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Lausd 403b Update

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Hi all,

What I have experienced recently should be instructive for those of you what are trying to change your district's policy with 403b. Mind you, what I am about to tell you here is about 6 years in the making. Lots of letters, meetings, publicity, presentations and even getting blacklisted from my own union because, my friends, believe it or not, 403b reform is revolutionary. But after people understand what 403b reform is about, then things start happening.

 

Yesterday, I was invited by CFO LAUSD, Ken Kotsch, to a meeting at LAUSD headquarters to discuss 403b. It was an update on some of the issues we had talked about last summer, 403b brochure, updated the district web page regarding 403b vendors and the problems with NEBSonline.

 

NEBSonline has contracts with many districts in California. Another thread started by Bill, a VP of the company, has already told us what they do. NEBSonline was approved by the Board a year ago, but the agreement will be cancelled. NEBSonline were not clear on their fee structure and they wanted confidential employee information as part of their business practice to keep the fees low. It was the understanding of the administration that Nebsonline were doing business with particular vendors which of course threw up a red flag for all of us. Lastly, much of the information that NEBSonline provides will be made available for free from CalSTRS own website as a result of the implementation of AB2506.

 

Both Ken and Brian, the benefits administrator said that they will publish a brochure on 403b in a couple of months. And the information on the website will be updated. I don't know all of the details about this brochure, but this type of conversation would have never materialized without Ken's urging.

 

Lastly, I was impressed when they gladly shared some very encouraging statistics:

1. Number of employees actively participating in a 403b: 32,400 employees, up from 25,000 four years ago.

2. Total annual amount: $156,000,000 up from a $125,000,000 four years ago.

That’s about a 50% participation rate which is higher than the national average. The word is getting around that it is extremely important to supplement CalSTRS. I was surprised and very pleased.

 

Furthermore, they prioritized the number of companies starting with the most 403b money. I was very pleased that TIAA CREF is 29th out of about 140 companies on the district's list. No bad for a company who has been shut out of the "approved vendor" status by UTLA and the district from publicizing their plan. The word is getting around anyway. Unfortunately, the first ten companies are TSA from insurance companies and one loaded Mutual Fund Company. I made it clear that there were no low fee companies on that top ten list and efforts should be made to address this bias. I said to the entire board of about 8 high ranking district administrators that LAUSD has a good 403b plan, advertise it!

 

The reason why I am so impressed with Ken, the CFO, is that he is not only a very bright and articulate man, but he is very enthusiastic and looks out for the best interests of employees. He made a personal point to make me feel important. In fact today, he called my house and thanked me for coming in and sharing my thoughts. (When was the last time any school administrator, principal, super, union official has ever called your house and thanked you for a teaching job well done). That is the kind of person Ken is.

Maybe it is too early to announce this but IMO, between Mr. Kotch and David Tokofsky, the board member, 403b reform is on its way. LAUSD is very lucky to have these two men.

 

Best wishes,

Steve

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Guest Joel

Hi Steve,

 

Because one may now make maximum contributions simultaneously to 457(b) and 403(b), employees who want to make contributions beyond the per plan maximum but only have one of these plans available have, in essence, only half a plan available. How's that for a mouthfull? Are there any definitive plans by the LAUSD to make a 457(b) plan available prior to your retirement?

 

Peace and Hope,

Joel

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Hi Steve,

 

I completely understand your enthusiasm regarding the new CFO. Anyone that is interested in promoting the "Benefit" of the plan is OK in my book. However, there was a statement in your note that is not correct.

 

First of all, we have been and always will be very clear about how we are compensated for our services. Ken, unfortunately, was not involved in the decision making process of bringing NEBSonline to the district as an alternative option for employees.

 

Secondly, the reason that we require the employee information is because we handle the common remitter and compliance services. How are we going to remit the funds to the providers and take care of check resolution issues if we don't have the account numbers. We are very specific in our agreement which states that we will not contact any employee directly. They would have to contact NEBSonline first. We are also very clear that we do not share, sell or otherwise provide this information on employees to any other entity without the expressed written consent of the district, unless required by law.

 

Steve, I believe that there are a lot of mis-communications with regards to our services and I would personally like to meet with you so that you are clear on what it is that we do. I will be back in Southern California the week of February 9th. Can you tell me if it would be possible to meet. I will also call Brian and Ken to see if they are available. Please let me know.

 

Sincerely,

 

Bill

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Bill,

I am a teacher with LAUSD. I took a look at your website. I didn't find it very helpful. I am curious as to how your company would be of any value to me. I now have my 403b funds going to TIAA-CREF. What could you offer that would be better than that? Best Wishes.

 

Joe

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Guest Joel

Joe,

 

Please permit me to give you my two cents. You have what most observers would consider the gold standard in Defined Contribution plan investing. Just stay healthy, keep contributing and learn how to become your own best investment advisor by attending seminars, reading books, magazines and maybe taking a course or two in investment management. Check with your local community college.

 

Peace and Hope,

Joel L. Frank

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Bill,

I am not the person to talk to. You need to talk to Ken and his staff. If he wasn't involved in the decision making process, then who was? The only people above him are the super and the board of education. They don't know anything about this stuff. But that is beside the point at this time.

Steve

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Joel,

 

No, the 457 was not discussed in this meeting. But a rep from TIAA CREF will be talking to Ken about the 457 in a couple of weeks. TC has a 457 plan in place with the LA community college system and the LA County Office of Education.

For now, I believe LAUSD is trying to get off the ground with their 403b first.

