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JudyS

Easy Question Re: Agreement Form

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I called Vanguard today and they confirmed that they WILL NOT sign any ISA other than their own and the rep also stated that Vanguard will NOT sign any forms that the school district requests them to. Vanguard made it very clear that they they will not review thousands of potential ISA, therefore they have determined that if a school district wants to keep them as a vendor, the school district/TPA MUST sign Vanguard's paperwork period.

 

To make matters worse, Fidelity appears to be following the same lead. I called them at 1-800-868-1023 and "Maria" advised me that many ISA's they have received are asking various things of Fidelity and she stated their legal dept is going over them and suspects Fidelity will refuse to sign most of these. One request that was made of them by a school district, was for Fidelity to absorb the cost instead of passing it to the plan participants.

 

Two of the LOW cost leaders are gonna be forced out! My worse fears have been realized, Vanguard said they will NOT sign anybody else's paperwork and my last hope was Fidelity. Fidelity is also starting to sing the same tune.

 

I told Vanguard that in the end we the conscientious investors are getting screwed. Thanks to these new rules we are losing the low cost providers. I really can't believe what is happening. The smart teachers who have the common sense to use Vanguard or Fido will be left with such shitty choices.

 

I voiced my displeasure with Vanguard and in my opinion this could have all been elimated if the IRS came up with a standard form that both parties could use and neither party could modify it or make additional requests. Instead there are numerous variations of these ISA's which Vanguard said they will NOT even look at, it's their way or the highway.

 

I blame Vanguard for not giving a damn about these teachers who fought so hard to get them in the first place now Vanguard is turning their back on them, Shame on them. As a Voyager Select client I am considering moving my assets to Fidelity's index funds. I am disgusted with them.

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Just so it is clear to all of you:

 

1. I have no interest in 403b plans other than as a participant.

 

2. I do not recieve any income from 403b plans, TPAs or providers.

 

3. An employer can use any provider for their 403b plan which meets the employer's requirements for the plan, including a low cost provider.

 

4. The employer cannot force any provider to offer its funds to their plan if the provider does not find the terms offered by the employer to be in its business interest.

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Jim and Sierre,

I have said people make mistakes and I regret not posting my responses to the portal issue at the time. I actually did spend a considerable amount of time thinking and writing about the issue by two great friends who are pros and are trying to change the 403b system.

Below are the two entries that I wrote in my personal journal. I post them here for what it’s worth and I think it explains my position. Call it good old fashion cowardness or fear of losing two friends. I was caught at a weak moment. In reflection, Scott and Dan are class acts and would respect my opinion.

Have a great weekend,

Steve

 

 

Hi Dan,

I have read this thread carefully to make sure I understand what is going on. I am still not quite sure of the particulars because every case is a little different. But when costs such as revenue sharing, 12b1 fees and other expenses are hidden, I get paranoid easily. Every since AIG was chosen by LAUSD to be the TPA of the 457 plan, there has always been a fight with the TPA to ensure transparency. Our powerful committee demands it. I am sensitive enough, I believe, to know when an appearance of lack of transparency exists. I have seen plenty of it in the last two years on this committee.

 

I have written and rewritten several posts trying to find a way to say what I want to say. For for better or for worse, here it goes. It appears that the main complaint is lack of transparency. Despite all of the great things you have done in the last eight years and doing it right, that is, looking out for the educators best interests, I am afraid that despite how shocking and irritating the accusations are, there appears to be a reluctance on your part to answer cost questions how much do the end user pay—the educators. Because you are looking out for the best interests of educators and you are going into uncharted territory that no agent will ever go, you cannot withhold any cost information no matter how trivial or insignificant and how good and credible you are as an educator for the educator.

 

I totally agree that your portal is the first attempt to bring objectivity to educators, that’s is not a product and the fact that you want to make some money from it is fine, in fact, it is encouraged. Our 457b committee might look into it as an educational piece for our 100,000 employees. Because you are the leader of this burgeoning field of low fees, objectivity, education and transparency, you alone are burdened with a higher standard and that higher standard comes with a price. By definition, you must do business a little differently. You simply cannot use proprietary rights as an excuse; it doesn’t work in this unique situation. You can protect your product, Perhaps later when this new idea catches on, but not now. There are too many eyes watching. This is the efficient market hypothesis at work.

