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sullivanke

Another Victim Of The 403b Debacle

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JUST got this 5 minutes ago in E-mail.....Timely huh

Fidelity was the only non high cost annuity selling option. Now its gone.

Any input on the remaining 6 (6 prociders for a HUGE district, amazing) no option as to where to put MY retirement money. You know the unions are in on this.

 

The district has been regularly communicating with all of the TSA vendors for many months in response to new IRS regulations requiring a master 403(b) Plan Document as of January 1, 2009. The district’s 403(b) Plan Document was approved by the district in August 2008 (effective January 2009) and vendors were then required to sign Investment Provider Service Agreements to ensure their compliance with our approved plan document (including information sharing and plan administration). The vendors had until December 31, 2008 to provide the appropriate and compliant documents. Despite all efforts, some of the vendors who have done business in our district previously (most notably Primerica, Fidelity and Franklin Templeton) were unable to provide compliant Investment Provider Service Agreements and therefore may not take contributions from our employees effective January 2009.

 

The vendors on the attached list are the only ones that provided compliant Investment Provider Service Agreements in accordance with our IRS required 403(b) Plan Document. Going forward (starting with the January 15 payroll), these are the only 403(b) plans to which you may contribute.

 

If you must change your TSA vendor, you should do so as soon as possible. Contribution forms for the January 15th payroll must be received in the Payroll Department by January 9, 2009. All changes made after that date will become effective for the subsequent payroll date. In general, the vendors on the attached list are at the ready to help facilitate an expeditious enrollment process in an effort to have contribution forms ready for submission to the district as soon as possible.

 

We apologize for the tight timeframes, but we were trying to resolve Investment Provider Service Agreement issues up to the last minute and wanted to ensure we retained as many of the existing TSA vendors as possible

Company Name Contact Name Phone E-MAIL ADDRESS Fax

AIG (formerly VALIC) Al Vitelli 800-892-5558 ###### 8963 www.aigretirement.com 732-530-4735

AXA Equitable Tom Foley, Ted Beal 732-452-7276 www.axa-equitable.com 732-906-3629

Lincoln Investment Patrick Bergin 800-627-0067 www.lincolninvestment.com 908-276-3939

Lincoln Life Joseph Tagliareni 800-445-2448-###### 4702 www.lfg.com 201-368-5161

Met Life Allan Levy 800-492-3553 ###### 28685 www.metlife.com 732-295-0879

Security Benefit Susan Cain 1-888-724-7526 x3423 www.securitybenefit.com 785-368-1772

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It's interesting how the same names keep coming up.

 

Call Security Benefit to see if it offers the direct invest option which allows you to bypass the salesperson. Don't be surprised if 1) it's "not available" or 2) the salesperson tries to steer you away from it.

 

The direct invest option is not too bad, but the "regular" option is awful.

 

 

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It's interesting how the same names keep coming up.

 

Call Security Benefit to see if it offers the direct invest option which allows you to bypass the salesperson. Don't be surprised if 1) it's "not available" or 2) the salesperson tries to steer you away from it.

 

The direct invest option is not too bad, but the "regular" option is awful.

 

 

Gotcha, if they do offer the direect invest option are you familiar with anything they offer that would mimic what I was allocated into at Fidelity? I was 100% into Fidelity 4-1 Index Fund which was about 90/10 Stock/Bond allocation

Has your district kept good options?

THANKS>

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Gotcha, if they do offer the direect invest option are you familiar with anything they offer that would mimic what I was allocated into at Fidelity? I was 100% into Fidelity 4-1 Index Fund which was about 90/10 Stock/Bond allocation

Has your district kept good options?

THANKS>

 

They offer index funds for the S&P 500, mid cap, small cap and international. The first three cost .50, and the latter costs .60. There is no bond index fund, but they offer PIMCO Total Return for .68.

