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HSCounselor

Just In: Fidelity Not Offered Beginning Jan.1

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I have to admit, about 20 months ago I was desperate to get away from VALIC, and I did much research, read these boards constantly, and settled on a rollover to Fidelity. My International, emerging markets, and s&p 500 are like everyone else's (pretty tanked), but my bond fund is up 16 percent which is somewhat of a positive offset. WELL yesterday we get a DL to everyone in the district saying that "Here are the people you can choose for your 403b. If yours isn't on the list, your contributions will stop in January. Pick someone else or all contributions will cease."

 

I emailed our person in charge of this in the district (Katy, Texas-- a rather large suburb of Houston with around 80,000 or more students and over 6.000 employees). Bottom line, FIDELITY has not agreed to the plan terms and has not signed the agreement; therefore, they will no longer be offered.

 

WELL, DAMN!

 

This came as a surprise and it is much too late for me to do anything related to lobbying. It is purposeful that they waited until the last possible moment to tell us that well over half the vendors that were once "approved" will no longer be available. (they waited until one day before our Christmas break starts). I called Fidelity who of course, were no help to me. They just kept saying that no agreement has been made.

 

Besides being ticked that I have to choose a vendor from the district's "approved" list, I am just fed up with this. How dare ANYONE tell me where to put my retirement money--that company A is okay but company B is not. My retirement fund already does that--my personal account should be just that--personal. What a racket. 403b's should go the way of the dinosaur and get the employer out of the middle. My retirement savings are essentially being dictated by some agreement between a school district and a third party administrator.

 

You can see I am ranting.

 

 

Does anyone know perhaps why Fidelity Investments is okay with losing potentially tens of thousands of investors due to these new regs? I am considering taking the tax hit, putting the extra in a cash account, taking the loss that will happen due to inflation, and calling it a day.

 

Helpful and useful comments would be most appreciated. You guys helped me in the past with getting my plan in order at Fidelity in the first place!

 

If I MUST choose someone else, Vanguard may be on the list. But to start over again with the research....no school district should have that power over where I am allowed to put my retirement money!

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HSC, I am no expert, but it sounds to me it has something to do with the TPA your district is using. Fidelity has signed agreements with many in Illinois. In my district in Illinois I lost Vanguard as a provider but just found out that fidelity would be an option if I can get 4 others to sign up with me should be no problem I hope.

 

Merry Christmas

 

Rich

 

PS New reg stink

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If I was in your shoes I would lobby to get them to add 403b ASP. They have access to 26,000+- funds and have the whole vanguard lineup and most of fidelity and all the other usual suspects. Their fee is very worth it.

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HSC, I am no expert, but it sounds to me it has something to do with the TPA your district is using. Fidelity has signed agreements with many in Illinois. In my district in Illinois I lost Vanguard as a provider but just found out that fidelity would be an option if I can get 4 others to sign up with me should be no problem I hope.

 

Merry Christmas

 

Rich

 

PS New reg stink

 

 

School district 203 and 204 in Naperville Il is losing Fidelity not because there aren't enough participants but because of the ISA. Are you guys retaining Fidelity because you have sufficient participants or because the TPA in your district is more flexible than CPI Qualified Plan consultants and others like CPI that won't bend.

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Here are a few comments on vendors in regards to “losing participants.” From the vendors point of view 403b in many cases is a very small part of their overall business, especially in the landscape of k-12 with multi vendors.

 

Not only does 403b have a poor participation rate (40-50%), but it is a pie that is shared by many. For example average participant count in NY state is probably around 240, with average vendor count still even with the regs between 14-18. So these vendors look at their models and have to ask themselves how much are they going to agree to for a piece of a small pie.

 

Sometimes the answer is they will walk away. By doing so they risk less exposure than the assets they would claim. The unions and districts may learn over time that leveraging the assets and getting away from the current scattered approach will benefit all in the long term. Participants would have in many cases a well priced offering, that covers a diversified investment line up and districts would have all centralized to either meet their compliance needs internally or have a recordkeeping firm to assist.

 

Contrary to those i read here that take the time and dilligence to do their own research, the majority of participants (80%) still flow to annuity based sold products. The unions encourage this action and threaten districts if they do think of changing, thus most have kept status quo.

 

So back to the Fidelity's and Vanguard's of the world they have no problem walking away. They won't expose themselves to agreements they feel are contrary to their situation and they do not have a sales force to battle the union pushed friends of annuities.

 

This will be a second phase of the learning curve over the years for 403b after the regs, and where in some opinions real change will occur in the market. Time will tell, but currently there will be flux for individuals for a while.

 

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We are having some problems with utilizing Fidelity also. Our TPA WILL sign their ISA and other documents, but Fidelity is still saying that they don't want us. We have been told - just recently that we can use the "Advisor" platform, but not the "Direct" investment - ie. the entire reason for going with Fidelity as a No Load/Low Fee option. I am sure it is because we are a small district - maybe only 20-30 participants. Seems that we are not worth their time.

 

Our TPA is still talking with Fidelity and there is possibility they may be able to obtain the direct option for us, but, this is a pretty good example of the problems of the 403b - our TPA is willing to sign any and all of their paperwork, and they still are not interested.

 

We do have Vanguard in place and do have direct investment with them. So, it is not like all is lost. Also, we may be able to switch out one of our "Advisor" choices like Oppenheimer, and move Fidelity into that group with American, and then try to pick up T. Rowe Price to go along with Vanguard.

 

Could be worse, but, still dissapointing that Fidelity does not want our business - even on their terms.

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HSC, I am no expert, but it sounds to me it has something to do with the TPA your district is using. Fidelity has signed agreements with many in Illinois. In my district in Illinois I lost Vanguard as a provider but just found out that fidelity would be an option if I can get 4 others to sign up with me should be no problem I hope.

 

Merry Christmas

 

Rich

 

PS New reg stink

 

 

School district 203 and 204 in Naperville Il is losing Fidelity not because there aren't enough participants but because of the ISA. Are you guys retaining Fidelity because you have sufficient participants or because the TPA in your district is more flexible than CPI Qualified Plan consultants and others like CPI that won't bend.

 

 

ft not sure how the tpa got fidelity on the list. but its there. We will also have access to vanguaqrd through 403basp. But I am leaning to fidelity because it is direct with them. ($24.00 yaerly mantinance fee plu exspense ratio is pretty darn good)

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