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Lola

Independant Consultant To Examine 403 B/401 K Options

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I am a controller for a small private school in SF area.

We currently have our 403 B account through Valic.

Can someone recommend an independent consultant whom we can hire to review our current plan in terms of admin fees, and performance (it’s all annuities) , and examine other options. We don’t want a broker who sells specific investments, we want someone completely unbiased to advice the administration of the school to how provide the best possible retirement options to our teachers.

I am very new to a non profit word, so thank you so much for your help,

Lola

 

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Hi Lola,

I am a member of my school districts 457 oversight committee and know something about how to evaluate potential financial consultants. I believe I know what you are looking for and those teachers may never know that you are looking out for their best interests. My hat is off to you.

 

As you have already experienced, the non profit world is very different than the for profit world with regard to tax deferred retirement plans. I can imagine your dismay and possible horror when you found out that the only choice the teachers have are annuities. And nobody complains, right? The 403b world is riff with self interest and deception not just by the vendors but the school districts and unions as well. But things are slowing changing for the better thanks to the good teachers and one or two pros on this site.

 

Independent consultants may pass the test in any legal definition (independent companies with no products), but I look for ethics as well. When you interview consultants look for their reactions to costs and specific low fee companies. For example, does the consultant suggest high cost products because the vendors have to get paid for services provided? Or does a consultant want to hold costs down as much as possible so that the teachers have more money in their pocket? How does a potential consultant react to you asking, for example, what is your opinion about Vanguard, TIAA CREF and Fidelity Investments? If they have a negative response to these low cost companies, give him or her a polite thank you and show them to the door. TIAA cRef is one vendor that clearly brings out a financial consultant's bias. Most financial pros who post hear hate TIAA CREF because it takes away from their bottom line--commissions and high fees.

 

While not answering your question about specific consultants directly, I hope I helped you with a process to evaluate potential consultants. It is really not that difficult. Just follow the money and I am confident that you understand where I am coming from and confidently hire a qualified consultant who, honestly and ethically, has the best interests of teachers in mind and not their pocketbook.

 

Let us know your progress.

 

All the best,

Steve

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I am a controller for a small private school in SF area.

We currently have our 403 B account through Valic.

Can someone recommend an independent consultant whom we can hire to review our current plan in terms of admin fees, and performance (it’s all annuities) , and examine other options. We don’t want a broker who sells specific investments, we want someone completely unbiased to advice the administration of the school to how provide the best possible retirement options to our teachers.

I am very new to a non profit word, so thank you so much for your help,

Lola

 

 

There are some posters on this board who continue to be totally oblivious to the realities of what options are available for 403b plans of small non profit organizations due to the new regulatory environment effective in 2009. Small non profit organizations are unlikely to attract low cost mutual funds such as VG or TIAA-CREF who have withdrawn from the the small plan market due to the cost of complying with the new IRS 403b regs that were effective January 1. Insurance companies are available because they offer the necessary administrative services by charging higher fees and may provide a plan document. If your non profit organization provides for employer contributions in addition to employee contributions then the plan will be subject to ERISA and the expenses will increase because of the new annual reporting requirements that take effect this year as well as the compliance requirements for plans regulated by the US Department of Labor. Also all employers are required to adopt a 403b plan document that conforms to the IRS regulations no later than December 31, 2009 which will require that you retain counsel.

 

As for hiring a consultant have you checked with other NPs in your area to see if they have a reference? You might also want to check benefitslink.com to see if you can find such a person in their service provider index.

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Hi Lola,

I am a member of my school districts 457 oversight committee and know something about how to evaluate potential financial consultants. I believe I know what you are looking for and those teachers may never know that you are looking out for their best interests. My hat is off to you.

 

As you have already experienced, the non profit world is very different than the for profit world with regard to tax deferred retirement plans. I can imagine your dismay and possible horror when you found out that the only choice the teachers have are annuities. And nobody complains, right? The 403b world is riff with self interest and deception not just by the vendors but the school districts and unions as well. But things are slowing changing for the better thanks to the good teachers and one or two pros on this site.

