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403(B)(7) And 90-24 Confusion

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Guest Joel L. Frank

Steve

 

Why is TRowe Price cited here so much? I looked at their funds and most are under 1.% but not by much. They seem a little on the expensive side actually. Even Fidelity, outside of the Spartan Funds tend to stray on the high side.

 

 

 

VG and TIAA CREF are so rare in tax deferred retirement plans, I include Fidelity and TR PRice because they are more frequent. Years ago, I invested in Invesco, knowing that they charged 12b1 fees. I would never chose Invesco now, nor would I choose TR Price or Fidelity, but at the time Invesco and Fidelity were great choices considering where I used to have my money.

If anybody has Fidelity as a choice in their plan, I would certainly suggest the Spartan funds, hands down.

 

 

Steve,

 

Would you please clarify: "VG and TIAA-CREF are so rare in tax deferred retirement plans"

 

Joel

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More on this. We had a partial staff meeting. Before the meeting the plan administrator found out that the Lincoln rep does the Form 5500 for us for ~$200. The thought is that he would not want to do it anymore if Lincoln was competing with Vanguard (for example) for our 403(b) business. The accounting firm that does our Form 990 gave a ballpark estimate of $1000 to do the Form 5500. The roughly $800 difference, if that's in fact what it would end up being, is giving the management of my non-profit some heartburn. I think that price is kind of whacky for a 2 page form, but I'm not an accountant.

 

I, as the person advocating for adding a custodial account vendor to the plan, provided the following information on expenses.

 

Lincoln expenses:

 

Annual Account Fee -- $25 (they say they may waive it but there are no details on how/when they do).

 

Mortality and expense risk charge: 1.002%

 

The investment options (funds) charge management fees and expenses also, ranging from 0.53% to 1.93%.

 

Therefore, total account fees range 1.78% to 3.18%.

 

Vanguard:

 

Annual Account Fee -- $15 (waived if account holder has 50K or greater in assets with Vanguard) That's 0.15%

 

The funds have management fees and expenses that average 0.2% and are almost always less than 0.5% (There may be a $15 fee in some funds if the assets in that fund are less than 10K, but it seems that might be waived if electronic delivery of documents in arranged or if total assets with Vanguard)

 

Therefore, total account fees are 0.65% or less, a savings of at least 1.1 - 2.5% a year, more likely at least 1.5%.

 

I did not get much of a reaction -- I don't think people think about the compounded drag that result after being in high-expense plans for years. Someone suggested bringing in the Lincoln rep and see what else they may offer besides a "variable annuity." Because we are a very small non-profit (around 20 employees), I'm guessing that the annuity will be the only option. That meeting is next week and I'm learning all I can about 403(b) plans, and something I learned today I will put in another post.

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Hi everyone,

I have a 403b7 with Lincoln Financial (cheapest vendor in my district currently) and it is a custodial account (not an annuity).

Perhaps asking your Lincoln rep if they can offer you a Custodial Account would be a good first move. Then you can invest in any mutual fund they offer (and you can follow it by it's ticker symbol). Of course, you want to look at the fund expenses before investing.

With my custodial account I must still pay a broker fee (typically 1%), because Lincoln will not let me self direct, but at least I'm out of the insurance piece (and the associated fees).

 

PS I'm still working on getting my district's plan administrator to sign an Information Sharing Agreement with Vanguard....then we could invest directly with Vanguard and save on the broker fees as well...I'm also looking at ASPIRE financial if I can't get Vanguard.

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Hi everyone,

I have a 403b7 with Lincoln Financial (cheapest vendor in my district currently) and it is a custodial account (not an annuity).

Perhaps asking your Lincoln rep if they can offer you a Custodial Account would be a good first move. Then you can invest in any mutual fund they offer (and you can follow it by it's ticker symbol). Of course, you want to look at the fund expenses before investing.

With my custodial account I must still pay a broker fee (typically 1%), because Lincoln will not let me self direct, but at least I'm out of the insurance piece (and the associated fees).

 

PS I'm still working on getting my district's plan administrator to sign an Information Sharing Agreement with Vanguard....then we could invest directly with Vanguard and save on the broker fees as well...I'm also looking at ASPIRE financial if I can't get Vanguard.

 

Thanks for this reply. I'll specifically ask the Lincoln rep about a custodial account. Certainly I am going to ask for very specific information on fees/commissions, etc.

 

As far as getting an information agreement with Vanguard out of my organization... I think it will be a tough row to hoe. The plan administrator knows nothing (e.g., I had to explain to her what an annuity was)... If I asked for a copy of the "plan" I'm sure the reply would be to call the Lincoln guy. I'm sure no one in the org (plan administrator or director or whomever) thinks they need to know anything about this stuff at all.

 

But if they don't agree to add Vanguard as a vendor I will probably ask for the information sharing agreement.

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