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Move Funds Out Of 457 Plan

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I was wondering whether the option available in a 403(b) plan - to transfer funds out of it to a vendor of your choice also applies to a 457 plan. Does anyone know?? Does 457 plan have anything like this....

 

"Unhappy with your current 403(b) provider? Fed up with your employer's vendor list? The IRS allows you to perform something called a 90-24 transfer into the vendor of your choice. The caveat is that your employer's plan and your existing vendor must permit transfers. The IRS allows transfers, but does not require them to be made. You may experience some reluctance on the part of your existing provider to part with the funds. If they simply refuse to make the transfer, there is little that can be done. If they do permit transfers, however, you can move existing 403(b) money into quality low-fee companies like Fidelity, Charles Schwab, TIAA-CREF, and Vanguard to name a few, even if they are not on your employer's approved vendor list. There are two more significant points to keep in mind....." Info is from this website.

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Subran,

 

What are your major beefs with your 457(b)? Do you have a straight mutual funds menu or must you invest in the sub-accounts of a variable annuity?

 

All is not lost. The 457(b) law requires material involvement on the part of your employer. Unlike a 403(b) arrangement the 457 law requires your er to establish a Plan Document, appoint a Plan Administrator, appoint a board of trustees, etc. So you should be successful in getting your er to add more fund choices.

 

Peace,

Joel

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The fees charged are high. It ranges from 0.75-1.25 basis points. Its an annuity product.

 

Come to think of it - I don't we get anything (reports etc) from them. Its entirely between the co. and the participant. My employer offered the plan in 2000 but we do not have any input as to the fund selection, etc.

 

 

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Subran:

 

Add on about 1.00 percent to the operating expenses of the sub-investment accounts. These 100 basis points is for Mortality and Expense charge.

 

You need to go to your employer. It is the Plan Sponsor. Tell the Plan Administrator that you guys and gals are being "feeeed" to death. Ask him/her to tell you why you do not have a straight mutual funds menu...bypassing the annuity. Tell him/her the extra mandatory fees associated with the annuity are of no value to you because you will not be annuitizing your account balance. Tell him/her that as a Plan fiduciary he/she should offer low-cost investment options as well as the higher cost variable annuity. Ask the decision makers if they ever heard of the Vanguard, Fidelity, TIAA-CREF or T.Rowe Price.

 

There are some who refer to your 457(b) Variable Annuity as a "full service" provider. Aren't you satisfied with the services? Doesn't your personal rep offer you individualized retirement financial planning in addition to selling you a 457(b)?

 

Peace,

Joel

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There are some who refer to your 457(b) Variable Annuity as a "full service" provider. Aren't you satisfied with the services? Doesn't your personal rep offer you individualized retirement financial planning in addition to selling you a 457(b)?

 

If you are not satisfied with your service, you have two options, of course. The first is the one outlined here by Joel: forego the notion of service entirely and go with a "no-load" provider. You won't get much in the way of personalized attention (or attention of any other kind), but then again, you know that going in, so it may be the best choice for you. If you're not getting any service anyway, there's certainly no reason to pay for it.

 

The second option would be to convince your employer to put the plan back out to bid, and make it very clear in the Request For Proposal that you are dissatisfied with the current level of service and not terribly thrilled about the fees involved either. You are bound to get at least one proposal back that will at least match your current level of fees, if not beat it, and which is likely to be able to improve the level of service you get now. The RFP could even specify mutual funds over annuities, if you so chose.

 

Hope this helps.

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Thanks for all the replies - Appreciate the insight. For the past week, I've been calling around for my employer - to seek an alternative 457 plan. It seems like the insurance co. are the major players in this field. Since my agency only has 200 employee - the options are not that good - the vendors are quoting about the same level of fees (in fact the investment options may be better in our current plan). Vanguard is not a player in 457 plans. Fidelity seems to have a good plan - $24 per year in fees - no reps - and a 50 page contract that covers them from virtually anything that could go wrong! American Century offers an interesting plan - $10 per fund - waived if participant assets are over $10K. TIAA-CREF & TR Price wants an initiation fee - about $2k which my employer would throw out. Also we would only have access to the co. mutual funds.

 

All is not lost. Also contacted the City administrators/bureaucracy - and they are considering opening up their plan to other agencies in town. Theirs is a no fee plan with an oversight committee. Seems to be logical choice -- but the investment options could be better. Their provider indicated that City has 60% participation rate (compared to 10% at our agency). Will urge boss to write a courtesy letter to prod them to act - but still unsure if this is a good option.

 

Others at work not really interested so its all on my shoulders (pity, pity...). That's where I stand for now. Any further discussion/insight is appreciated!

 

By the way -- what does it mean to "... annuitizing your account balance.." as qouted by Redwoods - I've come across it before but don't know what it means...

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By the way -- what does it mean to "... annuitizing your account balance.." as qouted by Redwoods - I've come across it before but don't know what it means...

===============================================

Annuitizing means that the insurance company guarantees you a monthly income for a period of time usually for the remainder of your life. In return for this guaranteed income you sign over your title to your capital to the insurance company. For this guarantee the insurance company charges you a fee during the accumulation phase as well as the income phase. ING for example charges its Opportunity Plus clients 100 basis points or 1.00 percent per year as a Mortality and Expense fee. All who try to make their money work hard for them realize this is a totally unnecessary expense because who among us plans on annuitizing? And who among us believes they need to be guaranteed a return of premiums in the event they die during the accumulation phase? So if you do not need the return of premium death benefit and you do not plan on annuitizing why would anyone voluntarily elect to use a variable annuity for pre-tax retirement savings?

 

The above analysis is the rationale for the enactment in 1974 of section 403(b)7 which authorizes the use of mutual funds as an alternative to the annuity as a 403(b) funding tool. Thirty years later we still have the insurance companies and their loyal clients and endorsement partners telling us that we should not be concerned with the ME fee because we are getting full service.

 

Peace,

Joel

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