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wwilllie

Experience With A 90-24 Transfer

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My wife was with Citistreet/Travelers as the 403b/b7 provider for 5 years, and the hospital decided to change to Mass Mutual as of the first of this year, but the monies would not transfer till June. I saw this as an opportunity to try to transfer as much to Vanguard as possible (which is where we have all of our accounts). We contacted Vanguard to have a 403b7 established. Through a painful period with Citistreet, finally was able to perform a 90-24 transfer to Vanguard, but they only did the portion that was with Travelers, approx 1/3 of the assets. Filled out another form for the balance of which was with Citistreet, but during the interim the hospital authorized the total transfer of all the participants monies to Mass Mutual, including my wifes. Wrote a cover letter to be attached to the Vanguard forms sent to Mass Mutual stating that the transfer was made in error, and requested that a transfer of that amount which was transferred from Citistreet be made to Vanguard. Mass Mutual denied the request. This is where I really get annoyed, as Mass Mutual seems to forget who that money belongs to. The transfers were authorized by the Plan Administrator, and I cannot see the grounds that Mass Mutual has for making that decision. If the monies had been total contributions to Mass Mutual, perhaps, but not the case; although, she has been contributing to Mass Mutual since January 2004.

 

Very ironic, the guy that apparently was involved in setting up the plan between the hospital and Mass Mutual told us that the MM plan was not a 90-24 plan, but a group investment plan and therefore cannot do a 90-24 transfer. I asked him if he had been on the MM website lately, as there is a link to promote individuals to consolidate their funds with MM. Hit on the link and there is a 90-24 transfer form all filled out, all you have to do is fill out the portion where MM has to go to get the funds. So MM would probably be great in helping one get money transferred in, but going out....

 

Feel up against the wall at this point!I would be very interested if anyone can provide some guidance as to any other course of action I may have with Mass Mutual to resolve this issue, or just bite the bullet and move on. I am aware that she could resign for a couple of weeks, and transfer the total to her IRA, but not really in a position at this time.

 

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I recently did a 403(b)(7) from AIG Valic to Vanguard. Had very few problems and Valic was very cordial. My question for this forum is this: I am happy to have the low fees at Vanguard/good funds/etc. and realize that this is not an annuity. What do others out there see as risks in the 403b7? Thanks.

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There are really no down sizes to a 403(b)7. It really depends on the needs/wants on the individual.

 

A TSA can provide more options than a 403(b)7 , (ie. diversification, death benefit, payout option) but all of these come at a price. If these benefits are not important to you than a 403(b)7 makes sense.

 

Its hard to make a blanket statement because every individual has different needs and wants.

 

Hope this helps

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There is no such thing as a 90-24 plan. 90-24 refers to the Revenue Ruling allowing 430(b) funds to be transferred to another 403(b) vendor without taxation.

 

Since it is an ERISA plan, there should be a plan document. Get a copy and read what is allowed with respect to transfers.

 

Mark Fischer, CFA

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A TSA can provide more options than a 403(b)7 , (ie. diversification, death benefit, payout option) but all of these come at a price. If these benefits are not important to you than a 403(b)7 makes sense.

 

Its hard to make a blanket statement because every individual has different needs and wants.

++++++++++++++++++++++++++++++++++++++++++++++

Why is it the rule rather than the exception that a 403b is funded via an annuity....it is because the annuity pays the vendor's rep a fat commission that's why. END OF STORY!

 

The death benefit and lifetime income guarantees are paid for by the insurer charging a Mortality and Expense fee of anywhere from 75-125 basis points. Anyone who just does a simple analysis of the VA recognizes that the death benefit is extremely expensive and is, therefore, a waste of money. Additionally, the law does not allow you to elect a payout option while you are working/accumulating funds. Yet by paying the ME fee you are effectively paying for a lifetime income guarantee when you are years away from embarking on a payout plan. In my view this is simply stupid! Yet some are more than willing to pay for these worthless benefits because their rep furnishes them with sound financial planning advice.

 

Peace and Hope,

Joel

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Guess it all goes back to the quality of the advice being rendered, the value placed on the additional features of a 403(b) vs. a 403(b)7, and what the purchaser thinks is worthwhile compensation for all of the above. Somehow classifying such benefits as "worthless," and the people who find value in them as "stupid," seems counterproductive to the desire to educate them.

 

I agree with the summary provided by gr8lakes...there really is no blanket answer to what's best for anyone. As with anything in life, of course, if you're paying more for Product A than for Product B, it's incumbent on the buyer to know what they're getting for the extra money.

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Joel,

 

I would have to disagree with your assumption of 403(b)'s being funded by annuity contracts because of the "FAT" commissions they pay the reps.