Steve

 

PS

Joe M may respond to your post as he should, but I just want to say that Joe is one of the most knowledgable teachers in investing in our 403bAware group. I only wish he would post here more often.

 

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Bill,

I am not the person to talk to. You need to talk to Ken and his staff. If he wasn't involved in the decision making process, then who was? The only people above him are the super and the board of education. They don't know anything about this stuff. But that is beside the point at this time.

Steve

Steve,

 

The people that were involved included Joe Zeronian, Yoshi Fong, Robert Diaz, Olonzo Woodfin, Karen Tillman, the UTLA Rep, the CSEA rep, Rick Duran and Sarah Griffin at Jones Day. All of the above mentioned persons have been involved in this decision.

 

Ken came in after we received board approval and set up a schedule of implementation with the group. 3 years of work all blown away because Yoshi and Joe retired 2 months too early. Now there is this huge misunderstanding of communications.

 

I know that you are not one of the decision makers at the district Steve, but you are respected in the industry. Just as Scott Dauenhauer, editor of the Teachers Advocate is respected. We are all in the same boat my friend. If we want to improve this benefit we need to work together. For the better of all employees.

 

I have tried to reach Ken and Brian at the district, but I can't seem to be able to get a returned call. If there is anything that you could recommend, I would appreciate it.

 

Bill

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Bill,

I think it would be nice if you can tell me how your company can be of any benefit to me at LAUSD. I have my 403b funds going to TIAA-CREF. What do you offer that is better than that? Best Wishes.

 

Joe

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Guest Joel

Bill,

 

If you have confidence in your service it seems to me you would jump at the chance to show us all how you can take the TIAA-CREF platform and improve upon it to the degree that a prospect will want to become your client.

 

You asked us to give you our "feedback". Joe gave you his. So, to ignore Joe's reasonable request after he gave you his imput reveals to this observer that your service is all smoke and mirrors.

 

Peace,

Joel

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Bill,

I think it would be nice if you can tell me how your company can be of any benefit to me at LAUSD. I have my 403b funds going to TIAA-CREF. What do you offer that is better than that? Best Wishes.

 

Joe

Joe,

We at NEBSonline never say that everyone has bad investment choices. We only say that some people need to know if what they have is the best choice or not based on empirical data and risk tolerances.

 

That being said you may be in the best investment choice for YOU! However, with NEBS at LAUSD, there are many behind the scene services that we provide. Did you know that there are more than 200 checks that come in and go out for resolution issues on a monthly basis? How much do you think that is costing the district? How about the fact that there are 7 payroll cycles and at least 85 providers that checks are sent out to on each payroll. That means that there are 595 checks that the district has to cut, reconcile, stamp, address and mail every month. How long does it take for the mail to get to the providers, for the providers to open the envelopes and deposit the check and for the check to clear before it hits your accounts?

 

NEBSonline would simplify this process for LAUSD by taking over all check resolution issues (any returned checks would be researched and accounted for to the district within 5 business days of receipt), we would ensure that the district only have to reconcile one data file per pay period and send only 1 check/wire for each. We then ACH/wire all monies to the providers (ACH monies are electronic transfers which show up as cash to the providers. The provider gets a computerized breakdown of each account and how much is to go to each.) Your monies will hit your accounts quicker.

 

Have you ever had to research an issue with a contribution through the district? They are as helpful as they can be, but with thousands of duties to accomplish, how can they adequately follow up for you. NEBSonline is a Retirement Application Service Provider with only the goals of providing the best client services available in the industry. You call us, we take care of it within 24 hours!!!

 

I could go on and on with the advantages that you would receive. I hope that you see that we at NEBS are trying to bring a solution to the real problems that are dealt with on a day to day basis within your community. We are here for you!

 

Sincerely,

 

Bill

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Guest Guest_Joel

That being said you may be in the best investment choice for YOU! However, with NEBS at LAUSD, there are many behind the scene services that we provide. Did you know that there are more than 200 checks that come in and go out for resolution issues on a monthly basis? How much do you think that is costing the district? How about the fact that there are 7 payroll cycles and at least 85 providers that checks are sent out to on each payroll. That means that there are 595 checks that the district has to cut, reconcile, stamp, address and mail every month. How long does it take for the mail to get to the providers, for the providers to open the envelopes and deposit the check and for the check to clear before it hits your accounts

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

Bill,

 

The mess that you accurately describe can be cleaned up by the LAUSD adopting a policy of Keeping It Simple Stupid! I would recommend that the District allow only one no-load family of funds to be sold to participants. This will come cost free to the teacher and the taxpayer. It is too bad that such a KISS puts a dagger into your business plan but that's the business plan that is in the best interests of the District and its employees.

 

Peace,

Joel

 

 

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TX,

 

A single family of no-load funds for the vast majority of employees would be just fine. If different investment objectives cannot be found in a single family then it behooves the employer to select other no-load funds from other families. To play devils' advocate, let's assume the employer wants to offer 10 no-load funds (to meet 10 different investment objectives) but can only find them from 10 different families. At the end of the month the employer needs to cut 10 checks not 595 as is the current practice at the LAUSD.

 

Bill's best interests is to make sure the 403(b) mess remains a mess so he could come in for a fee and be the housekeeper. My solution is along the lines adopted by 401(k) employers---it is quite applicable to a large city school system like the LAUSD. Bill's service is completely unnecessary---he would not get thru the front door of a fortune 500 company. This is proof that 403(b) employers should say to Bill: "Thanks, but No Thanks"

 

Peace and Hope,

Joel

 

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