway. Perhaps our cause for 403b reform from the collateral connection will gain some publicity. Perhaps you may have to do the right thing for employees by publishing what we already have—a decent 403b retirement plan. The good news is that you do not need to hire an expensive consultant, its already done. It’s very simple and I think is needed more than pet insurance (sorry pet lovers). I have even included a table to help you at no additional cost. All you have to do is create a 403b brochure and send it to all employees. To assist you with a brochure, I have also included a 403b informational brochure that our 403bAware group created.

 

History of 403bAware Support Group

 

I am very happy about this development. Your brochure and cover letter was a blessing in disgust for you and the others who set policy in our district. First, a little history, our 403bAware group was created in 1999 to fill a serious void. We assist colleagues with objective information for their 403b planning and seek 403b reform either through district changes or through state law (We got to know each other through local and national press and through the Internet). For the record, all of us are employees and we will never become professional financial advisers, our services are free. We are K-12 teachers, audiologists, psychologists and one administrator. Because of our unique rock solid credibility that is beyond reproach, we were successful on two areas. First we managed to change the pay stub label “TSA” to the correct “403b” because TSA (Tax Shelter Annuity) implies that employees can only invest tax deferred 403b money in annuities, while the correct IRS label “403b” states that either annuities and custodial accounts with mutual fund companies and TIAA CREF are also available. With the help of Sam Kresner of UTLA, our group of ragtag 403bAware educators got the district to see the light. It was not the district’s high paid attorneys or the bureaucrats who initiated this change--we will take full responsibility and are proud that we think we are doing something good for this district and its employees. It is all LAUSD employees, not just teachers. Second, last year Governor Davis signed the first ever 403b reform law AB2506 that was also sponsored by UTLA, CTA and the community college guild.

 

The Annuity Connection Versus 403b Reform

 

These reform measures will help district employees weave through the thicket of the mysterious, little know and unappreciated 403b. We had to learn the hard way. Change originates from persistent employees, from politicians or from opportunists (e.g., Ron Unz’s 227). In the 403b case, it is from the people most affected and perhaps, just perhaps, you will take this letter seriously and take the “bull by the horns” by initiating (as opposed to reacting) something good for all the hardworking employees in this district.

The traditional problem with educators and their 403b money is what I dubbed “the annuity connection.” Reporter Scott Burns said it best: “For reasons they should be called upon to explain, the state legislatures [and school districts] in Texas and California appear to believe that teachers are bright enough to teach children but too slow to make investment decisions for themselves. As a consequence, teachers are "protected" into high-commission retirement plan "reservations." Simply stated, high priced annuities are not the place to invest 403b money period. Two reasons. 1. Many of us were ripped off by investing our money in “safe” annuities from large insurance companies. 2. The Securities and Exchange Commission released a report (2000) warning investors that investing 403b/401k (private sector equivalent) is does not increase the tax deferred benefit and significantly incurs unnecessary and expensive insurance coverage and the atrocious surrender fees. Please be aware that I am not just another teacher complaining, but the Federal Governments SEC is also on record against using expensive annuities in 403b plans. Thus, our 403bAware group mission statement is to educate our colleagues to the murky world of 403b because in California in particular, very few policy officials talk about this benefit. Never mind that 25,000 district employees are actively contributing $125,000,000 each year in this district alone. I do not know about you, but that is a lot of money. Now you may understand why I am “surprised” by a new benefit plan that includes pet insurance coverage and an introduction to ARAG Group another expensive financial planning insurance company while LAUSD continues to ignore that $125,000,000, much of it already going into expensive and inappropriate investments.

I have written letters before, talked to the board of education about 403b and published articles in the UTLA newspaper, one of them chastising the district about your policy of not publicizing the terrific 403b program. But the times are a changing as AB2506 is now law that will instruct CalSTRS to launch a new website in June, 2004 that will further explain 403b. Hopefully, employees will begin to question your role (or lack there of) in the 403b tax deferred plan and ask why are you doing nothing about the terrific 403b program while actively promoting Pet Insurance.

 

How Employees Currently Get 403b Information: It ain’t Pretty—19th Century Ideas

 

The process of getting information about 403b products is the same as when 403b law was launched in 1958. Since it was insurance companies who first started selling TSAs to educations, the TSA sales people from large insurance companies still hold a monopoly in providing information resulting in about 85% of all 403b money in these companies. The acronym “TSA” is very familiar to most educators because that is all they hear from the bias financial advisers. Consequently, educators are under the erroneous assumption that TSAs were the only plans available (Main reason we successfully argued for the pay stub label change). Referring to my attachment, on the left column includes 112 insurance companies signed on to do business with LAUSD. This long list is in part due to an arcane California insurance code 770.3 that states that if a company is willing to sign the district’s hold harmless agreement, the district must add them to the list. By comparison, there are only six low fee companies on the right column and the only non-profit pension institution—TIAA CREF. The hold harmless agreement was initiated by the insurance lobby way back in the early 1970s because congress added custodial accounts, meaning 403b can now be invested in mutual funds.

 

The Infamous Hold Harmless Agreement—a 20th-Century 403b Problem

 

When congress added mutual fund companies to the 403b in 1974, a backlash by the insurance industry against this development ensued with a vengeance. The insurance lobby does not want any competition, especially here in California, which was led by a company in Pasadena. They got the state legislature to modify 770.3 and the state attorney general to support the use of highly restrictive hold harmless agreements. This agreement was suppose to protect the district and the employees from “bad investment companies.” It ended up protecting the monopoly over 403b by the insurance industry. Consequently, low fee, no load mutual fund companies refused to sign these agreements because the vendor would be liable even for district own fiscal mistakes! This is nuts! This explains the short list on the right side of the attachment. Thus, this was quite understandably too risky for low fee companies. Furthermore, insurance companies informed school districts that we would take all liability. In fact, the insurance industry created the hold harmless agreement. Obviously, district bureaucrats were very relieved that these companies would take all liability. It was a brilliant tactical move by the insurance industry because they knew there was never any liability, otherwise the insurance companies would have never signed such a ludicrous agreement. This policy has remained unchanged for thirty years. Amazing how school districts and the low fee mutual fund companies were duped to the boy crying wolf syndrome for three decades.