 

One "mistake" I made was allowing my picture in the TIAA CREF ad in the LA Times. Sure it was innocent, heck I only made $1.00 and we celebrated with the passage of ab2506. But it cost me any endorsement from my union for the CalSTRS retirement board election in 2004. I was accused of all kinds of stuff as you know and so I know what you are going through right now. This is the price I paid but it was in the short run and actually was a good thing for the union in the long run. It was in my opinion a good price because I would do it again if it might help the cause. In your current situation, you are risking something a little bigger; continuing to withhold information might hurt your credibility in the long term and because you are such a huge power house, it might hurt the cause.

 

Knowing that you did not seek my advice nor do you need a thing from this old man, I have experienced my share of mistakes and how badly I handled some of them. Don't make the same mistakes; so I am suggesting that you seriously reconsider for the cause. It’s your choice to take the risk of not answering the questions; I will always support you whatever you do. You know that. Somehow, we will get through this too. The cause needs your tremendous talents, leadership and courage badly. Seriously consider answering all of the questions and move on.

 

God bless,

Steve

 

 

(2nd Entry)

Scotty, AP and Dan,

Agree with AP. I too was a bit confused by this discussion and Dan's reluctance to discuss the fees of his portal. But as I think about it, the issue may be when one of "us" transitions into a pro, one of them. I know, I know, the us-them is tacky, but I am trying to explain what’s may be going on here in my head. I have known Dan for almost ten years. We have given a couple of workshops together here in Los Angeles and at the AFT convention in Las Vegas. He is extremely capable, smart and multitalented and a friend. So I was concerned why Dan did not disclose the fees of his product. Honestly, that is what the bad pros do all the time. I did not know what to say because I know he is not and will never be a bad pro.

 

When one of us, starts making money by writing books, charging vendors to advertise on website and creating a very nice portal that are all proprietary, we open ourselves up to greater scrutiny. Dan is a pro, we know this and still love him as one of us. But the difference is that Dan like Scotty is not just a good pro, he is a great pro with a tremendous future in this business.

 

Scotty explained that he should not disclose his produce fees because it will tip off the competition. Again, I don't know how to respond to that. Maybe you are right, Scotty. I just don't know the world of the financial professional, except from the world of a ripped off educator. I have been fighting the system a long time.

As far as making money from writing a book, all I can say is YOU GOT TO BE KIDDING. Writing a financial book is difficult enough but publishing and making any money is nearly impossible because the market is extremely crowded and competitive. The vast majority of authors never make much if any by writing a financial book. But Dan’s book is full of good information and he was good enough to donate 15 books which I gave to the 457 oversight committee where I serve as alternate chair, enough said.

 

As far as charging vendors to pay for this website, again, there are thousands of financial websites and if Dan can make enough money to pay for the expense of keeping this website up, more power to him. Where else can educators go to get objective information and a great place to ask questions and get honest answers?

 

Dan, all I can say is keep up the good, no, great work.

 

Love ya,

Steve

 

 

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Guest Sierra

I called Vanguard today and they confirmed that they WILL NOT sign any ISA other than their own and the rep also stated that Vanguard will NOT sign any forms that the school district requests them to. Vanguard made it very clear that they they will not review thousands of potential ISA, therefore they have determined that if a school district wants to keep them as a vendor, the school district/TPA MUST sign Vanguard's paperwork period.

 

To make matters worse, Fidelity appears to be following the same lead. I called them at 1-800-868-1023 and "Maria" advised me that many ISA's they have received are asking various things of Fidelity and she stated their legal dept is going over them and suspects Fidelity will refuse to sign most of these. One request that was made of them by a school district, was for Fidelity to absorb the cost instead of passing it to the plan participants.

 

Two of the LOW cost leaders are gonna be forced out! My worse fears have been realized, Vanguard said they will NOT sign anybody else's paperwork and my last hope was Fidelity. Fidelity is also starting to sing the same tune.

