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Omni And Fidelity - Isa Issue

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I recently spoke with a NYSUT rep. According to her communications with Omni (which primarily does business in NY as a TPA), Fidelity and Omni have very little keeping them from working together. She used the phrase "cautiously optimistic". Vanguard, on the other hand, only began answering calls from Omni very, very recently. Their first meeting was Tuesday, Nov 25, 2008! So, it looks like, if it happens, Vanguard will be late to adapt to these new regulations.

 

Thankfully Fidelity is working to get this done.

 

I sent a letter to Chairman of the Board Johnson and I received a letter from his assistant. My feedback was passed along to the "proper executives".

 

Vanguard replied to my letter with a nice letter, but it was written by a Vanguard "registered representative" and it stated in no uncertain terms that Vanguard would "not be able to review, interpret, accept, or sign any" ISA. They have theirs and that is what districts or TPAs need to sign if they are interested in doing business with Vanguard.

 

If your district uses Omni, and you are hoping for a "no-load", no "12b-1" fee fund company, search the vendors who have signed with Omni at other schools. You can find lists at www.omni403b.com.

 

If you find good ones, post here so we can share and try to improve our lot.

 

I know of two whose prospectuses show they are no-load funds with no 12b-1 fees as well.

They are American Century and Lincoln Investors.

 

Good luck.

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Fidelity has signed the ISA with Omni.

This is great news for all 600 or so (mostly)

New York State schools who use Omni.

Make sure your district adds Fidelity as a choice

if they haven't yet!

 

Vanguard's participation remains to be seen...

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I recently spoke with a NYSUT rep. According to her communications with Omni (which primarily does business in NY as a TPA), Fidelity and Omni have very little keeping them from working together. She used the phrase "cautiously optimistic". Vanguard, on the other hand, only began answering calls from Omni very, very recently. Their first meeting was Tuesday, Nov 25, 2008! So, it looks like, if it happens, Vanguard will be late to adapt to these new regulations.

 

Thankfully Fidelity is working to get this done.

 

I sent a letter to Chairman of the Board Johnson and I received a letter from his assistant. My feedback was passed along to the "proper executives".

 

Vanguard replied to my letter with a nice letter, but it was written by a Vanguard "registered representative" and it stated in no uncertain terms that Vanguard would "not be able to review, interpret, accept, or sign any" ISA. They have theirs and that is what districts or TPAs need to sign if they are interested in doing business with Vanguard.

 

If your district uses Omni, and you are hoping for a "no-load", no "12b-1" fee fund company, search the vendors who have signed with Omni at other schools. You can find lists at www.omni403b.com.

 

If you find good ones, post here so we can share and try to improve our lot.

 

I know of two whose prospectuses show they are no-load funds with no 12b-1 fees as well.

They are American Century and Lincoln Investors.

 

Good luck.

 

 

Gentlemen,

I am facing a similar issue with the ISA. A couple of years ago, I got the DeKalb ISD to accept Vanguard as a 403b7 opportunity. A couple of days ago, I received a letter from a new Plan Administrator who said Vanguard would no longer be an option. The problem is both have their own ISA and neither want to sign a common agreement. I have contacted both of the companies to research the issue. As you said below, Vanguard is not willing to sign anyone's ISA.

 

I have a possible solution to all of these issues. Unless I am mistaken, Vanguard administers plans for hospitals, universities, etc... If we could get the school districts to use Vanguard, Fidelity, Schwab or any low fee investment company as their administrator, the ISA issue would go away.

 

Please share any thoughts! Teachers deserve the best option!

 

William

 

 

I recently spoke with a NYSUT rep. According to her communications with Omni (which primarily does business in NY as a TPA), Fidelity and Omni have very little keeping them from working together. She used the phrase "cautiously optimistic". Vanguard, on the other hand, only began answering calls from Omni very, very recently. Their first meeting was Tuesday, Nov 25, 2008! So, it looks like, if it happens, Vanguard will be late to adapt to these new regulations.

 

Thankfully Fidelity is working to get this done.

 

I sent a letter to Chairman of the Board Johnson and I received a letter from his assistant. My feedback was passed along to the "proper executives".

 

Vanguard replied to my letter with a nice letter, but it was written by a Vanguard "registered representative" and it stated in no uncertain terms that Vanguard would "not be able to review, interpret, accept, or sign any" ISA. They have theirs and that is what districts or TPAs need to sign if they are interested in doing business with Vanguard.

 

If your district uses Omni, and you are hoping for a "no-load", no "12b-1" fee fund company, search the vendors who have signed with Omni at other schools. You can find lists at www.omni403b.com.

 

If you find good ones, post here so we can share and try to improve our lot.

 

I know of two whose prospectuses show they are no-load funds with no 12b-1 fees as well.

They are American Century and Lincoln Investors.

 

Good luck.

 

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For those that have heard the IRS speak, as recently as yesterday, and understand the regulations requirements know that an ISA is not a requirement.

 

One of the biggest myths and points of confusion out there is that an ISA needs to be signed by a plan approved vendor. That is absolutely not the case.

 

Yet some in the industry acting as "leaders" are acting in a manner that leads to more confusion then help.

 

If the agreement they are looking to get signed is a service provider agreement or hold harmless agreement then they should be calling it that. Instead to the chagrin of those in the industry trying to help and the IRS we see wording like the following on websites of leaders...

 

"Without an ISA in place, Service Providers (investment companies) will no longer be available for contributions after December 31, 2008."

 

That is completely false and unfortunate.

 

I am glad for those that can continue to use Fidelity; hopefully there are not other obvious misunderstandings behind the regs that lead to bigger issues from such "industry leaders."