There is only one legitimate liability. The biggest liability to the district was over contribution of tax-deferred money by employees, therefore, violating the IRS compliance law. Fortunately, in retrospect, this liability turned out to also be a ruse. Teachers do not make enough money to over contribute to 403b plans, even when the Maximum Exclusion Allowance (MEA) was in effect before the 2001 tax law illuminated it (MEA was the complicated formula that calculates the amount that employees can defer based to their salary level). Therefore, the risk factor for policy is gone. In fact, the IRS auditors found a mere $2000 in mistakes in over contributions in a sample of 900 LAUSD employees, according to your CFO. No employee can make the district liable now and the LAUSD bureaucrats cannot make that claim any longer thanks to the Federal law that illuminated it. Never the less I am willing to bet that many sales people who sell TSAs are still using the MEA because nobody is monitoring these people and this district has not informed employees of this development.

 

The 21-Century 403b Problem

 

The problem with 403b has now evolved to the lack of publicity issue (I am only talking about LAUSD, but there are many districts in California who do not have a good 403b plan because the employees have no low fee companies available). Because of the elimination of the MEA, two low fee vendors signed on with LAUSD. However, the present problem, as I have previously written, is that few employees know about all the options available to them. Why would one of the largest employers in LA County, who relentlessly claimed they needed more teachers, deliberately withhold information with their own and prospective employees, the terrific 403b benefit plan? I know what you and the LAUSD bureaucracy will say despite all the developments in federal law that eliminates the risk factor that I have elaborated above. You will still say: “We cannot put the district at risk for recommending particular companies because that may take money away from instruction.” This mantra is tedious and is solely based on ignorance, not from an informed 21-century policy maker. I may be wrong in this assumption but if I am, then what is stopping you now from publicizing the 403b benefit. (Furthermore, nobody is asking you to recommend a particular 403b company as you did in this new benefit program so that policy may have changed and if it has, I welcome it).

 

How To Correctly and Safely Publicize the 403b Plan

 

To reduce the liability of publicizing the 403b plan is to release the names, phone numbers and costs of these plans (not past performance of investments) of all the companies available. This request is not out of the blue. AB2506 requires CalSTRS to create a 403b vendor database that will include this information. It is state law. We are asking that LAUSD should be more responsible to its own employees and duplicate the spirit of AB2506. Retirement planning is big business and our employees need to know how these sales people make money off them. The current system in which employees get information, as I previously stated, was through the very people who represent for profit company plans, this is hardly objective. Sixty percent of LAUSD employees do not have a 403b plan. My hunch is the some of these folks do not like talking to high-pressured sales people and the rest erroneously believe that CalSTRS will take care of all their retirement needs. However, you can perform an exemplary service for all employees by informing the employees that handholding is expensive, CalSTRS may not be enough, and that there are no free lunches with any 403b plan. Having said that, if an employee says that they need handholding and will pay for it, then it is none of our business.

My attachment is an example that could be published on the LAUSDnet website, the annual LAUSD Benefits handbook and mailed out to every employee. A scaled down version was published in the UT newspaper in the summer of 2000. Board Member, David Tokofsky, Dr. Joe Zeronian, CFO and our 403bAware group rewrote and updated the 403b information to the Benefit part of the Employee Handbook (refer to attachment 2), but by the time it got through the system, the same old outdated information was still in place. The LAUSDnet website information is absolutely useless. There is literally a list of companies with no contact information. Add insult to injury, you have a list of companies that are NOT available. What good does that do for us to list companies we cannot use. Amazing! Then, if any of us want more information, you invite employees to contact a financial adviser for further information. What am I missing here? This is wrong. The 403b benefit is LAUSD’s not some sales person plan. Last I heard, LAUSD is not an employment agency for outside sales people with build-in biases. It’s the employees who are paying the fat salaries of these people. Many employees believe that professional financial advisers or insurance agent services are free because they are being told and I quote “the company pays for my fees, not you.” This quote is not a lie, but it is surely misleading. All companies that are represented by a sales person charges an annual expense ratio and either front or back load commissions. Then, the adviser gets paid by the company. But the damage of financial loss to excess fees of these plans to the educator is complete, the sale is made and the educator unknowingly pays huge fees to the company who in turn pays the adviser. That comment is deliberately misleading and it takes advantage of educators’ strong belief that this nice person is truly looking out for “me.” This belief comes from reality that we educators are truly concerned about our students and so we erroneously assume the sales person truly looks out for us.

 

403b Activist?

 

When I first signed up with a 403b vendor as a new teacher, I was wondering about free advice myself. Because I previously worked in the private sector, I knew from the start that there are no free lunches. The adviser came out to my house and did not charge me for her time. I found out the hard way when, years later, I wanted to transfer my 403b from that horrible annuity she sold me to a mutual fund company that I had to pay a $4000 surrender fee. That’s one way that adviser been paid and is the reason why I became an activist for 403b reform. These are real problems. Financial advisers are looking out for themselves. Educators are being ripped off and NOBODY in LAUSD is doing anything about this. LAUSD has been totally indifferent.

After learning how to manage our own self-directed 403b retirement plan without expensive advisers, the absolute bottom line in this entire discussion is that my partner and I have considerable assets and will have a comfortable retirement. The current system leaves out 60% of educators with no plan to supplement CalSTRS and the majority of the 40% who do participate in 403b plans are expensive where much of their retirement savings will be eating away by fees, commissions and expenses. Articles and books have been written about this problem. The problem can be safely avoided.

 

The Truth About TIAA CREF

 

Fortunately, insurance companies are getting sued left and right because advisers neglect to tell clients of this fee. Our 403baware group shows teachers how advisers are paid and to avoid annuities from large insurance companies. For the record, there is one good annuity provider in which I participate because it has no surrender fees and extremely low annual expense ratios—TIAA CREF. The status quo advisers/agents will not get a commission by informing employees that TIAA CREF, Fidelity investments, USAA, and the rest of the low fee and no load (no commissions) companies that are available. In fact, the TSA financial advisers loathe TIAA CREF and for good reason, the commission based financial advisers cannot compete. TC is a direct threat to the lucrative commissions that agents and financial advisers have enjoyed for years. Remember, the insurance industry has kept out competition for the 403b market for 30 years and are extremely comfortable and protective of their lucrative commissions.

 

How the Financial Management Profession Makes Money Off YOU!

 

I cannot underestimate how the financial management profession makes money. By comparison, all other professions charge a one-time fee and your are done. You go to the doctor, attorney or a tax preparer, the client is charged a certain agree amount. Not so in the financial management profession. If you are not careful, a financial adviser for your 403b will take a little bit of your 403b contributions for as long as you stay in their plan. Many times the educator never sees their financial adviser/insurance agent again for their entire careers! But a small portion of the educator’s hard earned money slowly leaks into the adviser’s bank account, year after year.