 

Independent consultants may pass the test in any legal definition (independent companies with no products), but I look for ethics as well. When you interview consultants look for their reactions to costs and specific low fee companies. For example, does the consultant suggest high cost products because the vendors have to get paid for services provided? Or does a consultant want to hold costs down as much as possible so that the teachers have more money in their pocket? How does a potential consultant react to you asking, for example, what is your opinion about Vanguard, TIAA CREF and Fidelity Investments? If they have a negative response to these low cost companies, give him or her a polite thank you and show them to the door. TIAA cRef is one vendor that clearly brings out a financial consultant's bias. Most financial pros who post hear hate TIAA CREF because it takes away from their bottom line--commissions and high fees.

 

While not answering your question about specific consultants directly, I hope I helped you with a process to evaluate potential consultants. It is really not that difficult. Just follow the money and I am confident that you understand where I am coming from and confidently hire a qualified consultant who, honestly and ethically, has the best interests of teachers in mind and not their pocketbook.

 

Let us know your progress.

 

All the best,

Steve

 

 

Dear Steve.

Thank you so much for taking time to answer my questions.

It’s incredibly helpful. We are a small school, just 27 employees, but I will be calling TIAA CREF first thing in the morning. I completely agree with you, our teacher work so hard for so little in terms of compensation, I really want to make sure that we have the best retirement plan possible.

Thank you so much again for such a great input.

Kind regards,

Lola

 

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Hi Lola,

Thanks so much for your response. Every so often, an administrator, such as yourself, comes here and asks questions knowing that their teachers are getting screwed by the insurance industry which has ruined the the potentially powerful 403b plan. Unfortunately, this nonsense continues with the new IRS regs (at least for the moment).

It is amazing the fight we have with getting the word out, trying to change unions, alerting our colleagues that a TSA is the worst retirement savings plan ever.

If you cannot get TIAA CREF, Fidelity Investments or Vanguard, thats regrettable. Our 457 committee has SST benefits as our financial consultant, which are located in Northern California. They might consult small organizations. They are good folks and think about the teachers, but the only downside is that they have an active managed philosophy. However, they will listen to what you want and try and come to a workable solution. By comparison, SST is a 100% more ethical than the previous consultant that never listened nor respected what the committee wanted. Furthermore, one of the SST consultants has been listening to John Bogle who is the god father of indexing.

Here is their website. Give Bill a call:

http://www.sstbenefits.com/

Hope this helps,

Steve

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Lola --

There are really quite a few good people out there who are not afficliated with any investment or insurance firms, per se. You could start by using google and looking for independent fiduciaries who work with 403b plans. And you might read Scott Simons' articles in Morningstar; you will have a head start if you do!

 

JudyS

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I am a controller for a small private school in SF area.

We currently have our 403 B account through Valic.

Can someone recommend an independent consultant whom we can hire to review our current plan in terms of admin fees, and performance (it’s all annuities) , and examine other options. We don’t want a broker who sells specific investments, we want someone completely unbiased to advice the administration of the school to how provide the best possible retirement options to our teachers.

I am very new to a non profit word, so thank you so much for your help,

Lola

 

Lola.

I am a member of our school system's 403 B committee. An " independent consultant" was hired. I did not like the product produced by his participation in the process. Vanguard was willing to be our vendor. However, the powers that be did not want to use them and their erisa plan. This excuse does not hold water. Vanguard has 403 B plans in all 50 states. The real problem is not with Vanguard, but with the buddy relationship schools have with these asinine insurance companies. Yes, it is a bold statement. However, anyone who can do basic math knows Vanguard would be a better deal than most others. Why would a school system choose a more expensive option? I will let you think about that one. I have an answer, but will not reveal it at this time.

