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bruceinwayne

Why Get A Tpa

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Tony,

 

I busted my ###### to get Vanguard in and I have no intention of letting the district blindly bring in a TPA now. I started this thread to get some insights into what others think, and increase my own knowledge base, so that when I fight this fight I win.

 

The responses were excellent, especially JSimmons with "4) As part of the NAGDCA Web-seminar of 1/22/2008, Elaine Immerman, Associate General Counsel for TIAA-CREF, suggested as an option "Eliminate plan features that make compliance difficult, E.g., plan loans, hardships, catch-up contributions" (Slide 58 of that presentation)"

 

I will research that Web Seminar and incorporate make it part of my own. I too think that by trimming the fat, i.e. loans, hardship withdraws etc. we can keep a low cost plan that makes a lot of sense for the VAST MAJORITY of 403(b) contributors.

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Tony,

 

I busted my ###### to get Vanguard in and I have no intention of letting the district blindly bring in a TPA now. I started this thread to get some insights into what others think, and increase my own knowledge base, so that when I fight this fight I win.

 

The responses were excellent, especially JSimmons with "4) As part of the NAGDCA Web-seminar of 1/22/2008, Elaine Immerman, Associate General Counsel for TIAA-CREF, suggested as an option "Eliminate plan features that make compliance difficult, E.g., plan loans, hardships, catch-up contributions" (Slide 58 of that presentation)"

 

I will research that Web Seminar and incorporate make it part of my own. I too think that by trimming the fat, i.e. loans, hardship withdraws etc. we can keep a low cost plan that makes a lot of sense for the VAST MAJORITY of 403(b) contributors.

 

 

 

Simplifying plans by eliminating certain features that are popular with participants will not eliminate the need for TPAs. TPAs are needed under the regs to record and transfer funds between different vendors, issue statements, certify valuations, make sure that applicable limits are complied with, comply with universal availability, IRS notices, etc that are required under the new regs. Few SDs have the resources to comply with these rules or add personel to their budgets for a task which is not part of the core function of the SD. The need to pay for plan administration is one of the down sides of the final regulations because plan sponsors can no longer ingore compliance with the rules for 403b plans as had been permitted in the past.

 

Another reason SD will want TPAs is for protection that will be provided by having the TPA handle plan administratrion and the indemnification that the TPA will give to the SD if the plan fails to comply with the regs. Self administation means self insurance by the SD in the event that the plan fails to comply with the regs which is a risk most SD will not be willing to take given the penalites and sanctions that can be imposed.

 

Having a separate plan outside of the plan not subject to the TPAs control is not a solution because the SD will be required to make sure that the combined contributions and other requirements that apply to both plans under 403b regs are complied with and will negate the purpose of using the TPA which is to eliminate the need for the SD to bear the risk and the costs of administering the plan.

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Wayne,

 

Keep us informed. I think your goal is a valiant one. It makes sense to me. I also fought for Vanguard, We now have it and I feel the same way as you do about losing it to some TPA.

 

Intruder, what you say may be true but our desire for change can only come about from people like wayne who is willing to go against the grain.

 

 

 

I think TPA's may be all the rage right now becuase everyone is frantic about the new regs going into effect but lets see what a good idea they will be in a few years after things have settled in.

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Wayne,

 

Keep us informed. I think your goal is a valiant one. It makes sense to me. I also fought for Vanguard, We now have it and I feel the same way as you do about losing it to some TPA.

 

Intruder, what you say may be true but our desire for change can only come about from people like wayne who is willing to go against the grain.

 

 

 

I think TPA's may be all the rage right now becuase everyone is frantic about the new regs going into effect but lets see what a good idea they will be in a few years after things have settled in.

 

 

 

Change costs money which will have to be paid by someone. VG's system is not compatable with a multi vendor platform.

 

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Intruder,

 

I understand your point about SD's using a TPA to protect themselves from being in violation of the new regs, and I understand why the participants should bear the cost, but 1% of net asset value is absurd, and I'm sure most TPA's are much higher.

 

Instead of being gouged by the insurance provider, I will be gouged by the TPA, and in many cases the participant is likey to be gouged by both. There has to be a better way to be in compliance with the new regs, yet I still keep most of the growth of my investments.

 

Are there any TPA's out there that just do the record keeping at a reasonable cost and do not force me to pay 1% for investment guidance that I don't want or need?

 

Is it possible that a district could charge all it's participants a flat fee, or a small percentage of contributions, and use that to pay someone to oversee the 403(b) in a district? For a district with 1000 people contributing, if everyone paid $50 per year, that's $50,000 to hire someone to manage the 403(b). I would gladly pay $50 per year, or some fair percent of contributions to offset the cost to the district. Is there anything that says that can't be done?

 

 

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