Years ago, a 403b consultant from KPMG who cleaned up the Chicago Public schools’ 403b program, informed our 403bAware group that the investment management profession is “the most lucrative highest paid profession in the world.” Just think about getting 3, 4, or 5% of someone else’s money multiplied over several hundred employees (One agent recently told me that he had 450 LAUSD clients), you get an idea how the current system works. It is clearly for the benefit of the professional sales force who permeate this district at the direct expense of the employees’ best interests.

 

How 2% Fees Add Up Over Long Periods of Time

 

Lets compare fees with a simple calculator. TIAA CREF charges an annual fee of .36% for the equity index fund. Most large company insurance annuities and loaded mutual fund companies charge 2% or more per year in expense ratios (commissions are added on to the expense ratios). On the surface, some might concur that this difference is inconsequential and immaterial. In the short run, it IS trivial, but lets look at the numbers over long periods of time. Lets not forget that retirement planning is a long-term endeavor. Suppose teacher A puts $400 a month every month for 20 years in the expensive annuity and teacher B does the same thing only puts her money in TC’s equity index. In ten years, teacher A will pay about $60 per month, every month for ten years paying the higher fee. After twenty years, the difference in expenses is staggering. Teacher A will spend $150 more than teacher B per month, every month after 20 years of sustained investing (assuming a hypothetical 8% annual performance).

 

The Alternative to These Fees Is Right Under Our Nose

 

Fortunately, there is an alternative. Allow me to formally introduce you to TIAA CREF (TC). This institution is the biggest pension non-profit institution in the country with $250 billion in assets. It is the only not-for-profit institution of all 150 companies on the LAUSD 403b vendor list. This institution has a long and colorful history of credibility with our brother and sister educators in the collegiate sector. Their 403b plan is simple, diversification of assets with extremely low fees with no commissions and no transfer/surrender charges. They have admirably served over 5000 colleges and universities in the country for almost a hundred years. Instead of welcoming this great institution into our fold, TIAA CREF has been treated as a pariah from the start. LAUSD employees are very lucky to have this great institution because for years they avoided the K12 market for good reason. I am contributing my own 403b money into this institution and I recommend TC to anybody who wants to get started with retirement planning. It is the only low cost “safe” annuity.

Instead what does LAUSD do? It informs employees via this recent announcement of another for-profit, expensive financial services insurance company--ARAG Group. We already have 112 insurance companies on the list. We don’t need this!

 

CalSTRS and Indexing Strategies for LAUSD Employees

 

CalSTRS retirement board has gotten the word about cutting management costs too. Last year, our pension plan adopted the Russell 3000 index for equity holdings. A great move by the part of CalSTRS board to lower costs. The reason why I thought about CalSTRS is that TIAA CREF has the Russell 3000 index fund too (Equity Index Fund) and which I am investing my 403b. Since 1976, when legendary investment guru John Bogle, the former Chairman of the other non profit no-load mutual fund company Vanguard, launched the first index fund, S&P 500 Index, much has been discussed about this approach to safely invest for working folks such as educators who do not have the time to chronically watch the stock market. Index funds offer much more than superior returns. Here’s why: They also provide maximum diversification, no overlap, no style drift, no manager changes, lower turnover, lower expenses, greater simplicity and peace of mind. If it is good for CalSTRS to use the Russell 3000 index, our employees should also know that TIAA CREF also uses this index at a cost of .36%. Currently all of our employees are already having their money invested in the Russell 3000 via CalSTRS, why not invest their 403b money in the same vehicle as CalSTRS. I am.

 

Some Hypocrisy Anybody?

 

Once again, I ask the Board of Education and district policy makers to think about what I said in this letter. This problem of the 403b will not go away. Employees want change. They are tired of LAUSD turning the entire matter over to sales people. Perhaps, the potential outcry over this current release of the new benefits program will highlight what you have not done in the 403b plan. We ask you to now inform the employees about the 403b benefit plan. Remember this is your plan and you should be proud of it. You cannot hide from this any longer.

It is hypocritical for you to continue to say on the cover of the Brochure that “LAUSD is pleased to introduce the new Voluntary Benefits Program… a whole new dimension in group insurance” with LAUSD logo written three times and on the back in very small print you state: “Although LAUSD has negotiated group discounts with Liberty Mutual, Veterinary Pet Insurance, and the ARAG Group, LAUSD is not the plan sponsor of these plans and, therefore, is not responsible for determining final quotes, interpreting contract language, or administering claims.” I called Liberty Mutual about the discount negotiated and the rep did not know the answer and instructed me to call you. You know damn well that if I try to complain to you about this plan, you staff is instructed to say to me, “call the company.” The days of this district having no position, as you once again claim in the brochure, is over. Therefore, what happens to the “valued employee” who has a problem with this plan? You are directly implying, “employees you are on your own.” This policy of turning the entire matter over to the sales force has to stop whether its this new plan or the 403b. Now the ball is in your court, you cannot hide the 403b plan any longer. I will be waiting for a 403b brochure in my mailbox.

 

 

In concluding, if you truly see us as “valued employees” you will immediately

inform all employees of the following benefits and information:

 

1. The negotiated fee reduction of the “Voluntary Benefits Program.”

2. LAUSD has a terrific 403b program and strongly encourage employees to supplement CalSTRS with the 403b plan

3. The spirit of new state law AB2506

4. MEA has been illuminated

5. Publish the maximums that employees are allowed to tax defer in their 403b for tax year 2003: $12,000 and if over 50 an additional $1000.

6. Put in place a 457 plan, which would alleviate many of the problems with 770.3. The San Diego School District has done just that.

7. Publish the enclosed chart: It includes all companies that are available and delineates costs and fees of the various investment vehicles. Publish it in the website, the annual employee handbook that goes out in November and send out only the 403b information as a separate informational brochure calling attention to this fine plan. (You did the pet lovers a favor in this district by announcing that pet insurance is available; now you can replicate this good deed with the 403b benefit)

 

Two suggestions: First, conduct a, first ever, survey of 403b and determine for yourself what employees want and experienced with the current method of getting 403b information. I doubt if any district in the state has bothered to do this for their employees and you would be seen as a model for reform.

Lastly, you have no further to go for consulting than our new CFO, Kenneth Gotsch. We 403bAware group are extremely happy that he has joined LAUSD from Chicago. He, of all LAUSD administrators, knows all about the 403b mess because he, along with the legendary Superintendent Paul Valas and KPMG cleaned it up in Chicago.

 

Sincerely,

 

 

Stephen A. Schullo, PhD

3rd grade teacher

Leo Politi Elementary School

 

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Steve----One only has to read your spirited letter to know that your commitment to 403(b) reform in the LAUSD is sincere and genuine.