 

I told Vanguard that in the end we the conscientious investors are getting screwed. Thanks to these new rules we are losing the low cost providers. I really can't believe what is happening. The smart teachers who have the common sense to use Vanguard or Fido will be left with such shitty choices.

 

I voiced my displeasure with Vanguard and in my opinion this could have all been elimated if the IRS came up with a standard form that both parties could use and neither party could modify it or make additional requests. Instead there are numerous variations of these ISA's which Vanguard said they will NOT even look at, it's their way or the highway.

 

I blame Vanguard for not giving a damn about these teachers who fought so hard to get them in the first place now Vanguard is turning their back on them, Shame on them. As a Voyager Select client I am considering moving my assets to Fidelity's index funds. I am disgusted with them.

 

Don't blame Vanguard---Blame the Congress for designing/writing such a stupid law in the first place (1958)and then kissing up to the Wall Street sharks as the years/decades passed us all by. Maybe the IRS should step up to the plate and say to the Congress: THERE IS A LIMIT ON HOW MUCH GOOD THESE NEW REGS CAN DO SHORT OF FUNDAMENTAL REVISION OF SECTION 403(b).

 

Peace and hope,

Joel L. Frank

 

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Jim and Sierra,

 

Upon reflection I don't believe that being a pro automatically disqualifies anybody from being an advocate because advocacy also involves changing within the industry. I have been an advocate within my union changing that institution. There is advocacy within institutions and within society. Dan and Scotty are trying to change the professional institutions. We are trying to change teachers and our unions.

 

On the issue of befriending Scotty. I think I can befriend who ever I want and if he is a pro than so be it. I am smart enough to know who is a good pro and nobody is going to change that.

Scotty has been on record for a long time and you are absolutely right Jim, Scotty and Dan can do no wrong. They might make mistakes, but in the long run, they will change this corrupt system.

 

While I disagree with you categorizing Scotty and Dan as "them", I agree with the principal of transparency, but I will NEVER stoop to the level of pushing Scott and Dan into the "Them" category because of it. That is as cowardly as my cowardness not to post any response to the issue. I don't understand your position as a go it alone at any price. We need to work together on this and while there will be disagreements and name calling among us, I have tried to stay away from bulling anybody into thinking as I think.

 

Have a great day,

Steve

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Guest Sierra

Jim and Sierra,

 

Upon reflection I don't believe that being a pro automatically disqualifies anybody from being an advocate because advocacy also involves changing within the industry. I have been an advocate within my union changing that institution. There is advocacy within institutions and within society. Dan and Scotty are trying to change the professional institutions. We are trying to change teachers and our unions.

 

On the issue of befriending Scotty. I think I can befriend who ever I want and if he is a pro than so be it. I am smart enough to know who is a good pro and nobody is going to change that.

Scotty has been on record for a long time and you are absolutely right Jim, Scotty and Dan can do no wrong. They might make mistakes, but in the long run, they will change this corrupt system.

 

While I disagree with you categorizing Scotty and Dan as "them", I agree with the principal of transparency, but I will NEVER stoop to the level of pushing Scott and Dan into the "Them" category because of it. That is as cowardly as my cowardness not to post any response to the issue. I don't understand your position as a go it alone at any price. We need to work together on this and while there will be disagreements and name calling among us, I have tried to stay away from bulling anybody into thinking as I think.

 

Have a great day,

Steve

 

 

Steve,

 

Of Note: You address me as "Sierra" to show your displeasure with me. It's ok, have it your way.

 

Peace and Hope,

Joel

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Joel,

I am quite surprised that you need me to approve of you!

I am just an old man going out to pasture soon. Add on another mistake.

Have a great weekend,

Steve

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FT6, or anyone else

 

Please pardon me if I am not understanding this. I am challenged in the technical areas of this discussion.

 

 

Under what circumstance could a school system keep Vanguard intact?. I know my school system is interviewing TPA's . I also know they want to eliminate vendors to a few but they would like to keep Vanguard.

 

Could Vanguard only , in the plan document be kept seperate from the TPA's jurisdiction?

 

Sorry if this sounds stupid. I worked too hard to get Vanguard to see it taken away now. I need ideas on how to go about keeping it. WE are a small school system of about 600 employees.