 

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Great to here about Fidelity. I spoke to Vanguard about the ISA issue and they did not budge. Myth or not, third party administrators and the ISA agreement are causing a lot of problems. Vanguard is no longer an investment opportunity per the administrator.

 

William

 

 

For those that have heard the IRS speak, as recently as yesterday, and understand the regulations requirements know that an ISA is not a requirement.

 

One of the biggest myths and points of confusion out there is that an ISA needs to be signed by a plan approved vendor. That is absolutely not the case.

 

Yet some in the industry acting as "leaders" are acting in a manner that leads to more confusion then help.

 

If the agreement they are looking to get signed is a service provider agreement or hold harmless agreement then they should be calling it that. Instead to the chagrin of those in the industry trying to help and the IRS we see wording like the following on websites of leaders...

 

"Without an ISA in place, Service Providers (investment companies) will no longer be available for contributions after December 31, 2008."

 

That is completely false and unfortunate.

 

I am glad for those that can continue to use Fidelity; hopefully there are not other obvious misunderstandings behind the regs that lead to bigger issues from such "industry leaders."

 

 

 

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Pat,

What is your source on this: "One of the biggest myths and points of confusion out there is that an ISA needs to be signed by a plan approved vendor. That is absolutely not the case."?

I spoke with the IRS and a "tax specialist" told me that an ISA needs to be signed by a plan approved vendor in order for contributions to be made post Jan 1, 2009.

-Dave

 

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My sources are three fold. I have been professionally knee deep in these reg's since 2004 when proposed and involved in 403b since 2001, and not from the investment sales side if that is of importance. Like most we all have questions, interpretations and disagreement to the pieces provided thus far. But this particular point is pretty clear and i have yet to hear why so many are confusing it other than for their own gain. I believe some would rather confuse sponsors and participants, which allows them to accomplish for their own gain.

 

Secondly, Bob Architect, who is certainly the main spokesperson to this subject and had a great amount of influence in the regs and writing of Rev Proc. 2007-71. He has very clearly communicated that an ISA is in no way needed for an approved plan vendor and there is nowhere is the reg's or rev. proc 2007-71 where this is stated or inferred. So i will respectfully state that the person from the IRS and "tax specialist" are misinformed. But they can rest easy they are not alone.

 

Lastly, I refer to as a source the regulations and the revenue procedure themselves. I would challenge anyone to show where in those documents an information sharing agreement is referenced to "an ISA needs to be signed by a plan approved vendor in order for contributions to be made post Jan 1, 2009." It will not be found because it does not exist.

 

Those would be my sources. At least once we get past 1/1/09 this should go away, because at that point truly the only discussion about ISA's should revolve around plans that will allow contract exchanges to outside vendors. If a plan does not allow such contract exchanges to outside non-approved vendors, which they probably should not, than those three letters, ISA, should never have to be whispered again.

 

 

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Pat B:

 

While ISAs are only required to be signed by vendors who will not be allowed to accept contributions from the employees (in other words they only accept transfers from other funds held in the participants accounts that accept contrbutions under the plan-the old 90-24 ) all vendors who accept 403b contributions will be required to sign some written document with ether the employer or TPA in which the vendor will agree to abide be the terms of the plan and other conditions requested by the TPA/employer such as a hold harmless agreement. Some vendors will not be able to agree to all the conditions because they limit how they provide information or transfer of funds to electronic transfers which will not be compatible with the administrative practices of the plan.

 

While the document that needs to be signed by the vendor is incorrectly referred to as an ISA, it will still be necessary for vendors to sign a written agreement that incorporates the language used in an ISA, such as restricting distribution to termination events, hardship and loans etc. as well as other conditions deemed necessary by the TPA or employer.

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Intruder, that is absolutely correct.

 

An approved vendor will need to agree to "share information" and act in a manner that allows fpr proper form and operation of the plan. This would be done with a service agreement/hold harmless, not an information sharing agreement.

 

The problem being agreements and their "titles" are being misused thus causing much confusion.

 

I think we all agree there's enough confusion caused by some of this that it would be useful to take advantage of the points that are clear. One being an information sharing agreement is not needed for an approved vendor receiving payroll deductions to be signed to continue receiving deductions.

 

For parties to communicate for example that a vanguard must sign an ISA to remain a payroll slot is either misinformed or being intellectually dishonest.

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Intruder,

Thanks for your (as usual) clear reply to Pat. You are a voice of reason that this forum can not do without.

 

***********

 

Pat,

I concede that "agreements and their 'titles' are being misused thus causing much confusion". I am not an expert and I never needed to think about "hold harmless agreements" and "written agreements" until the IRS created these new regulations.

 

Pat, the agreement I am speaking of "incorporates the language used in an ISA" so calling it an ISA is not far off the mark. While I understand the need for getting the name right, please do not lead people to think they can contribute to vendors that do not sign the new agreement.

 

Whatever the name for it, some type of paperwork needs to be signed in order for vendors to be available.

AND

Due to the new regulations which take effect on January 1, 2009, Vanguard and Fidelity may not be available for many.

 

I am lucky. Omni and Fidelity have worked out their difference and Vanguard has also signed WHATEVER NEEDS TO BE SIGNED and they are on the list as well.

 

So instead of facing complex annuities which are jammed with hard to understand fees, and mutual fund companies that charge front end loads and excessive fees, teachers at approximately 600 school districts in New York state will be able to invest with the no front-end load and low fee funds of Vanguard and Fidelity.

Of course, this is only if Vanguard and Fidelity are on the list. So, if they are not, talk to whoever is in charge and politely ask that they be added so that teachers have a variety of investment providers to choose from.

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