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How Do I Determine What Our Teachers Are Paying In Fees?

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Greetings,

 

New bWise member here. I've become the plan administrator for my school district's 403(b) and 457 plans. This is a great site, and I've already spent a lot of time reading through the myriad resources outside the forums.

 

I've been doing a lot of reading on fees and I want to get a clear picture of how we're doing at my District, because I suspect it's meandering out of control, as there has been little-to-no oversight for years, and the fact that NEA Valuebuilder is fairly popular here. From what I've read, NEA Valuebuilder is not very fair in fees, but if we ever go in a different direction, it's very important for me to justify with hard facts as to why. Luckily, we're not restricted like California. We can go out for bid.

 

So I've been trying to look into how much, on average, our teachers are paying in fees in our plan. I've read in other topics that in California, teachers pay an average of 2.11% in 403(b) fees, and I'm trying to calculate what that number is in my school district in Colorado. What is the best way to do that? We have five different providers, so of course I'd like to calculate it by provider, but of course within each provider there are myriad products. Do they have a disclosure report I can request? I asked one rep, but he just gave me the fee information on their sales literature, which was not helpful. The literature doesn't give me any real picture of what was "actually" charged based on plan activity. What's my next step?

 

Thanks all!

 

Tony W

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Greetings,

 

New bWise member here. I've become the plan administrator for my school district's 403(b) and 457 plans. This is a great site, and I've already spent a lot of time reading through the myriad resources outside the forums.

 

I've been doing a lot of reading on fees and I want to get a clear picture of how we're doing at my District, because I suspect it's meandering out of control, as there has been little-to-no oversight for years, and the fact that NEA Valuebuilder is fairly popular here. From what I've read, NEA Valuebuilder is not very fair in fees, but if we ever go in a different direction, it's very important for me to justify with hard facts as to why. Luckily, we're not restricted like California. We can go out for bid.

 

So I've been trying to look into how much, on average, our teachers are paying in fees in our plan. I've read in other topics that in California, teachers pay an average of 2.11% in 403(b) fees, and I'm trying to calculate what that number is in my school district in Colorado. What is the best way to do that? We have five different providers, so of course I'd like to calculate it by provider, but of course within each provider there are myriad products. Do they have a disclosure report I can request? I asked one rep, but he just gave me the fee information on their sales literature, which was not helpful. The literature doesn't give me any real picture of what was "actually" charged based on plan activity. What's my next step?

 

Thanks all!

 

 

Tony W

 

 

Hi Tony,

Welcome. First you are right about Value Killer. It's terrible. It was the subject of an unsuccessful lawsuit several years ago because of the outrageous fees and money taken from members to NEA coffers. The judge threw it out because 403b are not under ERISA jurisdiction.

Get rid of it!

 

Second, I am surprised that you, the plan administrator, got the run around? I would talk to the person responsible for all of the reps, demand the full cost, not just what the funds charge, but all fees: revenue sharing, 12b(1) fees, commissions or loads, mutual fund annual expenses, surrender fees, administration and paperwork. Ask for the Investment Policy Statement, being the plan administrator you should have one. And ask out of $100 how much would I pay in fees if I were enrolled in the 403b plan and the 457b plan. Tell him or her who you are. They know that you can take your business elsewhere because of your states freedom to go out to bid. If you cannot get an answer, go out to bid.

 

Let us know what you find out,

Steve

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Guest Joel L Frank

Greetings,

 

New bWise member here. I've become the plan administrator for my school district's 403(b) and 457 plans. This is a great site, and I've already spent a lot of time reading through the myriad resources outside the forums.

 

I've been doing a lot of reading on fees and I want to get a clear picture of how we're doing at my District, because I suspect it's meandering out of control, as there has been little-to-no oversight for years, and the fact that NEA Valuebuilder is fairly popular here. From what I've read, NEA Valuebuilder is not very fair in fees, but if we ever go in a different direction, it's very important for me to justify with hard facts as to why. Luckily, we're not restricted like California. We can go out for bid.

 

So I've been trying to look into how much, on average, our teachers are paying in fees in our plan. I've read in other topics that in California, teachers pay an average of 2.11% in 403(b) fees, and I'm trying to calculate what that number is in my school district in Colorado. What is the best way to do that? We have five different providers, so of course I'd like to calculate it by provider, but of course within each provider there are myriad products. Do they have a disclosure report I can request? I asked one rep, but he just gave me the fee information on their sales literature, which was not helpful. The literature doesn't give me any real picture of what was "actually" charged based on plan activity. What's my next step?

 

Thanks all!

 

Tony W

 

 

Tony:

 

Colorado's Public School Districts are affiliated employers of their COLORADO PUBLIC PUBLIC EMPLOYEES RETIREMENT ASSOCIATION (PERA). As such, your School District's employees are eligible to join the 401(k) and 457(b) Plans administered by their PERA.

 

Now, you may give a proper burial to your 403(b) Plan-----it can no longer hurt your employees.

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Tony W.

 

Go to www.403bcompare.com Chances are the products available in your district are available there. Good for you that you can put your plan out to bid.

 

Dan Otter

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Thank you all, for your input.

 

I'll contact the providers again and see what I can get from them. I wasn't sure if there was some standard disclosure/statement that they can provide me or send me on a periodic basis that would contain comprehensive ACTUAL fee information (if not, there should be!).

 

Joel, we do have participants in the PERA 401(k)/403(b), but PERA aren't really advisors, out visiting employees, providing advice and guidance, and (of course) selling investment products. Therefore, while I'm not sure exactly what it is, I'm pretty sure the PERA discretionary investment participant rate is low. Also, since it doesn't really fall under my District's 403(b)/457 plan, it didn't really fall within my realm of responsibility and therefore hasn't been on my radar.