 

You like the rest of us believe that the high cost product, be it a mutual fund or an annuity, has no place in the retirement planning field. Getting your LAUSD, however, to prepare a list of 403(b) vendors with their relative expenses will not guarantee the elimination of these high cost predators. Elimination of high cost 403(b) vendors in your school district, or any other for that matter, will only take place when the high cost 403(b) providers know that the PRIMARY salary reduction plan for teachers is the 457. The one sure way to eliminate these 403(b) predators is by having the employer adopt a 457 Plan. Steve, if you want to assure that a low cost plan is legally the only one sponsored by your employer you will fight for the 457.

 

With section 403(b) the teacher is the titleholder to the individual account/annuity. This is why the teacher may effectuate a Revenue Ruling 90-24 Transfer without any employer involvement. With a salary reduction 403(b) arrangement there is no Plan Sponsor, no Plan Document and no Plan Trustee. The deal is strictly between the vendor and the employee with the employer simply being responsible for remitting the salary reduction to the vendor. Complain to the employer and his says: Do a 90-24 Transfer!

 

Section 457, on the other hand, requires the PLAN SPONSOR TO ADOPT A PLAN DOCUMENT AND APPOINT A PLAN TRUSTEE. The Plan Trustee is th titleholder to the assets of the Plan with the teacher having a beneficial ownership in his/her proportionate share of the underlying net invested assets of the Plan. This is why Revenue Ruling 90-24 does not apply to 457 Plans. And this is why the employer who offers the 457 is on the seat to make sure it is a low cost plan. The employer can't say: "do a 90-24 Transfer if you don't like the choices." Steve, if you want to assure that a low cost Plan is legally sponsored by your employer you will start to direct your energies toward the adoption of the 457 rather than giving free advertising to the 403(b) predators with the list you want your employer to promugate.

 

You wrote: "6. Put in place a 457 plan, which would alleviate many of the problems with 770.3. The San Diego School District has done just that."

 

You don't sound too enthusiastic. IF YOU AREN'T YOU CAN'T EXPECT MR. CLELLAND TO BE, CAN YOU?

===========================================

 

I would have written: "Teachers expect the LAUSD to make available section 457 to its employees especially in light of the fact that one may now make a maximum contribution to both a 457 and 403(b). The 457 Plan has been operational for many years. All of the necessary work has already been done for the LAUSD. You see, California State Law requires that the 457 Plan of the State be made available to local school districts. You as the local employer simply have to request participation of the Deferred Compensation Board of California. The person you should speak to is..............., he/she can be reached at ------------. Dozens of school districts have already joined with San Diego being the largest. I will be calling you in a few days to see if I can be of any assistance to you in this matter."

 

Let us know how you make out, Steve.

 

Peace and Hope,

Joel

 

 

 

 

 

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Hi Joel,

Thanks for your thoughtful response. I agree that what I am proposing will also "publicize" the high priced products. For now, my belief is that if employees knew how much they were paying for handholding and KNEW that there were alternative lower cost options, many more employees might be motivated to learn about the low cost options. As you know, the employees already know about the high cost "TSA" options through the sales force army. If the district publicizes TSA companies along with the low cost options, many people may at least question about the lowest cost options because they now know that they are available. Joel, I still get emails from people who admit that they did not know TIAA CREF or Fidelity Investments were available. It’s a first step. Of course, I would love the district to offer workshops and set up a 457 plan, but that my friend, will not happen, IMO. We have some of the densest people in both LAUSD and UTLA about 403b, let alone another plan, 457 that requires them to be totally responsible.

This is the reason that I am for now taking a back seat to the 457 plan. People don't even know 403b and to bring in yet another plan, IMO, will incite even more resistance and indifference. You need to be more sensitive to who we are dealing with here in LAUSD and California. It’s pretty bleak. On this issue, nobody talks about this, nobody wants to do something good for employees let along take responsiblity for it as required by 457. Even during the AB2506 campaign, only a very few people actually knew about this bill. The reason San Diego has got a 457 plan because they have two very savvy people in policy that brought it forward. I saw a brief presentation of what they have. Nobody like those guys exists in LAUSD. NOBODY!!!

There is one very small hope and I mentioned him in the letter. LAUSD has a new CFO from Chicago, who oversaw the cleanup of the 403b there by KPMG. He has already mentioned to my ally on the board about the 403b. But nothing has come up yet. I am sure that he is so overwhelmed by the massive fiscal problems LAUSD has, he will not get to look at 403b for a while.

I always have hope. Change is ever so glacial especially when we have power, commissions and market share at stake. The industry will not give up easily and the policy makers just don’t want to do something new.

The TIAA CREF folks have an appointment with the new CFO in a couple of weeks. If he goes for the 457 plan offered by TIAA CREF, that would be great.

Steve

 

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Dear Steve,

 

Section 403(b) is becoming a dinosaur in school districts in states, like California, who offer local public employers participation in not only a statewide 457 plan but also a 401(k) plan. A 457 Plan is legally required to be offered in order for the employee to take advantage of the maximum salary deferral permitted under federal tax law. What are the advantages to a local school district in belonging to this Statewide Program?

 

 

1. The State does ALL the work in administering the Program. No due dilligence is required by the local school board. One check is remitted monthly to one salary reduction carrier----the State of California---not 50 or more as may be the case with the dozens of 403(b) vendors permitted in the various school districts throughout the state.

 

2. The local school district offers maximum salary deferral permitted under federal tax law. By offering a 457 Plan and a 401(k) Plan under statewide administration local school districts are no longer legally required to offer a local 403(b).

 

3. Due to the fact that some investment advisors employed by the Statewide Public Employee Retirement Systems are also the investment advisors of the Statewide Deferred Compensation Plans the Deferred Compensation Board is in the position to negotiate lower expense ratios.

 

4. Is it not logical for the State government to be in charge of the salary reduction programs just like it is in charge of the mandatory pension systems to which public employees must belong?

 

Bring these points to the attention of the decision makers of the LAUSD. The San Diego Public Schools have already recognized these points. You should devote your energies to communicating these points to the Chief Financial Officer of the LAUSD. Let us know how you make out.

 

Peace,

Joel

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Hi Joel,

Here is my response to you in a letter to our new Chief Financial Officer at LAUSD.

Please notice that I copied word for word some of your statements about 457.

TIAA CREF folks are meeting with Mr. Gotosh to talk about the 457 plans and other issues as well.

Thanks again,

Ill keep you posted.

