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Lausd's 403b Vendor List

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So the only venders that can be recommended for investing in the 403b are tiaacref and usaa insurance company, and fidelity if the hold harmless agreement is signed.

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Steve, thanks for the info.

 

I got my start with LAUSD 403b investing by reading your online information about 7 years ago, so I am indebted to you for that. You are doing good work.

 

To answer your 457B question (somewhat): The LAUSD's 457B plan through AIG Retirement offers a Schwab brokerage window, making the plan very viable, in my opinion. AIG tacks on only 15 basis points in general to most funds in the core AIG offering of about a dozen mutual funds from the likes of Vanguard, Dreyfus, Janus.

 

If instaed you pass money (either directly from your monthly contribution, or by exchange from an AIG core fund) into the Schwab PCRA window, AIG tacks on small, one time fee (I forgot what it was, but when I inquired with AIG, and performed the calculation on the figure they quoted, I decided is was very reasonable fee.) Once you are inside the Scwab PRCA, it makes sense to invest only in quality low Fee, No-Load, No Transaction Fee funds). I MAY be wrong here, but my recollection is that while the money is accumulating inside Schwab PCRA itself, AIG does not get their 15 basis points - they only get that one time fee as the contribution passed from them into the Schwab window.

 

Regarding the current LAUSD 403b situation: You are correct in that the vast majority of LAUSD 403b vendors are very unattractive due to the poor performane of investment choices, Loads and high fees (for example, Oppenheimer's 5.75% Load and 2.00% redemption fees.

 

But... I am not a Boglehead index fund, buy-and-hold-at-all-costs-guru. I feel some small fees - such as the 15 basis points AIG tacks on to their managed and index mutual funds in our 457B plan is acceptable. BTW, this is purely my personal opinion, there are two or three Vanguard index funds in this AIG 457b plan, which don't interest me nearly as much as the Janus Mid Cap Value - which to my sensibilities - is a world beater.

 

Back to LAUSD 403b problem: I didn't know that USAA is the only one on the current LAUSD approved vendor list (as of November 2008) offering mutual funds. I'm not too sure of that. What about the CalSTSRS plan?

 

I read on the internet (from someone working for CalSTRS as a consultant, that the 403b compliance arm of CalSTRS is in talks with Fidelity Investments (as of November 2008) to have them sign the agreement in those jurisdictions (school districts) where CAlSTSRS has contracted themselves out as 403b compliance consultants. So if CalSTRS 403b Comply can bend Fidelity's arm to sign onto the new 403b regulations in some California school districts, then LAUSD employees may be in luck a year or two down the line to get Fidelity back to LAUSD (and of course, Steve, we would probably need someone's help :). Fidelity just laid off 2,000 employees. They will NEED our money, just as much as we need them.

 

To Steve and other LAUSD employees: Are you aware of the CalSTRS 403b plan called "Pension2"? CalSTRs is on the LAUSD approved vendor list.

 

At least for the Orange County teachers, CalSTRS Pension2 offers a few decent low fee managed mutual funds such as from Vanguard and Dodge and Cox, (but adds on 33 basis points to the underlying fees - this 0.33% is pushing the edge of acceptability to me - but it is better than the other options on the current LAUSD 403b list, by far).

 

I also read that, at least for Orange county teachers, there is a brokerage window available inside this CalSTRS "Pension2" 403b - if you have at least $5,000 accumulated in their money market fund, then you have access to all funds in TIAA-CREF's brokerage service.

 

However, I don't know if this is the same CalSTRS 403b plan that's available to LAUSD employees, if any.

 

I will call CalSTSRS this week and ask about their LAUSD 403b plan. I will report back my results to this web site ASAP.

 

 

There are Fidelity funds in the CalSTRS 403b. In fact I was very diversified in it from, Dodge and Cox to Matthews Asia. I left and went to Fidelity because they charged a heafty .95 basis points at the time! It's lower now. However while I was still there I was able to open a D&Cox Roth when they were closed. But they opened up again this year because of the withdrawls. Also I think the district just approves the vendor not what funds they sell.