 

For more info: https://nea.securitybenefit.com/neavaluebui...ctfactsheet.htm

 

Caution: this is an NEA-endorsed product. That puts up a red flag for me. Security Benefit pays a fee to NEA for the latter's endorsement of Value Builder.

 

As far as I can tell, my district has kept Vanguard. My wife's district, however, dropped Fidelity.

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Gotcha, if they do offer the direect invest option are you familiar with anything they offer that would mimic what I was allocated into at Fidelity? I was 100% into Fidelity 4-1 Index Fund which was about 90/10 Stock/Bond allocation

Has your district kept good options?

THANKS>

 

They offer index funds for the S&P 500, mid cap, small cap and international. The first three cost .50, and the latter costs .60. There is no bond index fund, but they offer PIMCO Total Return for .68.

 

For more info: https://nea.securitybenefit.com/neavaluebui...ctfactsheet.htm

 

Caution: this is an NEA-endorsed product. That puts up a red flag for me. Security Benefit pays a fee to NEA for the latter's endorsement of Value Builder.

 

As far as I can tell, my district has kept Vanguard. My wife's district, however, dropped Fidelity.

 

 

I see, thanks. I asked our business administrator if there was anything that we, as teachers, could to to regain Fidelity or to even perhaps add Vanguard to offer at least one, low cost provider. The response was, "Does Vanguard offer 403b(7) products and would they be willing to sign our agreement?" I want to proceed cautiously and really dont have much faith that this will amount to anything but how should I respond? I dont even know what the lawyer for our district has drafted? Would love to have Vanguard. Ide just choose Target Retirement Date 2040, set it and forget it. (much better than the Fidelity Target funds which are actively managed)

THANKS!

 

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Hey Sullivanke,

 

Thanks for sharing. What is the name of your district and where are you located? Ask your employer why Montgomery County Public Schools is able to offer a compliant plan that makes available Fidelity, TIAA-CREF, and T. Rowe Price, but your employer can't? Note: MCPS employees are now able to access their accounts directly through the YourPlan Portal. See "Access Your Account" on left hand side of home page.

 

Dan Otter

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update........

 

This is from my business admin. in response to other districts being able to offer low cost providers in compliannce with drafted plans?

please advise.

 

Kevin,

 

 

 

What are you comparing regarding costs, just the maintenance fees, load fees and/or the gamut of services that they charge you for? I know Fidelity, even in their non-compliant paperwork, unfortunately included annual maintenance fees of $20 per account. It is unfortunate that TSA vendors such as Fidelity cannot comply, but we can’t make them comply. Importantly, they also would not allow loans or hardship withdrawals. Our plan document allows for these uniformly for all of our TSA vendors (one of the reasons the IRS required plan documents: uniformity amongst an employers’ plans). I don’t want to be the one to tell an employee they can’t borrow or take a hardship withdrawal against their own money! This is a huge stumbling block for Fidelity.

 

 

 

I wonder if they (and others) may be lower cost because they will not legally assume any responsibility or administration (which allows their costs to be lower) with their 403(b) plans? If they are still in districts, it must be under a situation where the district is comfortable with (and staffed for) 100% responsibility and plan administration and calculations, and they are comfortable with Fidelity 100% abdicating all liability and responsibility.

 

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I don't think from the sound of this he has any understanding of expense ratios and all the other fees in annuities that are much more significant than a yearly $20.00 per account charge. I don't think he understands that all the services the insurance companies are offering will cost him thousands of dollars over his working years. Services, by the way you don't need.

 

Also, I didn't know that Fidelity didn't allow for loans or hardship withdrawals. I thought that was an IRS decision.

 

Personally, if Fidelity is not allowing hardship withdrawals or loans I think its a smart thing to do for the investor.

The 403b was never meant to be an all service bank. Its a retirement account.

 

 

Sorry you have to join the crowd which includes me and have to put up with all this crap. It seems those of us

who can choose our own investments and manage our retirement 403B responsibily are being penalized for the greater good made up of many financial illiterates.