I personally spoke with the manager of the small business division at Vanguard and he told me the hold up was with the school system, not with Vanguard.

 

 

 

I am a controller for a small private school in SF area.

We currently have our 403 B account through Valic.

Can someone recommend an independent consultant whom we can hire to review our current plan in terms of admin fees, and performance (it’s all annuities) , and examine other options. We don’t want a broker who sells specific investments, we want someone completely unbiased to advice the administration of the school to how provide the best possible retirement options to our teachers.

I am very new to a non profit word, so thank you so much for your help,

Lola

 

 

There are some posters on this board who continue to be totally oblivious to the realities of what options are available for 403b plans of small non profit organizations due to the new regulatory environment effective in 2009. Small non profit organizations are unlikely to attract low cost mutual funds such as VG or TIAA-CREF who have withdrawn from the the small plan market due to the cost of complying with the new IRS 403b regs that were effective January 1. Insurance companies are available because they offer the necessary administrative services by charging higher fees and may provide a plan document. If your non profit organization provides for employer contributions in addition to employee contributions then the plan will be subject to ERISA and the expenses will increase because of the new annual reporting requirements that take effect this year as well as the compliance requirements for plans regulated by the US Department of Labor. Also all employers are required to adopt a 403b plan document that conforms to the IRS regulations no later than December 31, 2009 which will require that you retain counsel.

 

As for hiring a consultant have you checked with other NPs in your area to see if they have a reference? You might also want to check benefitslink.com to see if you can find such a person in their service provider index.

 

Intruder,

The expense excuse is not accurate. I personally spoke with the small business manger at Vanguard. They would have liked to have become our vendor. However, it was the school system that wanted things that the I.R.S. DID NOT require. I was told this directly as I pressed the issue. The real question or issue is why would a school system choose a more expensive option when a low cost provider that meets erisa standards is available? By the way, Vanguard has 403 B plans in all 50 states. There seems to be an unhealthy relationship between schools and these sorry insurance companies.

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I am a controller for a small private school in SF area.

We currently have our 403 B account through Valic.

Can someone recommend an independent consultant whom we can hire to review our current plan in terms of admin fees, and performance (it’s all annuities) , and examine other options. We don’t want a broker who sells specific investments, we want someone completely unbiased to advice the administration of the school to how provide the best possible retirement options to our teachers.

I am very new to a non profit word, so thank you so much for your help,

Lola

 

Lola.

I am a member of our school system's 403 B committee. An " independent consultant" was hired. I did not like the product produced by his participation in the process. Vanguard was willing to be our vendor. However, the powers that be did not want to use them and their erisa plan. This excuse does not hold water. Vanguard has 403 B plans in all 50 states. The real problem is not with Vanguard, but with the buddy relationship schools have with these asinine insurance companies. Yes, it is a bold statement. However, anyone who can do basic math knows Vanguard would be a better deal than most others. Why would a school system choose a more expensive option? I will let you think about that one. I have an answer, but will not reveal it at this time.

I personally spoke with the manager of the small business division at Vanguard and he told me the hold up was with the school system, not with Vanguard.

 

 

 

I am a controller for a small private school in SF area.

We currently have our 403 B account through Valic.

Can someone recommend an independent consultant whom we can hire to review our current plan in terms of admin fees, and performance (it’s all annuities) , and examine other options. We don’t want a broker who sells specific investments, we want someone completely unbiased to advice the administration of the school to how provide the best possible retirement options to our teachers.

I am very new to a non profit word, so thank you so much for your help,

Lola

 

 

There are some posters on this board who continue to be totally oblivious to the realities of what options are available for 403b plans of small non profit organizations due to the new regulatory environment effective in 2009. Small non profit organizations are unlikely to attract low cost mutual funds such as VG or TIAA-CREF who have withdrawn from the the small plan market due to the cost of complying with the new IRS 403b regs that were effective January 1. Insurance companies are available because they offer the necessary administrative services by charging higher fees and may provide a plan document. If your non profit organization provides for employer contributions in addition to employee contributions then the plan will be subject to ERISA and the expenses will increase because of the new annual reporting requirements that take effect this year as well as the compliance requirements for plans regulated by the US Department of Labor. Also all employers are required to adopt a 403b plan document that conforms to the IRS regulations no later than December 31, 2009 which will require that you retain counsel.