 

So the only venders that can be recommended for investing in the 403b are tiaacref and usaa insurance company, and fidelity if the hold harmless agreement is signed.

 

 

Thats what it looks like and CalSTRS too if the fees are low enough.

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LAUSDfred,

Diehards? What can they do about LAUSD? But I guess it certainly doesn't hurt to ask.

Ira, Joe and myself are the only diehards that I know of who contribute to this site.

 

You can call Fidelity yourself and talk with the retirement department that handles 403b compliance.

Steve

 

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LAUSDfred,

Diehards? What can they do about LAUSD? But I guess it certainly doesn't hurt to ask.

Ira, Joe and myself are the only diehards that I know of who contribute to this site.

 

You can call Fidelity yourself and talk with the retirement department that handles 403b compliance.

Steve

 

 

I'm a diehard too and we can ask them their opinion of our choices.

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Here are what in my personal opinion are the "Viable" LAUSD options as of November 17, 2008:

 

AIG Retirement: The 403b investment offerings and fees from AIG are identical to the LAUSD's 457b AIG plan, according to Anna Rozezadeh from AIG Retirement (I spoke to her on phone today).

 

In general, there are about 15 core mutual funds from the like of Vanguard, Janus, Dreyfus, etc. There is also the excellent option to use the Charles Schwab Brokerage window. AIG tacks on 15 basis points for the core funds. The is no AIG tack-on fee to use funds in the Brokerage window, but AIG does assess a small one-time fee to pass money through it to Charles Schwab. Charles Scwab has some nice no-load, no transaction, low cost funds available.

 

CalSTRS Pension2: Very Similar to AIG plan above, except the CalSTRS/TIAA-CREF fee is 33 basis points, not 15. Also, the brokerage window is into TIAA-CREF Brokerage. I do not have complete info on the TIAA-CREF brokerage fees, but I imagine they are similar to AIG plan.

 

TIAA-CREF Offers low cost mutual funds, and variable and guaranteed annuities.

 

USAA Mutual fund company with halfway decent performing funds, low to mid cost actively managed funds, and a few index funds.

 

Oppenheimer is a mutual fund company also with halfway decent performing funds, but I am NOT impressed with their fund's high loads and redemption fees.

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Hi Fred,

I have been posting and lurking on the VG diehards site for ten years, since they started and I think you know what they would say about our list of 403b Vendors. Here is what I think they would say, thumbs up or down on each vendor:

 

AIG Retirement/VALIC thumb down

Life Insurance Company of the Southwest thumb down

Americo thumb down

MetLife thumb down

AXA Equitable thumb down

Midland National thumb down

CalSTRS When they know about it, it would be a thumb up

Oppenheimer thumb down

Great American thumb down

PFS Investments, Inc. thumb down

Horace Mann thumb down

Plan Member Services thumb down

Industrial Alliance Pacific thumb down

Security Benefit thumb down

ING thumb down

USAA Insurance Company thumb up

TIAA CREF has just been added November 14 Thumb way up!

 

Steve

 

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Hi all,

Just adding on more details based on LATeachers post. Below is the breakdown of each fund in the 457b selection. The 3 VG funds and the Dreyfus Cash Management fund have the lowest costs.

Steve

 

 

Exp. Ratio, Rev Sharing, TPA Cost, Total Cost

American Growth Fund R4 0.68% 0.35% 0.15% 0.83%

Vanguard Growth & Income 0.40% 0.00% 0.15% 0.55%

Vanguard Extended Market 0.25% 0% 0.15% 0.40%

Vanguard Dev Market Index 0.29% 0% 0.15% 0.44%

American Europacific R4 0.83% 0.35% 0.15% 0.98%

PIMCO Total Return Admin 0.68% 0.25% 0.15% 0.83%

Dreyfus Bond Market Index Inv 0.40% 0.35% 0.15% 0.65%?