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Thanks Tony. Yeah there are a few teachers who understand the implications and are ready to rebuttle. One of them the economics teacher and who is also union rep.

 

Maybe we can get something going.

 

Regarding AXA, who are treated like gods at our district, are there any set, definitive numbers in terms of there costs that I can use in my defense? Can this be found on there website?

 

KC

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This is their 403b page:

http://www.axa-equitable.com/for-employers...d-services.html

 

I only searched for a few minutes. If I had more time I assume I would find more fees.

Here goes,

 

Some lowlights of the EQUI-VEST® 403(b) TSA - Series 100

*You lose 6% if you move the money out of AXA and into, let's say Fidelity, within the first FIVE YEARS!

*"Maximum total Separate Account A annual expenses" = 1.49%

*Total Annual Portfolio Operating Expenses for 2007 - Ranged between 0.38% and 3.71%

*In small print: "This is not a complete description of the EQUI-VEST® variable annuity contract. Variable annuities have limitations. For costs and complete details, contact a financial professional."

 

 

 

Thanks Tony. Yeah there are a few teachers who understand the implications and are ready to rebuttle. One of them the economics teacher and who is also union rep.

 

Maybe we can get something going.

 

Regarding AXA, who are treated like gods at our district, are there any set, definitive numbers in terms of there costs that I can use in my defense? Can this be found on there website?

 

KC

 

 

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This is their 403b page:

http://www.axa-equitable.com/for-employers...d-services.html

 

I only searched for a few minutes. If I had more time I assume I would find more fees.

Here goes,

 

Some lowlights of the EQUI-VEST® 403(b) TSA - Series 100

*You lose 6% if you move the money out of AXA and into, let's say Fidelity, within the first FIVE YEARS!

*"Maximum total Separate Account A annual expenses" = 1.49%

*Total Annual Portfolio Operating Expenses for 2007 - Ranged between 0.38% and 3.71%

*In small print: "This is not a complete description of the EQUI-VEST® variable annuity contract. Variable annuities have limitations. For costs and complete details, contact a financial professional."

 

 

 

Thanks Tony. Yeah there are a few teachers who understand the implications and are ready to rebuttle. One of them the economics teacher and who is also union rep.

 

Maybe we can get something going.

 

Regarding AXA, who are treated like gods at our district, are there any set, definitive numbers in terms of there costs that I can use in my defense? Can this be found on there website?

 

KC

 

 

Oh, this one just gets better and better. Here are some other little goodies from the AXA gods. This is from the "AXA Premier VIP Trust" Target 2045 Allocation:

 

(http://www.axa-equitable.com/prospectus/pdf/EQUI-VEST_Employer-Sponsored.pdf)

 

- Management fee: .10

- 12b-1 fee: .25

- Other expenses: 2.81

- Acquired Fund Fees and Expenses (Underlying Portfolios): .55

- Total annual expenses: 3.71

 

But wait! It gets more interesting. Due to the kindness of the AXA gods, we have "FeeWaivers

and/or Expense Reimbursements" of 2.56, so the Net Annual Expenses (After Expense Limitations) is 1.15. Two questions:

 

1) Can the expenses limitation of 2.56 be removed at AXA's discretion? If so, then the poor sods who buy this load of !@#$ are back up to expenses of 3.71.

 

2) Are the above expenses in addition to the mortality & expense and other charges specified elsewhere in the prospectus? I THINK so, but I can't say for sure. The 572 page prospectus was, oh, just a little bit daunting.

 

KC: if folks in your district are treating AXA like gods, AXA is in turn treating them like dirt.

