Jump to content
Sign in to follow this  
Why Me

New California Tpa (octfcu) Disappointments And Questions

Recommended Posts

My community college district has just switched to OCTFCU as TPA for 403b and 457 accounts. First thing, they notified me that I can no longer contribute to my 403b at Vanguard, since Vanguard has not signed the relevant agreement with OCTFCU. Fidelity is an option, so I am attempting to open a 403b there--I like their offerings less than Vanguard, but they'll do. (Fidelity has been surprisingly unresponsive to my calls and mailings about setting up the account--I hope that's not a harbinger of things to come.)

 

I've reached the point where I can contribute the maximum to my 403b, so I'd like to open a 457 account as a supplement. This is where OCTFCU gets a bit ugly: the 457 choices are limited to their in-house selection, which seems to require that you go through their agent/broker. They charge an admin fee of .25 percent annually on top of whatever expenses fees the underlying funds contain. With the few low-cost options they have--a couple of Vanguard and Dodge & Cox funds--they tack on an additional surcharge of .40 percent: .65 total above the fund expenses. A mix of index funds (some international, from Nationwide) will cost .84--that's probably what I'm stuck with. (By the way, OCTFCU does nothing to make the total fees and expenses easily accessible, instead posting stuff on their web site about "we pay the membership fee," "no sales loads, " etc. It seems designed to mislead the ignorant: I would hope for better from a teacher's credit union.)

 

So the situation isn't dire, but I do wonder: a) are there better options at OCTFCU that I'm missing? b) Is there something in the 457 regulations that prohibits them from offering direct access to the same providers available in the 403b plan? c) Is there any way to bypass the broker/advisor fee? d) How does this stack up against the competition--are there clearly superior TPA options that I can call to the attention of our business services department? (We're in LA County.)

Share this post


Link to post
Share on other sites

Whyme,

 

My wife and I face the same problem. We have maxed out on 403b and want to open a 457, but the OCTFCU options for her are poor, and mine are even worse (Value Killer, if you can believe that). It really gets me that an organization like OCTFCU cannot do anything better for its members.

 

I don't think that there are any easy answers for you other than to contribute to a Roth IRA and/or a tax-efficient taxable account.

Share this post


Link to post
Share on other sites

Thanks for the reply. I may still put a little in the .84% 457 account--I don't think that expense ratio is so high that it will cancel the benefits of pre-tax investing. But it sure is obnoxious to pay 4 or 5 times the rate that I would as an off-the-street investor in a taxable account. I'm trying to cover all the bases: I'm also maxing out a Roth, and have a few shares of Berkshire Hathaway "B" in a taxable account, which may turn out to be the lowest-cost, highest-return and most tax-efficient investment of the bunch (it would be, by far, if I sold today).

Share this post


Link to post
Share on other sites

Thanks for the reply. I may still put a little in the .84% 457 account--I don't think that expense ratio is so high that it will cancel the benefits of pre-tax investing. But it sure is obnoxious to pay 4 or 5 times the rate that I would as an off-the-street investor in a taxable account. I'm trying to cover all the bases: I'm also maxing out a Roth, and have a few shares of Berkshire Hathaway "B" in a taxable account, which may turn out to be the lowest-cost, highest-return and most tax-efficient investment of the bunch (it would be, by far, if I sold today).

 

Perhaps I should re-think the OCTFCU 457, but I just have a hard time paying, as you say, four times what I would otherwise be paying in my regular 403b account.

Share this post


Link to post
Share on other sites

OCTFCU did have an AMerican Funds at NAV (A shares) option, call and ask them about it. Also, they have Certificates of Deposit that have pretty good yields (actually quite good). I agree that their Nationwide product isn't great.

 

As for TPA's - your district probably chose the credit union because they were offered for free.

 

CalSTRS offers a TPA service called 403bComply, www.calstrs.com/403bcomply, there is a charge for it - as there is for all good service.

 

The OCTFCU TPA is free to the district and subsidized by those who buy 403(b), 457(b) and other products from the credit union. Its a highly conflicted situation as the district is locked into OCTFCU as the 457 provider and is not allowed to make a 457 choice based upon fiduciary principles.

 

Vanguard unfortunately will probably disappear from all lists, they simply haven't showed the will to be in this market and to work with TPA's. So, regardless of your TPA.....you will probably still lose out on Vanguard.