Steve

 

 

August 10, 2003

 

Kenneth Gotosh

Chief Financial Officer

LAUSD

 

Dear Mr. Gotosh:

 

I have been meaning to write to you since I heard the great news that you accepted the CFO position. Welcome to LAUSD! We need you and this letter explains why. You may have received my emails and pfd attachment on the horrendous number of 403b companies currently signed on to conduct 403b business with our employees. Most recently, I sent you a copy of a letter I wrote to Brian Clelland, Director of Benefits Administration, regarding the district’s new “Voluntary Benefit Program.”

Your work in Chicago Public Schools has not gone unnoticed. You may be surprised to hear this. How in the world does a CFO attain legendary status across the country over an issue that very few people here in California ever discuss publicly—403b. Furthermore, your boss, Chicago Superintendent, Paul Valas, IS legendary in the 403b reform world. Yes, such an esoteric world exists. Why? Very simple—educators are demanding reform and the Internet. With the help of this greatest 20th century invention, educators are increasingly aware that our pension plan, CalSTRS, is fine but cannot possibly maintain working lifestyles into retirement. Enter the world of the 403b tax deferred retirement plan, the 20th century’s second greatest invention. Retirement planning is paramount especially for our young teachers. According to demographic predictors, people in their twenties will be expected to live a full life to their 100th birthday. That is a full 40 years after retirement. The 403b reformers know from persistence and a little investment knowledge that the most powerful wealth building plan is right under our noises, the defined contribution 403b tax deferred retirement plan. Investment information is easily available over the Internet.

My partner and I have attained millionaire status largely because of this wonderful benefit, despite this three year bear market and despite the fact that 28 years ago when we met, we were dirt poor students with nothing but two broken down VWs and some furniture. No wealthy parents, no inheritances, no elite private schools, no extraordinary talents, just plain common sense with a good public education and persistence were our strength. Our wealth was slowly build month after month year after year in our public service 403b plans invested in low cost plans. Books have been written about one of the greatest inventions of all, compound interest. Wow!

Largely because of this positive experience, I have been a crusader to empower my colleagues to plan for there retirement by taking much more responsibility for their financial management than turning the entire matter over to a sales person. It is very simple, really. I have also had bad experiences, largely because I was not immune to the biases of the current TSA sales system of obtaining 403b information. Unfortunately, I STILL currently keep hearing from colleagues who were steered into inappropriate and expensive retirement plans. Additionally, over 60% of my colleagues in LAUSD are not currently participating because many erroneously think CalSTRS will provide all they need and many do not like interacting with sales people about something my colleagues know little or nothing about.

We need to supplement with a powerful benefit plan that everybody in this district has access to—403b. Retirement planning is paramount and this district needs to do more to inform its employees of what is available. The problem is access, not options. LAUSD has a great plan in place, but few employees know about it because of the hands-off policy, which is tedious and obsolete. The current policy reflects mid 20th century thinking about the role of school districts with informing their own employees about this wonderful plan. David Tokofsky understood this from the beginning of my activity. He knew that this could be used as an incentive to encouraged experienced teachers to teach at hard to staff schools, attract new teachers, retain the veterans, and improve the image of this district. Who in this district would not want all of this?

In my previous letter to Mr. Clelland, I stressed the fact that employees need objective information about the entirety of the 403b plan. Objective information is impossible under the current system because it all comes from sales people, not from an objective third party such as the district. Mr. Cleland spent all of this time and money to promote yet another program, while we already have a decent benefit plan in place and he does nothing about that. I was furious, obviously. Fortunately, there is another way around the 403b problem.

There is a model already in place in San Diego Unified School District; they adopted the sister tax-deferred plan--457. 457 is similar to the 403b but it is not under the jurisdiction of 770.3. California allows school districts to adopt the 457. There are many benefits for LAUSD to follow San Diego. It is my understanding that the state does ALL the work in administering the Program. No due diligence is required by the local school board. One check is remitted per month to one salary reduction carrier----not 150, as in the case with LAUSD that currently has so many 403(b) vendors.

The local school district offers maximum salary deferral permitted under federal tax law. By offering a 457 Plan and a 401(k) plan, they are no longer legally required to offer a 403(b). Because some investment advisors employed by the Statewide Public Employee Retirement Systems are also the investment advisors of the Statewide Deferred Compensation Plans, the Deferred Compensation Board is in the position to demand lower expense ratios. Consequently, 457 plans offer a remarkable value to both LAUSD and all employees. Lower costs benefit BOTH LAUSD and employees plus the fact that it brings simplicity to both employer and employee because LAUSD will have fewer vendors. The current list of 150 403b vendors is nuts for both LAUSD and employees for obvious reasons; its expensive for LAUSD to administer and the overwhelming alphabetic list of 150 403b vendors with no other information is utterly useless for employees.

Only an extraordinary administer will do the right thing for both employees and employer. There is a reason why LAUSD hired yet another outsider to solve and update LAUSD’s infrastructure. While LAUSD has vast and colorful cultural and ethnic diversity and our business is to develop and cultivate minds, ironically, LAUSD has a serious and a systemic cognitive dysfunction. We do not listen to each other. For example, my guess is that previous letters I have written to board members and administrators about 403b was interpreted as what does this guy want? I have the confidence that you will listen and understand as Mr. Tokofsky has, that this issue is not about me or anybody else. It is about a much larger picture requiring the best in strategic management—vision, leadership and just plain raw courage.

Mr. Tokofsky has been reelected twice now. All but one board member is gone since he started. He alone recognized a good idea when it lands on his desk while all the other board members dismissed 403b. Obviously, David has not survived solely because of 403b, but because he has courage, leadership and vision, the vision to know a good idea, all ideas from any source. He believes in principles over personalities. LAUSD’s huge bureaucracy can change, it must change, but it can only change from within, if it is going to survive. Simply reacting to the many opportunists that are everywhere to try to make a name and profit for themselves at public educations’ expense will result in dire consequences for public education. The most mysterious part of this entire debate is this simple idea is good for the bureaucrats too.

Here it is, Mr. Gotosh. 457 is piece of cake compared to all the profound fiscal and infrastructure problems that you face. I could not imagine. The good news is that you have already done this in Chicago. You know about KPMG. I became fast friends with the KPMG 403b auditor, Luke Collins, who assisted in the updating Chicago Public Schools’ 403b. (We were panelists at the 1999 Public Retirement Issues Workshop at the Los Angeles Times Investment Strategies Conference at the Convention Center). I am confident you will do the same thing and the right thing here.

If there is anything I can do to help, please do not hesitate to contact me.