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Ah, the allure of easy "access" to money through loans and hardship withdrawals. Isn't this in part how we got into our current national financial mess? If this is your business manager's criteria for a quality investment firm I feel for you. I love his/her: "I don’t want to be the one to tell an employee they can’t borrow or take a hardship withdrawal against their own money!" Sorry, but this is a little like a teacher saying: "I'm not going to tell a kid he/she can't run with scissors" or better yet, a loan officer saying: "I'm not going to tell this applicant who has no verifyable income that they can't borrow $300,000." Is it too much to ask for some grown up supervision in regard to the 403(b)? And I love his/her comment about the fact Fidelity doesn't allow this easy access: "This is a huge stumbling block for Fidelity." Ah, no it's not. It's a huge stumbling block for meaningful long term savings, which is what savings accounts like the 403(b) were designed for. We truly are a nation of financial illiterates.

 

Dan Otter

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Thanks guys for all of the responses and re-affirming me why I left AXA years ago and went with Fidelity. You all have taught me a lot.

 

Update- Just got an email from the business admin. Sent District wide. USAA has been added to our list of providers. I dont have any experience with them but I called and was told that they offer over 30 mutual funds with no load, no fees and No annual fee. They also have 5 index funds, One of which is S&P with an expense ratio of <.20 If this is the case, it truely would be great for all other 6 Vendors were insurance annuity products.

Anyone have any experience with USAA?

 

THANKS!

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Come on. 30 funds with no loads and no fees. I don't know anything about them but this sounds too good to be true, so I don't believe it.

 

Tony

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Ah, the allure of easy "access" to money through loans and hardship withdrawals. Isn't this in part how we got into our current national financial mess? If this is your business manager's criteria for a quality investment firm I feel for you. I love his/her: "I don’t want to be the one to tell an employee they can’t borrow or take a hardship withdrawal against their own money!" Sorry, but this is a little like a teacher saying: "I'm not going to tell a kid he/she can't run with scissors" or better yet, a loan officer saying: "I'm not going to tell this applicant who has no verifyable income that they can't borrow $300,000." Is it too much to ask for some grown up supervision in regard to the 403(b)? And I love his/her comment about the fact Fidelity doesn't allow this easy access: "This is a huge stumbling block for Fidelity." Ah, no it's not. It's a huge stumbling block for meaningful long term savings, which is what savings accounts like the 403(b) were designed for. We truly are a nation of financial illiterates.

 

Dan Otter

 

Dan:

 

Why do you think that the little you know is all there is to know about retirement planning?

 

Plan particpiants do not need the nanny state oversight that that you as a former elementary school teacher think is best for employees ("Is it too much to ask for some grown up supervision in regard to 403b?"). If you feel that plan particiants don t have the ability to make rational decisions about their financial needs then you should go back to teaching elementary school because you will never make it as financial planner with that attitude. If plan participants are to be treated as a*d*u*l*t*s who can make their own investment decisions, then they should be allowed to make their own choices about when to take hardship withdrawals from their retirement accounts based upon needs such as a sudden death in the family or to prevent foreclosure. Frankly, who are you to tell people how to spend their money and what your qualifications for your supposed better judgment of their retirement needs?

 

If loans are such an evil why does TIAA-CREF, which you hold up as a model of a good provider and holds 60% of all 403b assets, allow all participants to borrow from all indiviudual TIAA annuity contracts and most of the TIAA group contracts? Is TIAA acting contrary to the best interest of plan participants by allowing loans?

 

Also loans are permitted only in the supplemental TIAA 403b contracts which are funded with voluntary employee contributions and not contributions made under the regular retirement plans which provide the primary retirement benefits. Similarily, the 403b contracts available to SD employees are used to provide retirement benefits which supplement the retirement benefits avialable under public DB plans which provide retirement benefits of 50% of more of final pay usually with a COLA increase.

 

Finally,why would a 403b participant choose to have a child take out a $25,000 student loan with an 8% interest rate for 15 years which will result in $18,004 in interest expenses instead of borrowing $25,000 from a 403b contract for 5 years at 5% which will result in $3,307 in interest? Unlike the student loan, the participant's account will be credited with a stated rate of interest during the loan from the 403b plan.

 

Who is the financial illiterate?

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