 

 

Full Disclosure: I helped create the CalSTRS Comply program.

 

 

ScottyD

Share this post


Link to post
Share on other sites

 

As for TPA's - your district probably chose the credit union because they were offered for free.

 

 

 

Thank you for clarifying this (and for the other info as well). It seemed to me that CalSTRS was the obvious candidate for TPA, since the Defined Benefit Plans are with CalSTRS. The recently opened Pension2 program looks to have several investment options that are more attractive than anything from OCTFCU. I'll bet you are exactly right about the reason for the choice--alas, our district never seems to put the faculty members' interests first, either in terms of supporting their work with students or helping them financially. I do realize, of course, that there are worse vendors out there... I suppose I should be thankful that they didn't hand us off to some annuity-only outfit with heavy sales loads.

Share this post


Link to post
Share on other sites

My community college district has just switched to OCTFCU as TPA for 403b and 457 accounts. First thing, they notified me that I can no longer contribute to my 403b at Vanguard, since Vanguard has not signed the relevant agreement with OCTFCU. Fidelity is an option, so I am attempting to open a 403b there--I like their offerings less than Vanguard, but they'll do. (Fidelity has been surprisingly unresponsive to my calls and mailings about setting up the account--I hope that's not a harbinger of things to come.)

 

I've reached the point where I can contribute the maximum to my 403b, so I'd like to open a 457 account as a supplement. This is where OCTFCU gets a bit ugly: the 457 choices are limited to their in-house selection, which seems to require that you go through their agent/broker. They charge an admin fee of .25 percent annually on top of whatever expenses fees the underlying funds contain. With the few low-cost options they have--a couple of Vanguard and Dodge & Cox funds--they tack on an additional surcharge of .40 percent: .65 total above the fund expenses. A mix of index funds (some international, from Nationwide) will cost .84--that's probably what I'm stuck with. (By the way, OCTFCU does nothing to make the total fees and expenses easily accessible, instead posting stuff on their web site about "we pay the membership fee," "no sales loads, " etc. It seems designed to mislead the ignorant: I would hope for better from a teacher's credit union.)

 

So the situation isn't dire, but I do wonder: a) are there better options at OCTFCU that I'm missing? b) Is there something in the 457 regulations that prohibits them from offering direct access to the same providers available in the 403b plan? c) Is there any way to bypass the broker/advisor fee? d) How does this stack up against the competition--are there clearly superior TPA options that I can call to the attention of our business services department? (We're in LA County.)

 

 

Bottom Line: You get what you pay for !!

 

Your SD is using a credit union as a TPA .... It must be one hell of a bargain !!

 

Fidelity hasn't been helpful ... It's an 800 number and a prayer !!

 

You get what you pay for !!

 

Not to say that you have an option either way !! Good luck !!

Share this post


Link to post
Share on other sites

 

 

As for TPA's - your district probably chose the credit union because they were offered for free.

 

 

 

Thank you for clarifying this (and for the other info as well). It seemed to me that CalSTRS was the obvious candidate for TPA, since the Defined Benefit Plans are with CalSTRS. The recently opened Pension2 program looks to have several investment options that are more attractive than anything from OCTFCU. I'll bet you are exactly right about the reason for the choice--alas, our district never seems to put the faculty members' interests first, either in terms of supporting their work with students or helping them financially. I do realize, of course, that there are worse vendors out there... I suppose I should be thankful that they didn't hand us off to some annuity-only outfit with heavy sales loads.

 

 

Under a CA attorney's general's opinion CA law prohibits a SD or TPA from charging employees a fee to cover the cost of administering a 403b plan. However, Federal Credit unions are not subject to CA law and can charge employees for the cost of 403b plan administration. SD will not use budgeted funds to pay for 403b plan admin costs unless the costs are negotiated with the union representing the employees.

 

Share this post


Link to post
Share on other sites

Intruder,

 

You are wrong on both accounts. Employees in California MAY pay admin fees and Credit Unions are certainly subject to state laws as they apply to 403(b) accounts.

 

ScottyD

Share this post


Link to post
Share on other sites
Guest Sierra

Intruder,

 

You are wrong on both accounts. Employees in California MAY be admin fees and Credit Unions are certainly subject to state laws as they apply to 403(b) accounts.

 

ScottyD

 

Scott---please re-write your post.

 

Joel

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...