Dreyfus Cash Management 0.30% 0.10% 0.15% 0.40%

Dreyfus S & P 500 Index 0.50% 0.40% 0.15% 0.65%

VALIC - Fixed Interest 0.15% Total Cost?

TRP Income (ADV) 0.89% 0.35% 0.15% 1.04%

TRP 2010 (ADV) 0.93% 0.35% 0.15% 1.08%

TRP 2020 (ADV) 1.01% 0.35% 0.15% 1.16%

TRP 2030 (ADV) 1.05% 0.35% 0.15% 1.20%

TRP 2040 (ADV) 1.05% 0.35% 0.15% 1.20%

Davis NY Venture A 0.89% 0.25% 0.15% 1.04%

Turner Mid Cap Growth 1.20% 0.40% 0.15% 1.35%

Janus Mid Cap Value (inv) 0.92% 0.25% 0.15% 1.07%

 

 

 

LA Teacher,

What AIG spoke person said was not correct. AIG is the common remitter for the 403b. They are not charging any fees for any of the 403b companies. Also, the differences between the 403b and the 457 list of vendors is huge. Refer to my previous two posts with the lists of vendors of the 457 and the 403b.

 

But as you know, that does not mean teachers are getting a good deal. At the moment because the list changes daily, there are still too many costly and inappropriate insurance companies and not enough no load low cost mutual fund companies on the 403b list.

Steve

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Steve,

 

Thanks for posting those expense ratios. One of the advantages of CalSTRS is that it uses institutional funds of Vanguard. So even with the .33 that CalSTRS charges beyond the fund expenses, the total expenses in some of those Vanguard institutional funds are as low as .40.

 

I like how you also showed the charges for revenue sharing.

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Thanks AP,

The committee and I wrangled with AIG and the former committee financial adviser about the revenue sharing fees. We tried to get them replaced with companies that had to revenue sharing agreements. Unfortunately, LAUSD brass in their "go it alone" attitude put the revenue sharing fees in the RFP with AIG, and/or probably AIG wanted those fees so they can say to the Board of education, that we "charge only 15 bsps." We went round and round for weeks. I was so frustrated that I almost quit the committee. But in the end, we forced them to reveal these fees to all participants. Kathy Kristof of the LA Times, was at that meeting and wrote a report about exposing revenue sharing costs to participants in the times the next day.

Steve

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There is also the excellent option to use the Charles Schwab Brokerage window. AIG tacks on 15 basis points for the core funds. The is no AIG tack-on fee to use funds in the Brokerage window, but AIG does assess a small one-time fee to pass money through it to Charles Schwab. Charles Scwab has some nice no-load, no transaction, low cost funds available.

 

Hi LA Teacher,

Thanks for posting this information. I agree with everything except the Charles Schwab brokerage window. It costs more than just the 15 bps. In the LAUSD AIG contract it reads: The service provider will deduct on a basis not more frequently than quarterly an annual charge in the amount of $50.00 from the MM Fund in each participants PCRA account under the Plan." Mind you, for 3 funds $150 per year does not seem like a lot of money, but you have to add on the original fund expenses and fees.

 

"Click here scroll down to the bottom of the screen and read the fine print. Also, Vanguard is not available in the program with LAUSD, however you can invest in VG but Charles Schwab tacks on additional fees. Unless I am missing something, this feature is not worth it IMO.

 

Thank you for bringing up PCRA. I have looked into it about a year ago, but did not follow up until you brought it up. I was leery at the time but since the reports we get at the oversight committee meetings is that no LAUSD employee has yet to use it, I felt no need to look further into it. I will inquire about this at our next open public meeting on December 4th.