 

As for hiring a consultant have you checked with other NPs in your area to see if they have a reference? You might also want to check benefitslink.com to see if you can find such a person in their service provider index.

 

Intruder,

The expense excuse is not accurate. I personally spoke with the small business manger at Vanguard. They would have liked to have become our vendor. However, it was the school system that wanted things that the I.R.S. DID NOT require. I was told this directly as I pressed the issue. The real question or issue is why would a school system choose a more expensive option when a low cost provider that meets erisa standards is available? By the way, Vanguard has 403 B plans in all 50 states. There seems to be an unhealthy relationship between schools and these sorry insurance companies.

 

 

FE:

 

You have to ask the SD(school district) for the specific reasons it rejected VG but how about the SD rejecting VG because SD are not subject to ERISA and it would be impermissible for the SD to adopt a plan containing ERISA provisions.

 

The SD board as the fiduciaries for the plan have a duty to provide a plan that suits the needs of all particpants and complies with applicable state laws as well as meet the requirements under the 403b regs. However, the IRS regs do not have any authority over the SD's responsibility to make sure that participants are informed investors which may require investment education and enrollment meetings. Because of its low cost structure VG does not send out represeatives to conduct investment education or enrollment meetings which many plan fiducaries deem necessary for plan administration.

 

Also VG prefers to conduct all of its operations over internet and limit transfers and contributons to wire transactions which is not an option for many SDs. VG may not be willing to provide the SD with a plan document which now required under the 403b regs.

 

As for ERISA plans there are significant expenses that 403b plans will incur in preparing 5500 reports beginning with 2009 and plans using VG will have increased expenses because VG can only provide the information in a format that will require that the accountants for the sponsor do additional work to convert the information to a format that can be submitted on the 5500 to the DOL. Plan administrators prefer another provider that will generate lower expenses for filing the 5500.

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I am a controller for a small private school in SF area.

We currently have our 403 B account through Valic.

Can someone recommend an independent consultant whom we can hire to review our current plan in terms of admin fees, and performance (it’s all annuities) , and examine other options. We don’t want a broker who sells specific investments, we want someone completely unbiased to advice the administration of the school to how provide the best possible retirement options to our teachers.

I am very new to a non profit word, so thank you so much for your help,

Lola

 

Lola.

I am a member of our school system's 403 B committee. An " independent consultant" was hired. I did not like the product produced by his participation in the process. Vanguard was willing to be our vendor. However, the powers that be did not want to use them and their erisa plan. This excuse does not hold water. Vanguard has 403 B plans in all 50 states. The real problem is not with Vanguard, but with the buddy relationship schools have with these asinine insurance companies. Yes, it is a bold statement. However, anyone who can do basic math knows Vanguard would be a better deal than most others. Why would a school system choose a more expensive option? I will let you think about that one. I have an answer, but will not reveal it at this time.

I personally spoke with the manager of the small business division at Vanguard and he told me the hold up was with the school system, not with Vanguard.

 

 

 

I am a controller for a small private school in SF area.

We currently have our 403 B account through Valic.

Can someone recommend an independent consultant whom we can hire to review our current plan in terms of admin fees, and performance (it’s all annuities) , and examine other options. We don’t want a broker who sells specific investments, we want someone completely unbiased to advice the administration of the school to how provide the best possible retirement options to our teachers.