 

Dan, I've checked out that site, but it's pretty hard to accumulate that data since I mostly do not have a comprehensive breakdown of what our employees are invested in.

 

I'll keep you updated.

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Guest Joel L Frank

Thank you all, for your input.

 

I'll contact the providers again and see what I can get from them. I wasn't sure if there was some standard disclosure/statement that they can provide me or send me on a periodic basis that would contain comprehensive ACTUAL fee information (if not, there should be!).

 

Joel, we do have participants in the PERA 401(k)/403(b), but PERA aren't really advisors, out visiting employees, providing advice and guidance, and (of course) selling investment products. Therefore, while I'm not sure exactly what it is, I'm pretty sure the PERA discretionary investment participant rate is low. Also, since it doesn't really fall under my District's 403(b)/457 plan, it didn't really fall within my realm of responsibility and therefore hasn't been on my radar.

 

Dan, I've checked out that site, but it's pretty hard to accumulate that data since I mostly do not have a comprehensive breakdown of what our employees are invested in.

 

I'll keep you updated.

 

 

Tony:

 

Your School District has the option of administering its own salary reduction plans or using the PERA 457(b) and 401(k) Plans. This is what is wrong with the laws of the 50 states. State law should require local employers like School Districts to opt into the State run supplemental plans. They should not be allowed to have their own supplemental plans any more than the law allows them to have their own basic Defined Benefit/Defined Contribution Plan.

 

Q.: Why would your School District voluntarily choose to administer its own supplemental 403(b)/457(b) plans when PERA offers supplemental 457(b) and 401(k) plans at de minimus cost to the employee and at no cost to the School District?

 

 

JOEL

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Tony, congratulations on your appointment to this important position and your efforts to ensure your colleagues get a fair deal. I found Loeper's book called "Stop the 401k Ripoff" to be excellent, and he now has a newer book called "Stop the Retirement Ripoff". This gives good advice and methods for discovering the hidden fees. Available at Amazon.

 

For many years I figured the reps, advisors, etc. were liars when I wanted to know about fees. I was wrong. All they know if what their companies teach them, and 99% of them have NO IDEA of what the fees are. Really, they don't. Unfortunately, that means you have to do the homework... hopefully you can get a colleague involved with you to help!

 

Judy S.

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Joel, I hear you! I will put significant consideration toward that option when going over all this. You're right; it doesn't make much sense to have our own separate plan, as long as the PERA return is comparable to our existing providers'. Even if it is, however, I think we both know there are lots of politics involved in doing something like that. Teachers will feel they're being forced into something and having their choice/freedom taken away. I know it's silly having them fight so hard against something that is really the best for them, but that's the American way, right? "It's my right to do it, even if it's bad for me."

 

I gotta be sensitive here; there are a lot of people and history involved, and I don't want to ignore that, even if the choice is fairly black and white from our perspective.

 

 

Judy, thanks for your note. I hadn't really thought about it that way, but of course, you're right. Thanks for the book recommendations as well.

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Guest Joel L Frank

Tony, congratulations on your appointment to this important position and your efforts to ensure your colleagues get a fair deal. I found Loeper's book called "Stop the 401k Ripoff" to be excellent, and he now has a newer book called "Stop the Retirement Ripoff". This gives good advice and methods for discovering the hidden fees. Available at Amazon.

 

For many years I figured the reps, advisors, etc. were liars when I wanted to know about fees. I was wrong. All they know if what their companies teach them, and 99% of them have NO IDEA of what the fees are. Really, they don't. Unfortunately, that means you have to do the homework... hopefully you can get a colleague involved with you to help!

 

Judy S.

 

 

Hi Judy,

 

They may not know all of the fees involved but they surely know that the fees are far in excess of a no-load offering otherwise they would not be hanging around the teachers' cafeteria with their box of doughnuts.

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Guest Joel L Frank

Joel, I hear you! I will put significant consideration toward that option when going over all this. You're right; it doesn't make much sense to have our own separate plan, as long as the PERA return is comparable to our existing providers'. Even if it is, however, I think we both know there are lots of politics involved in doing something like that. Teachers will feel they're being forced into something and having their choice/freedom taken away. I know it's silly having them fight so hard against something that is really the best for them, but that's the American way, right? "It's my right to do it, even if it's bad for me."

 

I gotta be sensitive here; there are a lot of people and history involved, and I don't want to ignore that, even if the choice is fairly black and white from our perspective.

 

 

Judy, thanks for your note. I hadn't really thought about it that way, but of course, you're right. Thanks for the book recommendations as well.

 

 

Tony;

 

Sensitive?... my foot! These sales sharks (they could be a friend, colleague, former colleague or relative) are mocking you and your fellow employees every two weeks. This is war....economic war. You need to learn from them and put your own economic interests first. If the employee doesn't do it who will?

 

Moreover, you have no choice in the matter. As a fiduciary the School Board must place the interests of their employees ahead of any entrenched interests; i.e., commission broker dealers. This fiduciary principle is recognized by the PERA Trustees that designed the 457(b) and 401(k) Plans known as "PERA Plus".

 

Q.: DON'T YOU THINK IF "VALUE BUILDER" etc; WAS IN THE BEST INTERESTS OF YOUR EMPLOYEES IT WOULD BE ON THE INVESTMENT LINE-UP OF THE PERA 457(b)/457(b) PLANS?

 

Joel

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