 

Tony

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Guest Sierra

Joel,

I am quite surprised that you need me to approve of you!

I am just an old man going out to pasture soon. Add on another mistake.

Have a great weekend,

Steve

 

 

Steve;

 

Calling me by my real name, Joel, when you know that IS my name is hardly showing me that I meet your standards of approval.

 

You too,

Have a great w/e

 

Joel

 

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FT6, or anyone else

 

Please pardon me if I am not understanding this. I am challenged in the technical areas of this discussion.

 

 

Under what circumstance could a school system keep Vanguard intact?. I know my school system is interviewing TPA's . I also know they want to eliminate vendors to a few but they would like to keep Vanguard.

 

Could Vanguard only , in the plan document be kept seperate from the TPA's jurisdiction?

 

Sorry if this sounds stupid. I worked too hard to get Vanguard to see it taken away now. I need ideas on how to go about keeping it. WE are a small school system of about 600 employees.

 

Tony

 

 

There are at least 5 ways:

 

1. make VG the sole provider for the plan which will eliminate the need for an ISA or TPA.

 

2. VG could be one of several vendors under a plan administered by a TPA. But this would only happen if the TPA accepts the industry ISA that VG will only sign which is highly unlikely.

 

3. Find a state run plan in which VG is a provider and become a participating employer.

 

4. Make VG an option under a plan adminstered by a TPA where VG is an investment offered through a wholesaler or other intermediary in which a wrap or similar fee of about 1% would be charged to the employee.

 

5. Have two 403b plans, one adminstered by the TPA for all options except VG and a separate plan for VG. This assumes that the TPA and VG will agree to this arrangement. Problem is that the the SD would be responsible for making sure that both plans comply with all IRS requirements including maximum contributions, loan limits, hardships, universal availability, etc to prevent disqualfication of the plan if it is audited by the IRS since TPA would not be responsible for administering VG plan or aggregating the maximum $ amounts permitted under the regs. SD would have to hire personnel/consultants who are proficient in plan administration and tax laws as well as have IT capability. It would call into question why SD would retain a TPA who is supposed to take care of 403b plan administraton.

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Guest Sierra

Why would vendors want to pay for the YourPlan.info portal?

 

All of your vendors will have their own page on the portal, allowing them to provide specific product information, forms and contact information. This serves as a terrific sales tool, and lends a degree of legitimacy that vendors have not always enjoyed due to the past sales practices of many financial firms (selling in staff lounges, classrooms and cafeterias). If you would like more details about pricing, please send us your contact information through our online form and we will be in touch.

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

Dan:

 

I interpret this statement as your clear endorsement of the commissioned based variable annuity and mutual fund. The no-load reps surely do not hang out in the Teachers' cafeteria and will not register with YourPlan.info.

 

You're simply saying to prospective clients (employers): There is no-need for the sharks to be so overly aggressive by allowing them to hang out in the schools to cold canvas your employees. Just tell them they need to follow a first step BEFORE they are allowed to hang out in the schools and that first step is to register with YourPlan.info. This offering of yours is simply another layer of costs that the shark vendor will pass on to the teacher. And even if the cost is absorbed by the vendor this is surely not the way for an employer to encourage deminimis cost investing. Should this not be the primary goal of the employer?

 

Dan: Do you know of any employee who is demanding that his employer add a bunch of loaded funds to the approved menu of no-loads?

 

Steve: What is your view?

 

Peace and Hope,

Joel L. Frank

Pension Columnist

The Chief-Civil Service Leader

277 Broadway

New York, NY 10007

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FT6, or anyone else

 

Please pardon me if I am not understanding this. I am challenged in the technical areas of this discussion.

 

 

Under what circumstance could a school system keep Vanguard intact?. I know my school system is interviewing TPA's . I also know they want to eliminate vendors to a few but they would like to keep Vanguard.

 

Could Vanguard only , in the plan document be kept seperate from the TPA's jurisdiction?

 

Sorry if this sounds stupid. I worked too hard to get Vanguard to see it taken away now. I need ideas on how to go about keeping it. WE are a small school system of about 600 employees.

 

Tony

 

 

There are at least 5 ways:

 

1. make VG the sole provider for the plan which will eliminate the need for an ISA or TPA.