 

Before 1974 one couldn't use anything but an annuity to fund a 403(b) and it wasn't until much later that the M.F. companies got into this marketplace. We all realize the no-load companies aren't pushing down the doors of school districts or non-profits to put their funds in. I agree annuities are not for everybody... heck, not even the majority but I know for a fact that in cetain cases they are a good fit.

 

I think FrenchTeacher hit it right on the head..... On a public forum such as this, it is VERY counterproductive to bash products and make those "stupid" assumptions.

 

It makes no sense to bash reps for selling these products..they are not the problem..I believe we need to look at the Treasures and CFO's and come down on them for allowing only (in most cases) annuities. Until we properly educate these people, we are not going to change a thing...

 

 

 

 

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To gr8 and Frenchteacher:

 

Are you of the opinion that the millions of federal employees should have the opportunity to participate in the Federal Thrift Savings Plan via a commissioned rep? Are you saying that the Federal Government, as a Plan fiduciary, is in breach of their duties by not offering this option?

 

Joel

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You bet it is a serious question. Just because you did not say anything about federal employees does not make my question irrelevant. On the contrary it is quite relevant and goes to the heart of the matter. The Congress makes all of these laws and the members of that body participate in the TSP, the lowest cost plan around. Yet when they write section 403(b) of the Code they keep the door wide open for high cost vendors to enter with their free doughnuts and coffee. Why? Could in have something to do with the high powered lobby of WS?

 

Did you not say that in some instances annuities are a good fit? So should not commissioned VAs be offered under the Federal Thrift Savings Plan? Afterall, why should only teachers have the impartial advice of the VA rep at their fingertips?

 

Why should only teachers have the opportunity to pay for a ME fee that ranges anywhere from 75-125 basis points when a simple return of premium death benefit costs no more than 10 bp? Also, could you tell us why it is advantageous to pre-pay the cost, via the ME fee, for a guaranteed lifetime income during the accumulation phase?

 

Joel

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One really has to wonder why a retirement plan has to be such a complex issue. I have taken Mark's advice, and requested a copy of the plan. The website offers a 4 page version, but very condensed....

 

Talking about cost, the Mass Mutal 403b maintenance fees are suppose to be around 40 basis points. Currently, recieve a very condensed statement: Beginning balance, contributions, Ending Balance. To confirm what I was told about fee cost, I requested a quarterly itemized statement so I can see what is actually going on in the account. The only reply I ever get with these people is 'contact your plan administrator'. I replied that the current statement would be similiar to them recieving a monthly checking statement that only displayed the beginning and ending balance, you - the individual - figure out the individual credits and debits. Contacted the SEC, they told me since it had to do with a retirement plan, would have to go to the DOL.

 

Another issue is that all the funds are subadvised; therefore, the average expense ratio is 1.3%. At Vanguard, where I have tried to transfer the assets, there is no maintenance fee, and the funds that we use average 30 basis points. The frustration level is just about an all time high, as our retirement contributions - like many others - will be our main source for funding our retirement, and play a major role in our taxes. It leaves one in a position where you feel that you can't stand your sister, but you have to love her cause it is the only one you have.

 

Appreciate the replies guys. I'm still pursuing, and will advise of the results.

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Are you of the opinion that the millions of federal employees should have the opportunity to participate in the Federal Thrift Savings Plan via a commissioned rep? Are you saying that the Federal Government, as a Plan fiduciary, is in breach of their duties by not offering this option?

 

 

 

I have said in many other places, and I will repeat here, that I am generally against any restrictions placed by the employer on the employee. As passionately as I believe no-load options should be available to all 403b investors, I believe just as passionately that full-service options should also exist for those that want or need them.

 

Of course, I'm not charging anyone with "breaching their duties" by failing to provide both kinds of options. But given that there is such disparity of opinion over what constitutes the best choice, why restrict anyone to ANY one kind of investment? Why not allow for both no-load and loaded options, and let each employee make his/her own decision?

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So if one is of the opinion that all employees, not just 403b particpants, should have a load and no-load menu we have to ask the members of Congress why they are satisfied with just the no-load variety with their TSP.

 

Joel

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So if one is of the opinion that all employees, not just 403b particpants, should have a load and no-load menu we have to ask the members of Congress why they are satisfied with just the no-load variety with their TSP.

 

 

I'm going to have to have waaaaaaaaaaaaaayyy more free time on my hands than I do, before I start advocating for the rights of those poor folks in Congress.

 

Anyway, I don't know that there's any evidence that they ARE satisfied with the current setup. Let's face it, if you're basing that assessment on the general lack of an outcry, you could make the same observations about teachers, 98% of whom are silent about their need for greater options with their 403b plans.

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