I am very new to a non profit word, so thank you so much for your help,

Lola

 

 

There are some posters on this board who continue to be totally oblivious to the realities of what options are available for 403b plans of small non profit organizations due to the new regulatory environment effective in 2009. Small non profit organizations are unlikely to attract low cost mutual funds such as VG or TIAA-CREF who have withdrawn from the the small plan market due to the cost of complying with the new IRS 403b regs that were effective January 1. Insurance companies are available because they offer the necessary administrative services by charging higher fees and may provide a plan document. If your non profit organization provides for employer contributions in addition to employee contributions then the plan will be subject to ERISA and the expenses will increase because of the new annual reporting requirements that take effect this year as well as the compliance requirements for plans regulated by the US Department of Labor. Also all employers are required to adopt a 403b plan document that conforms to the IRS regulations no later than December 31, 2009 which will require that you retain counsel.

 

As for hiring a consultant have you checked with other NPs in your area to see if they have a reference? You might also want to check benefitslink.com to see if you can find such a person in their service provider index.

 

Intruder,

The expense excuse is not accurate. I personally spoke with the small business manger at Vanguard. They would have liked to have become our vendor. However, it was the school system that wanted things that the I.R.S. DID NOT require. I was told this directly as I pressed the issue. The real question or issue is why would a school system choose a more expensive option when a low cost provider that meets erisa standards is available? By the way, Vanguard has 403 B plans in all 50 states. There seems to be an unhealthy relationship between schools and these sorry insurance companies.

 

 

FE:

 

You have to ask the SD(school district) for the specific reasons it rejected VG but how about the SD rejecting VG because SD are not subject to ERISA and it would be impermissible for the SD to adopt a plan containing ERISA provisions.

 

The SD board as the fiduciaries for the plan have a duty to provide a plan that suits the needs of all particpants and complies with applicable state laws as well as meet the requirements under the 403b regs. However, the IRS regs do not have any authority over the SD's responsibility to make sure that participants are informed investors which may require investment education and enrollment meetings. Because of its low cost structure VG does not send out represeatives to conduct investment education or enrollment meetings which many plan fiducaries deem necessary for plan administration.

 

Also VG prefers to conduct all of its operations over internet and limit transfers and contributons to wire transactions which is not an option for many SDs. VG may not be willing to provide the SD with a plan document which now required under the 403b regs.

 

As for ERISA plans there are significant expenses that 403b plans will incur in preparing 5500 reports beginning with 2009 and plans using VG will have increased expenses because VG can only provide the information in a format that will require that the accountants for the sponsor do additional work to convert the information to a format that can be submitted on the 5500 to the DOL. Plan administrators prefer another provider that will generate lower expenses for filing the 5500.

 

 

I appreciate your post. I also have heard this before. Vanguard has better online investment education than I ever received form Valic or Lincoln. Whom actually would trust their investment dollars to an insurance agent? What a travesty this is for schools. This is legalized fleecing.

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Whom actually would trust their investment dollars to an insurance agent? What a travesty this is for schools. This is legalized fleecing.

 

 

FE:

And don't forget the unions are for the most part still thinking they can make money off their members. The huge California Teachers Association has not informed its members that our CalSTRS pension plan has a low cost plan administered by TIAA CREF, Pension 2. It can't get much better, yet CTA has been totally silent. I have heard through the grapevine that they might be developing their own 403b plan! I hope not.

 

I give Scotty, our resident pro and CalSTRS Board member Caroline Widerner all of the credit in the world for this tremendous development.

 

My union has done the right thing but withdrawing endorsements from all vendors and enacting education workshops. CalSTRS pension 2 administrators have graciously came to Los Angeles to provide seminars on investment strategies to my union members.

 

These activities need to be acknowledged and encouraged. Any teacher in california can call the Pension 2 office and request a presenter to come to their school or office. I believe Pension 2 has a full time administrator located permanently in Los Angeles.

 

BTW, thank you for the compliment about my "due diligence". My only wish is that I could do more than just post on these boards.

 

Have a good day,

Steve

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