 

2. VG could be one of several vendors under a plan administered by a TPA. But this would only happen if the TPA accepts the industry ISA that VG will only sign which is highly unlikely.

 

3. Find a state run plan in which VG is a provider and become a participating employer.

 

4. Make VG an option under a plan adminstered by a TPA where VG is an investment offered through a wholesaler or other intermediary in which a wrap or similar fee of about 1% would be charged to the employee.

 

5. Have two 403b plans, one adminstered by the TPA for all options except VG and a separate plan for VG. This assumes that the TPA and VG will agree to this arrangement. Problem is that the the SD would be responsible for making sure that both plans comply with all IRS requirements including maximum contributions, loan limits, hardships, universal availability, etc to prevent disqualfication of the plan if it is audited by the IRS since TPA would not be responsible for administering VG plan or aggregating the maximum $ amounts permitted under the regs. SD would have to hire personnel/consultants who are proficient in plan administration and tax laws as well as have IT capability. It would call into question why SD would retain a TPA who is supposed to take care of 403b plan administraton.

 

 

Thanks Intruder. I can understand what you are saying.

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I'm going to break ranks here and disagree with pretty much everyone but Intruder, keep an open mind here.

 

These new regulations are very, very onerous and the employer is now taking on a liability they've arguably never had. They need to take this very seriously. The question the employer must ask themselves is are they willing to allow the industry to write agreements for them and trust the industry to do the right thing for the employer? Would any self-respecting employer allow the vendor to dictate plan terms? The employer cannot afford to "trust" that the industry is looking out for them; they should have their own ISA and if a vendor is not willing to sign it.....they shouldn't be allowed to be a vendor. The ISA should be reasonable, but they should be writing the ISA to ensure that it works within THEIR plan, not allowing a vendor to write something that benefits the vendor.

 

The only reason Vanguard is available in AP's district is because AP's district didn't hire a competent TPA, instead they hired (I use that term loosely since the TPA doesn't get paid for doing compliance) a product sales organization. This organization is more than happy to open the district up to potential liability by allowing the vendors to run the show because they know that they'll still be around to sell products (the TPA). They aren't concerned about compliance, they are concerned about their own ability to sell products. AP benefits from this (and I am happy for him on that front), but for every 1 AP in the district there are 20 or 30 who end up with an Equity Indexed Annuity type product.

 

It pains me to rip Vanguard....it also pains me to hear through the grapevine that Fidelity may be following the same track. If they want to commit themselves to the 403(b) market, they need to play by the rules - it appears they don't want to. I love Vanguard, but they are the one's making the decision. I understand their position that they don't want to sign 13,000 different ISA's (which they won't as most districts will have TPA's - bring that number down easily to less than 1000) - but why were they willing to review and sign Hold Harmless Agreements previously? The problem isn't the agreement, its the sharing of information. Vanguard could easily create a product that works in the 403(b) market and be part of it - they have chosen not to and I think the employer has to look at Vanguard and say "No, our plan dictates the vendors, not the other way around."

 

I'm not a fan of these new regulations, but I think the employer is in a bind and needs to take them seriously. Vanguard has chosen to NOT take it seriously and I don't think that we should defend them when they make bad decisions, or decisions we don't agree with.

 

If VALIC was being rejected.......bet the tone would be different.

 

I mean no disrespect to all of my friends on this board - but in this instance - Vanguard is in the wrong.

 

ScottyD

 

 

Is anyone (other than Joel whose views are well known) interested in responding to the issues raised in Scotty's post?

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Intruder,

The truth hurts. I am going to pull all of my money out of VG and stick it under my mattress. Even though it pains me that VG does not want to deal with SDs, VG is a great investment company and will remain a great company for a long time. Dealing with SD policy is a different issue, thats what Scotty is talking about. Don't even try to equate the two as you are implying in your question. Why would a great company such as VG want to deal with SD personnel who are the most rigid, ignorant and arrogant people ever to walk this earth? Why? VG has too much class to deal with petty issues. If you think VG should be torn from limb to limb, think about the people we educators have to deal with everyday. You have no idea.

Have a great weekend,

Steve

 

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