 

 

Sincerely,

 

 

Stephen A. Schullo, PhD

3rd Grade Teacher

Leo Politi Elementary School

Local District F.

sschullo@lausd.k12.ca.us

R: 323 223-7257

B: 213 480-1244

 

Cc

LAUSD board members

Roy Romer, Superintendent

John Perez, UTLA President

 

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Steve, as always you are out front of the pack with your no holds barred approach for calling a spade a black spade.

 

You are wise to include the advice from Joel Frank re using a state-approved 457. LAUSD are indeed lucky to have a new CFO with Chicago experience.

 

Don't forget, avoiding the high cost 403b or the 457 altogether is an option. With a $5,000 a year IRA limit on the horizon(year 2004), most families will be allowed to seek out the low cost vendor and invest more than $800 a month. Of course they will have to eat peanut butter and bread 3 times a day to allocate that much from there disposable income.

 

I am convinced that human nature being what it is, we will all fail ourselves as we invest in our future. Thus I am a proponent of the employer understanding and communicating the value of financial education as part of the total benefits package. And as I look at such things as the "Nebraska Study" I apprecdiate more that we are our worst enemy when it comes to investing for our future. Employers should appreciate the profoundness of the "Nebraska Study" sd reform.

 

I found Warren's facts about the negative value of his employer's plan useful and enlightening--and distrubing. Of course, it's a story that we have all known for a long time; but employers tignore the facts over and over, because they don't want to learn the facts.

 

And I am convinced that it is in the best interest of the employee for the employer to provide a wholesale system not the current retail system that the insurance companies have foisted upon teachers for the past 30 + years. That we have so few people who haven't or won't spend the time, effort, resources to figure this out is beyond me. But "dems the facts as I see them."

 

Press On. Steve, you will get your just desserts.

 

Ted

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Hi,

Just yesterday, I received a response to my letter from LAUSD’s benefits administrator Mr. Clelland, defending the district's position about giving specific information to employees because these companies were awarded based on a RFP, which are the same as the other health, dental and vision companies.

However, he was in agreement with me about the 403b problems. I am going to post his letter here. I have tried to talk by phone, but has not returned my calls.

 

The other good news is that I called CFO Ken Kotsch yesterday and he DID return my call and apologized for not getting back to me a couple of months ago when I sent him some stuff. We are going to talk again on Monday and he wants my ideas. (Yes, Joel, I will stress 457, TIAA CREF has an appointment with him next week and they will follow-up on a specific 457 plan that LAUSD could use).

 

This sounds promising, but, and there is a but, these gentlemen are new to the LAUSD and eventually the bureaucrats will NOT support any changes in policies unless these guys are tough. The last CFO was also good and we talked quite a bit about 403b problems, but no positive results.

I am, as the politicians say it, “cautiously optimistic.”

 

Steve

 

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"Cautiously optimistic" is better than anything I've heard to date for LAUSD and your efforts to enlighten a recalcitrant and entrenched bureaucracy.

 

Good job and good luck, Steve.

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And I am convinced that it is in the best interest of the employee for the employer to provide a wholesale system not the current retail system that the insurance companies have foisted upon teachers for the past 30 + years. That we have so few people who haven't or won't spend the time, effort, resources to figure this out is beyond me. But "dems the facts as I see them."

====================================================

Ted--- you have put your finger on THE major defect of the 403(b) Statute. It simply requires a contract between the investment agent and the employee. The 403(b) statute has, on a silver platter, handed over to Registered Representatives a giant retail market to sell commission based products. The 403(b) never would have evolved into such an abusive system if the employer was required to adopt a formal Plan, Plan Administrator, Trustee, Summary Plan Description, etc. Absent a statutory change to section 403(b) the employer simply will not volunteer this level of involvement.

 

So being a realist I say the hell with the salary reduction 403(b) especially when California school districts may make available to its personnel the publicly administered CalPERS 457 Plan. THIS IS A NO BRAINER FOR ALL PUBLIC SCHOOL DISTRICTS/PERSONNEL IN CALIFORNIA WHO DESIRE TO PROVIDE/SAVE FOR RETIREMENT THROUGH SALARY REDUCTION AGREEMENTS.

 

Steve, I would favor the CalPERS 457 over the TIAA-CREF 457 because with TIAA-CREF the local school district still must adopt a Plan, Plan Administrator, Trustee, Summary Plan Description etc, THIS TAKES MONEY! But with the CalPERS 457 it is already done for the employer. Steve, you need to show that the school district's adoption of the CalPERS 457 Plan is simply a natural extension to the benefits of being a member of the PERS to which the district's employees belong, namely the STRS or the CalPERS.

 

Peace and Hope,

Joel

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Joel,

Most of us belong to STRS. You make it sound like its does not matter. PERS and STRS are different pension systems with different employees and beneficiaries. Does the 457 adopted by PERS apply to us?

Steve

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Hi,

I think it is very informative for those who may be thinking about writing a letter to your district to know from my experience how district policy makers think. This is the primary reason why I am writing word for word Mr. Clellands response to my letter that I have made available at the beginning of this discussion thread.

For brevity, you can skip the first two paragraphs as he defends the currently policy of publicizing certain companies and quite frankly, he is probably right, while at the same time, I still believe there is some hypocrisy. The last two paragraphs are about 403b. It may surprise some people that he AGREES with my observations, but please be forewarned. For example, years ago I was told directly to my face that Vanguard is an excellent 403b company by several of the LAUSD bureaucrats and they agreed with me that it should be available to the employees. But Vanguard is still unavailable. OF COURSE, these people will agree with you about this plan, WHO Wouldn’t! But until there is action and not just talk, LAUSD is still just LAUSD with regard to its 403b plan.

While it is important to know how bureaucrats think it is also important how they communicate to you and what actions they have taken.

Steve

 

 

Dear Mr. Schullo:

This is in response to your letter regarding the recent Voluntary Benefits Program (VBP) mailing.

First, let me say that with the VBP offerings the District did not break any "policy" regarding the promotion of individual companies. In fact, the District offers only select companies in its healthcare plans and has done so for years. All healthcare providers are selected through a competitive bedding process as were the VBP companies. We reviewed the plan designs and pricing for the VBP companies as we do for the healthcare providers. The companies chosen were those firms that offered the scope of services and competitive premiums that we felt would offer our employees and retirees value and the possibility of saving money over what they currently pay for like coverage.