 

Thanks again,

Steve

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Hi Fred,

I have been posting and lurking on the VG diehards site for ten years, since they started and I think you know what they would say about our list of 403b Vendors. Here is what I think they would say, thumbs up or down on each vendor:

 

AIG Retirement/VALIC thumb down

Life Insurance Company of the Southwest thumb down

Americo thumb down

MetLife thumb down

AXA Equitable thumb down

Midland National thumb down

CalSTRS When they know about it, it would be a thumb up

Oppenheimer thumb down

Great American thumb down

PFS Investments, Inc. thumb down

Horace Mann thumb down

Plan Member Services thumb down

Industrial Alliance Pacific thumb down

Security Benefit thumb down

ING thumb down

USAA Insurance Company thumb up

TIAA CREF has just been added November 14 Thumb way up!

 

Steve,

I agree. I see my choice as between CalSTRS and TIAA CREF and it looks like you would recommend T.C.

Also I have to consider that I'm 3 or 4 yrs from retirement and ready to reallocate anyway. I'm 90% in MM only because I listened to the canaries in the coal mines late last year so I don't have to worry much about waiting for anything to catch up. I currently contribute the max 90/10 MM and bonds.

 

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I am a LAUSD teacher witjh 403b at Fidelity, which is not on approved list (yet).

 

I called Fidelity this morning, and they said Fidelity is still in negotiations with the district, and to check omni403b.com for current status - although I did check this site and LAUSD is not listed on 0mni403b.com, many other school districts are, and fidelity has neither approved or denied signing on with them yet. So there is hope.

 

I believe the reason there are so few offerings has to do with the vendor willing to

1. Sign an ISA which looks very much like a hold harmless agreement, and

2. Pay a monthly fee to the TPA to administer the plan.

 

I would ask those questions....the low cost providers can/will not pay $2 per month per vendor as I have heard quoted.

 

the vendors offered will pay it or have tried to negotiate that fee downward. It is a new world with increased responsibility by the school district and they want help keeping track of this.

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Please excuse my ignorance, Is there a .95 percent wrap around for STRS?

 

 

 

That was the case when they first opened but I read here somewhere it was now .33

That should be the case anyway. Or it should be at cost! We don't need CalSTRS ripping off their own teachers!

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Steve, at the next public meeting you go to on Dec 4, it will report that one teacher is using the Scwab PCRA (me). I discovered the LAUSD 457B only itself 12 months ago, and the PCRA about 7 months ago. The PRCA is hidden pretty well in the LAUSD/AIG info.

 

Regarding the PCRA fees - we obviously come from a different investment strategies:

 

I contribute $15,500 a year to my 457B at AIG. About half of that, or $7,500 goes into the two funds inside the PCRA window. In about 14 year's time - when I plan to retire, that PCRA portion of my 457B will be about $250,000 assuming an 8.2% return.

 

Here's my calculation: Fee for two funds in the PCRA 2x$50 = $100. $100/$7,500 is 1.33% or 133 basis points - admitedly not attractive. However, 14 years from now $100/250,000 is 0.04% or 4 basis points - much more reasonable.

 

My feeling paying the fees getting into the PCRA is like a slave might feel trying to escape slavery - the pain is up front bushwacking through the thorns and wilderness - but over time, the freedom (from AIG's fees, the bonus of being able to have access to many more NTF, no load, low fee funds) is well worth the original pain.

 

Reagrding the small print you referenced, it mentions an addition $50 fees for funds exchanged on a short term basis. I am a long term investor, so those fees are not that important, but thanks for pointing them out.

 

Finally, one clue I got of how beneficial the PCRA window is to we investors is when I talked to AIG retirement months ago to learn more about it. They didn't seem too keen that I had discovered it, and were trying to encourage me to look at the core funds instead to see "if there was anything there I liked" (and there is - The Janus Mid Cap Value, run by Tom Perkins). AIG knows it will make more money over time from you if you invest in their core funds at an ongoing 15 basis points.

 

Again, I do not think AIG gets 15 basis points on your money once it's in the PCRA.

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