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Florida "model Plan" Praise Empty

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OK so now that we know your opinions on the model retirement plan what would you 403b "experts" propose in its place and what would be your business model?

 

 

I'm not an expert, but it does not take an expert to determine that the CalStrs 403b plan is pretty good. It charges a .33% administrative fee and has access to Vanguard institutional funds that are as low as .05%. The Connecticut plan charges only a .12% fee and offers low cost Vanguard index funds, as well.

 

When I look at the offerings of these two plans and compare them with Waddell & Reed, for gosh sakes, I am left scratching my head. Florida is a large state and has economies of scale. The best it can do for its low cost offerings is Waddell & Reed and American Century?! You've got to be kidding me.

 

 

But isnt a major difference that CA and CT both have a state gov. agency to administer the 403b plan, perhaps because they both impose a state income tax whereas FL has no state income tax and therefore isnt able to afford the admin costs of such a plan.

 

 

Intruder,

 

My goodness that's the silliest idea you've tossed us yet. The State doesn't have to support HIGH COST admin through a state income tax, that's ridiculous. That really made me bust out laughing. Scotty and I both identified two different vendors who can admin a small 403b plan for PENNIES compared to most plans. You, in some capacity, work (or worked, or are affiliated) with the industry, and so you know that's true. Why float the myth it cannot be done? it serves no purpose.

 

ANY SD in FLA can sponsor a low cost 403b plan for their participants. Period. Today. Without Question.

 

That the IBC has chosen a revenue sharing solution, in which they and the SDs can generate cash flow is just disappointing. Remember, we didn't proclaim their plan as a "model", they did, with positive press in 25+ publications and likely hundreds of posts on blogs around the web. We simply say prove it.

 

Best regards,

 

Jim

 

 

We are not talking about setting up a small plan for a single SD but centrally run plan for up tp 350,000 employees which will require that there be systems in place and procedures ready when the plan rolls out on day 1 which will require a expendure of funds in the $ millions in advance. There is more to getting this program off the ground than just hiring a vendor which escapes you. The reason why none of your ideas will ever be adopted is that they arent realistic.

 

If you think you have a better idea why dont you propose it to the FL Board and see what they say. LOL

 

 

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Guest Skeptical

We are not talking about setting up a small plan for a single SD but centrally run plan for up tp 350,000 employees which will require that there be systems in place and procedures ready when the plan rolls out on day 1 which will require a expendure of funds in the $ millions in advance. There is more to getting this program off the ground than just hiring a vendor which escapes you. The reason why none of your ideas will ever be adopted is that they arent realistic.

 

If you think you have a better idea why dont you propose it to the FL Board and see what they say. LOL

 

 

 

So you seem to concede that a single small district can sponsor a low cost plan. I thought that the IBC brought together the "buying power" and "economy of scale" of 350,000 participants? Any plan will be eventually be adopted by individual districts, both large and small so how does a large "buying group" increase costs? Maybe by mandating a cash payment back to the group.

 

The reason why none of our ideas is adopted is simple.

 

Hidden Expenses = Profits for Vendors = Sponsorships of Administrator Organizations + Campaign Cash for Elected Officials + Revenue for (some) Unions. A very simple business model that generates billions from the retirement nest eggs of millions. Eliminate the hidden expenses and the whole pie crumbles to pieces.

To be clear, are you now admitting that individual SDs can sponsor a low cost plan if they wish?

 

Jim

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Intruder,

 

Very simple: if small school districts can offer low cost plans, then large states can certainly do so.

 

Again: Waddell & Reed for a low cost plan?! This does not pass the giggle test.

 

You asked for an alternative to the Florida "model plan" and I gave you two.

 

Your arguments were laughable.

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Intruder,

 

You are incorrect, we are not talking about a centrally run plan for 350,000 employees. We are talking about a state with many counties that will each run their own plan. They have a TPA - TSA Consulting Group who is fully capable of doing the compliance regardless of the vendor - thus, why wouldn't we have at least one good low-cost vendor chosen?

 

You are going to have to come up with something better to defend this "model plan".

 

ScottyD

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Dan,

 

I checked the plan's web site and discovered that 24 companies submitted a bid. Most of them were of the "Great Americans" variety, e.g., Franklin, Mann, Lincoln. None of the companies favored by many of the posters on this forum - Vanguard, Fidelity, TRP, TC - apparently submitted a bid. With the size of the Florida market, I find that surprising. What do you think of the following possible reasons that they did not submit a bid:

 

1) The 403b market is not profitable enough, i.e., it's simply not worth their while.

2) The criteria that the IBC established in effect screened out these companies, so that they did not bother submitting a bid.

 

 

 

 

 

Dan,

 

I checked the plan's web site and discovered that 24 companies submitted a bid. Most of them were of the "Great Americans" variety, e.g., Franklin, Mann, Lincoln. None of the companies favored by many of the posters on this forum - Vanguard, Fidelity, TRP, TC - apparently submitted a bid. With the size of the Florida market, I find that surprising. What do you think of the following possible reasons that they did not submit a bid:

 

1) The 403b market is not profitable enough, i.e., it's simply not worth their while.

2) The criteria that the IBC established in effect screened out these companies, so that they did not bother submitting a bid.

 

 

 

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Dan, Only 24 companies submitted bids because there was a $15,000 fee for the privelage of bidding... FASA, Florida Association of School Administrators, which is the umbrella professional association ostensibly serving Florida's public educators helped construct this new model entity. FASA has an exclusive endorsement for their member's retirement savings providers from AIG Retirement (the old VALIC) that is rumored to pay FASA over 20-25K per year...

TSA Consulting has agreements with over 50 of the 67 counties in Florida. These agreements are to serve the employer; not the employee. A common remitter payroll platform, a standardized ISA (Information Sharing Agreement), a mandatory Hold Harmless Agreement and a 402(g) excess deferral calculator help the employer; not the employee. A mutual fund company will not/can not indemnify all parties from excess contributions or under withholding of income taxes which are requirements to play...

Additional "weasel clauses" in the fine print can require a licensed provider representative to have a physical residence in that market, agree to adding the School Board to the licensed representative's automobile insurance, require the provider company to post a Fidelity Bond of 1M with each particular School Board listed, to commit to a third party common remitter or to be obligated to an oblique and overly broad ISA that stipulates customized mandates as to preclude a competitive, low cost mutual fund provider.

Most Florida public education entities recognize the State of Florida as an unofficial, de facto status quo litmus test. Florida Statutes requires a defined contribution provider for State of Florida ORP (Optional Retirement Program) to only offer ANNUITIES. The current provider list will not be rebid until 2014. How could any low cost provider ever hope to compete in a market of so many "ear marks," obstacles and administrative snafus? They don't.

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flyer,

Two questions:

1. What I have been told that the unions were very involved with this process. So they just went along with the business as usual when you said that the plan "served the employers not the employees?"

 

2. Also, what do you mean "agree to adding the School Board to the licensed representative's automobile insurance?"

 

Thanks for your post,

Steve

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Flyer3,

 

Is this information posted on the model plan website or do you know this because you were a bidder or looked into bidding? Do you have any documentation, would love to see it. Thanks for the information.

 

ScottyD

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