 

The issues you raise about price quotes and District responsibility miss the point of the VBP. In this budget environment, the objective of this program is to offer employees and retirees the opportunity to save money on coverages that they currently have as individuals, and the possibility to obtain coverage in areas that they might not have considered, while at the same time not increasing the District’s overall benefit costs. In making this program available, the district is using the size of its population to secure premium pricing that can be better than an individual might secure on their own. Will everyone save money with the program? No, not always. I can tell you from my experience that I will save hundreds of dollars on my auto insurance, but won't on my homeowner’s premium. This is no guarantee as to savings. Additionally, such programs are offered by many large employers and serve as a supplement to the traditional employee benefit programs. As for servicing the employee on any problems, the role of the individual companies is to provide service to our population with minimal role for the District in plan administration. I would expect, however, that if employees are having problems, I will hear about it and I would work with the respective company to resolve any issues that may arise. Most issues that arise will involve payroll deductions and billing questions and for that we have engaged an administrative services firm to handle this activity and their number has been provided for all service issues. However, I must say that these programs traditionally do not generate much in the way of employee problems. Simply put, if you don't like the rate you are quoted, you don't have to purchase the coverage.

 

(His response to 403b)

 

Regarding the remaining pages of your letter, the issue of 403(b) promotion is one on which we can largely agree. There is very little in terms of communications and education regarding the subject of retirement savings and the need for employees to take advantage of these plans when offered. However, the choice of implementing a VBP or publicizing the 403(b) plan was never an issue given how the District is functionally organized (it was never a question of pet insurance vs. 403(b)). Being fairly new to the District myself and coming from the private sector, the entire arena of employee benefits is handled very differently here than what I have experienced in over 23 years in the employee benefits area. As historically dealt with by the District, "employee benefits" has been comprised of health and welfare benefits, and nothing more. In most other organizations, benefits encompass not only health and welfare plans but also retirement savings plans, pension plans as well as other types of plans. At present, these plans are housed in Benefits Administration, Payroll, Accounting and Human Resources. In short, the entire function is organizationally splintered and fractured with no overall management and no focus on these programs as a suite of plans that should be managed as an integrated package of benefits.

 

At this point, I can say hopefully, in the near term, you will see a difference in how these programs are handled. When this area is reorganized, I would expect that the resulting changes will coincide with many of your observations. If you have any further questions, feel free to contact me.

 

Sincerely,

 

Brian Clelland

Director, Benefits Administration

LAUSD

 

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Hi,

Many times we are faced with life’s two most pressing problems, 1. Not getting what you want, and 2. Getting what you want. In my situation, it is not me that is getting what I want, but my colleagues, every hard working educator at LAUSD. For now, very few people know what is in the planning stage for LAUSD’s tax-deferred retirement plans. However, according to what happened just yesterday, every one of my colleagues at LAUSD will find out.

Yesterday, I had a face-to-face meeting with LAUSD's CFO, Ken Kotch, and the Director of Benefits, Brian Clelland. It was very productive, very productive! They share all of the goals that our group 403bAware and I wanted LAUSD to do for years,

1. Publicized the tax deferred retirement plans with its own separate brochure with all the fees, expenses, phone numbers, performance data, different indices, etc.

2. Start a 457,

3. Hire a KPMG tax deferred, retirement plan consultant to help out, and

4. Dramatically update the information of all the medical, dental, vision and retirement plans on the LAUSDnet website, including online enrollments!

While all of this is still in the planning and talking stage, I am very encouraged. All of their predecessors were frozen and the current LAUSD fractured infrastructure has unbelievable challenges, but these guys seem undeterred. Ken Kotch, the CFO, wants to do the right thing for the employees and with great enthusiasm. So far, he has lived up to my expectations and the dream that somebody like him would come to LAUSD and clean this mess up. Here he is, wow! After all, he did this in Chicago. He showed me the brochures of the 403b plan they published in Chicago. He told Brian Clelland, the benefit's administrator, that the authority to make the above happen is his. Brian is also new to the district and it looks like the both of them are going to radically reform 403b as never before. Stayed tuned.

Have a great day,

Steve

 

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Guys,

 

I just wanted to point out that a TIAA-CREF 457(b) or Educators Money 457(b) would be preferable to the PERS 457(b) or San Diego 457(b). The PERS plan is not that great and not supported very well. The TIAA-CREF plan would have TIAA-CREF index funds, Vanguard funds, DFA funds, and the best fixed products available including a loan feature - all for a very reasonable and lower price than CalPERS. EdMoney has a very competitive product as well which would, in my opinion be better than the San Diego (LPL and Nationwide) and CalPERS plan. As always the district should do an RFP and force the vendors to compete and pick the ones that best fit the district. I however would not endorse the CalPERS plan as a worthy candidate.

 

Just my two cents - great job on everything Steve, you are a true 403(b) crusader. You keep taking care of LA, and I will keep watching over Orange County......who is wathcing San Diego anyway?????

 

I have been absent from the boards for a while - trying to get rid of some bad companies in Orange County and build a business at the same time. Its always good to see your progress.

 

ScottyD

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Scotty,

 

I have been doing some research about 457/401k in California. How do you rate the "Savings Plus Program" administered by the State Department of Personnel Administration which offers both 457 and 401k to just state employees? There appears to be much overlap/unnecessary costs based on state, county and local government involvement in these various plans. For example, State employees have both the 457 and 401k while Calpers, a state government agency, offers just a 457 to school districts and local employers. Some Counties on the other hand offer both plans; i.e., Placer county.

------------------------------------------------------------------------------------------------

 

Investment Choices Offered by Savings Plus

 

Savings Plus has grouped each of its investment choices into one of four "portfolio management levels." The levels represent varying degrees of involvement required by you to manage the various choices. There are no sales load charges, such as front-end sales charges or back-end sales charges, assessed by investment providers on any of the investment products offered through Savings Plus; however, investment management and other fees are assessed on certain investment products. For more information about investment product fees, please see the Savings Plus Investment Guide located under "Plan Info and Forms".

 

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Gartmore Investor Destinations Aggressive Fund

Gartmore Investor Destinations Moderately Aggressive Fund

Gartmore Investor Destinations Moderate Fund

Gartmore Investor Destinations Moderately Conservative Fund

Gartmore Investor Destinations Conservative Fund

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The Level II Portfolio offers low-maintenance, passively managed choices that require minimal monitoring, which you can do by checking their total return periodically to see that they continue to meet your current objectives. These choices have low administrative costs.

 

Savings Pool - The Golden 1 Credit Union and Washington Mutual Bank

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The Level III Portfolio requires you to be more actively involved in managing your account. Once you identify how you want your assets allocated, you may choose a combination of these funds, as well as Level II choices, to implement your investment strategy. The choices offered in this group vary in terms of risk and potential returns, have slightly higher administrative costs, and require more monitoring.

