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pbm

457 Regs (vendors)

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Our SD has written its new policy to conform with the new 403(b) regs, and as seems to be the case elsewhere, low cost vendors like Vanguard and Fidelity are not accepting the SD's policy and will no longer be vendor options to our teachers.

 

We currently do not have a 457 at our SD. Does a 457 fall under the same regulations as the new 403(b) rules? I am asking because I am thinking that it's possible for the SD to offer some of the vendors we are losing for 403(b) with a 457. Does that make sense? Is this possible? Or does 457 have the same requirements as the new 403(b) regs?

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Our SD has written its new policy to conform with the new 403(b) regs, and as seems to be the case elsewhere, low cost vendors like Vanguard and Fidelity are not accepting the SD's policy and will no longer be vendor options to our teachers.

 

We currently do not have a 457 at our SD. Does a 457 fall under the same regulations as the new 403(b) rules? I am asking because I am thinking that it's possible for the SD to offer some of the vendors we are losing for 403(b) with a 457. Does that make sense? Is this possible? Or does 457 have the same requirements as the new 403(b) regs?

 

 

Hi pbm,

Yes the 457b does function differently from the 403b. The 457 can offer some of the low fee funds that are restricted by the new 403b regs. At LAUSD, we have 3 Vanguard funds in our 457b in addition to other higher fee mutual fund companies in the mix. Vanguard has never signed on with LAUSD's 403b to my knowledge.

 

One of the caveats of having the Vanguard funds as a choice on the 457 is a very savvy and active committee that asked and asked again that Vanguard be on the list. As you are aware, if financial consultants are not properly monitored by employees on the oversight committee, we would not have any low fee companies. There default is active management by using funds that have revenue sharing agreements. Perhaps this is more than you asked for, but the bottom line that if you are successful in getting your SD to impliment a 457b, somebody has to demand that they put Vanguard, TRP, TIAA CREF or some other low fee company on the list. Beware of additonal fees charged by the TPA by offering low fee vendors in the 457b.

 

Ask you SD to start a 457b and be prepared to serve as a committee member to monitor what you want. BTW, what you want is in the best interests of all the SD employees.

 

Good luck,

Steve

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Thanks, Steve.

 

My other question is about transferring from a 403(b) into a 457. We currently have Vanguard with a 403(b), to which I've been investing for several years. Vanguard will no longer be an approved vendor for 403(b) after December 31. If our SD creates a 457 that includes Vanguard as a vendor, are teachers able to transfer their 403(b) monies into the 457? Are there penalties for doing so?

 

Patrick

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pbm,

 

many 457(b) governmental plans are dominated by insurance companies that add a layer of fees by offering vanguard, tiaa cref, etc in addition to there own funds and/or annunities. I have four providers (Hartford, AIG/Valic, Nationwide & FTJ fundchoice) that all add a layer of fees similar to what you are seeing in the new 403(b) accounts.

 

Based on what I have seen, the 403(b) plans are NOW catching up to the high fees of most 457(b) governmental plans.

 

sschullo advise is good. If you SD goes down the that road of offering a 457(b) governmental plan, be an advocate! Otherwise insurance companies will dominate these plans at your SD as well.

 

Another option, see if your SD has access to a state 457(b) plan. If you are in CA, CalPERS has a reasonable 457(b) plan. And there are some very low cost providers out there. 401kASP.com is one and they offer 457(b) plans.

 

gerrylef

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