 

GIC Fund - Dwight Asset Management Guaranteed Interest Contract

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Large Cap Growth Fund - Janus Twenty (JAVLX)

Large Cap Value Fund - Federated Stock Trust (FSTKX)

Small - Mid Cap Growth Fund - T.Rowe Price Mid-Cap Growth Fund (RPMGX)

Small - Mid Cap Value Fund - Accessor Mid-Cap Fund (ASMCX)

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International Growth & Income Fund - Glenmede Institutional International Equity Fund (GTIIX)

Variable Annuity Contract - Hartford Life

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The Level IV Portfolio offers the most flexibility in the selection of investments and requires the most active management to control risk and obtain optimum potential gains. This choice tends to have the highest administrative costs, but can produce higher rates of return for the experienced and attentive investor.

 

Personal Choice Retirement Account® - Charles Schwab

This account, offered by Charles Schwab, allows a participant to buy and sell individual stocks, bonds, and thousands of other investments not in the "core" portfolio.

 

Fund prospectuses can be ordered onling, through the voice response system, or obtained from your investment professional. Please read prospectuses carefully before investing any money.

 

Asset Allocation Funds (also known as Lifestyle Funds)

 

Gartmore Investor Destinations Series:

 

The series is designed to provide diversification across several major asset classes over time. Each Fund in the series, offered by Villanova Capital, investment advisor to Nationwide Family of Funds, invests in different combinations of mutual funds and short-term investments, but is comprised mostly of funds which mirror various indices. Once you determine which of the following "Lifestyle Funds," so named because they reflect different lifestyle needs, is appropriate for you, this choice should be your exclusive 401(k) and/or 457 investment. The information below describes each of the funds in this series.

 

Gartmore Investor Destinations Aggressive Fund - generally appropriate for aggressive investors comfortable with risk, investors with long time horizons, or investors who want to maximize long-term returns and who have a highertolerance for possible short-term losses.

 

Gartmore Investor Destinations Moderately Aggressive Fund - generally appropriate for aggressive investors who want to maximize returns over the long term but who have a tolerance for possible short-term losses or who are looking for some additional diversification.

 

Gartmore Investor Destinations Moderate Fund - generally appropriate for investors who have a lower tolerance for risk than more aggressive investors and are seeking both growth and income, who have a longer time horizon, or who are willing to accept moderate short-term price fluctuations in exchange for potential longer-term returns.

 

Gartmore Investor Destinations Moderately Conservative Fund - generally appropriate for investors who have a lower tolerance for risk and whose primary goal is income, who have a shorter time horizon, or who are willing to accept some market volatility in exchange for greater potential income and growth.

 

Gartmore Investor Destinations Conservative Fund - generally appropriate for investors who have a low tolerance for risk and whose primary goal is income, who have a short time horizon, or who are not willing to accept much risk but still seek a small amount of growth.

 

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Your Level II and Level III choices are grouped into the basic asset classes listed below. The asset classes are listed in order of their potential risk and return on investment, ranging from lower potential risk/return (Stable Value) to higher potential risk/return (International Funds). In addition, there are two Accumulation Annuities described at the bottom of this listing.

 

Stable Value

 

Savings Pool (Level II) - a fixed-rate savings account offering a blended rate of return from two financial institutions: The Golden 1 Credit Union and Washington Mutual Bank.

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Fixed Income

 

Lehman Brothers Aggregate Bond Index (Level II) - an investment vehicle, designed to replicate the performance of the index itself, based on corporate and government bonds, managed by Vanguard in its Total Bond Market Index Fund.

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Balanced Fund (Level III) - containing equity (stocks), fixed income (bonds), and stable value components (cash), managed by Hartford in its Advisors Fund HLS.

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Socially Responsible Fund (Level III) - this fund contains all equities, is based on certain social criteria, such as no tobacco, no alcohol. It replicates the performance of the Domini 400 Social Index and is managed by Domini Social Investments in its Social Equity Fund.

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Large Cap Blended Fund (Level III) - a portfolio of equities (stocks) from companies with over $8 billion in capitalization, including preferred issues and others that pay dividends, providing income to the portfolio, managed by Hartford in its Stock Fund HLS.

S & P 500 Index Fund (Level II) - an equity fund that mirrors the performance of the Standard & Poors 500 Index. The fund is managed by CalPERS.

Large Cap Growth Fund (Level III) - a fund that contains equities only, from companies with over $8 billion in capitalization, in the Growth style, which means that the fund manager tends to look for stocks of companies that are generally higher than the market's price-to-earnings ratio and have a history of consistent dividends and patterns of growth. This fund is managed by Vanguard U.S. Growth Fund, by Janus in its Janus Twenty Fund, and by American Funds in its Growth Fund of America.

Large Cap Value Fund (Level III) - this fund contains equities only, from companies with over $8 billion in capitalization, in the Value style, which means the fund manager tends to look for stocks from "out-of-favor with the market" companies. This fund is managed by Federated in its Stock Trust Institutional Fund.

Small - Mid Capitalization Equity Funds

 

Small - Mid Cap Growth Fund (Level III) - a fund comprised of stocks from companies that are small to mid-size, or between $1 billion and $8 billion each in capitalization, managed by T.Rowe Price in its Mid - Cap Growth Fund.

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Small Capitalization Equity Fund

 

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International Growth & Income Fund (Level III) - an equity fund that invests in stocks of large-cap companies from outside the United States. This fund is offered by Glenmede in its Institutional International Equity Fund.

Savings Plus also offers the following Accumulation Annuities:

 

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Mutual funds involve market risk including the possible loss of principal. The return and principal value of an investmetn in stocks fluctuate with changes in market conditions. For more complete information, including charges and expenses, consult fund prospectuses by contacting the Savings Plus Program Office or calling 866-566-4777. Please read prospectuses carefully before investing any money.

 

Certificates of deposit are insured by the FDIC or NCUA and offer a fixed rate of return. An investment in a money market fund is not insured or guaranteed by the FDIC or any government agency. Although money market funds seek to preserve the value of an investment at $1.00 per chare, it is possible to lose money investing in a money market fund.

 

=====================================================

Steve,

 

You are in a grand position. Set your sights on the entire State...not just the 403(b) mess in California. Use your powers of persuasion with the LAUSD To get the State to open up its "Savings Plus Program" (457(b) and 401(k)) to school districts and local governments in California. Once this is accomplished you can do what teachers have done in NYC---say a final prayer and let the 403(b) rest in peace!!

 

Peace and Hope,

Joel L. Frank

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