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Nagdca Conference Report

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This conference was a great experience. NAGDCA means National Association of Government Defined Contribution Administrators (http://www.nagdca.org/ ). It was encouraging to talk to like-minded people who want to do the right thing for their employees. It reminded me of how different my solo experience 20 years ago when I tried to take more responsibility for my 403b plan and getting nowhere with either financial advisers, LAUSD or UTLA. It was an absolutely different era, I call the dark ages of the 403b. You would of thought I was threatening the very existence of Western Civilization when I asked my agent about using mutual funds for my 403b, asking the district to make Vanguard and TIAA CREF available or asking my union to approve TIAA CREF (TC) as an “approved vendor” when TC become available for LAUSD employees.


Bullet Points


Pre-conference Workshop on 403b plans

• Conflicts of interest: TPA must not sell product

• Watch the costs. TANSTAAFL (Tere anit naw sus ting asafee lunch!) (there ain’t no such thing as a free lunch).

• 457b has a fiduciary responsibility by California State law

• 403b has no fiduciary responsibility by state or feds

• Nothing in the 2009 403b regs about fiduciary, only compliance

o There appears to be a lot of overlap between compliance and fiduciary responsibility. Question: What would a discussion between a guanine fiduciary and a participant look like when the discussion goes beyond just compliance?

• North Carolina talked about their statewide 403b plan. We can only dream about that type of change here in California. Their consultants are great people, our own SST. Automatic enrollment, formed a committee to study the options, found old business models didn’t work, lack of oversight…Duh! A state law passed easily, but there was a backlash by the industry, but it was too late.


Julia’s Durant, the President's opening remarks: Reaching out to the 403b world. Created a 403b task force which I joined. Both the City and the County of LA have NAGDCA board members.

Mellody Hobson Ariel investments showed a video of their firms financial education school. Shows how elementary kids can learn to invest. First minority owned financial firm. Very impressive and refutes the idea that the investing process is too complicated to learn.

Washington Report:

o There is a Roth 457b. Lots of discussion of Charter Schools.

o Might be a special annuity that extends the RMD until people are in their 80s.

o ERISA is the best place to find a model for fee disclosure. For example are the fees shared with participants who take out a loan?

o 403b audits require a written plan, operations no in compliance with the written plan, correction of past violations and only gets serious if the district didn’t correct past violations.

National Council on teacher retirement:

o Misinformation of our pensions, not going bankrupt

o But he was not specific about reforms

o Average asset allocation for public pensions are 29% fixed/cash and the rest in equities. Our CALSTRS has only 19% fixed/cash and rest equities. CalSTRS is taking more risk than the average and not getting compensated for this risk (2012 fiscal year return was a paltry 1.9%).

Session with plans of billion or more:

o Led by our neighbor City of LA

o The people were mostly defined benefit plan administrators

o More sharing of plans than a presentation

Social Media:

o Fastest growing population is people between 55-65

o People want stories of people like themselves

o They want content

o What do you want participants to do. Simple steps!

o State of Missouri presented their social media tools. It looks similar to what our own CalSTRS. He stressed that the audience want simple steps and to focus on relationships over numbers.

• Fee Assessment:

o What is the most equitable way to charge fees?

o The best approach is to have a fixed or explicate fee, a percentage of assets or hard dollar amount. No hidden fees such as revenue sharing (we knew this in 2006)

o Participants are paying 73%, shared 22% and employer is 5%

Ms. Borzi, assistant secretary of DOL:

o Wonderful presentation! 1.5 hours. She was a combination of legend John Bogle and Arthur Levitt (former secretary of SEC under President Clinton). All three are outstanding supporters of the participants.

o Too many people taking a lump sum from DB

o DOL recommends lifetime income (my only concern is with private company DB plans)

o On financial advice (sound familiar?):

 Transparency

 Accountability

 Objective tools (objective information)


70% of participants think they don’t pay fees!

o DOL offices all over the country and have outreach services. We should invite a DOL rep to our committee as part of the continuing education.

o The new fee disclosure law says the vendor must disclose to the plan sponsor. New regs on fees is great and covers all types of fees, require a glossary of terms, all common sense information.

o But the most controversial? You guessed it. Fiduciary standards. The new regs show advisers how to be a fiduciary, show all fees, be accountable and provide objective information so clients can make informed decisions.

 The industry response is that conflicted advice is better than no advice! Imagine that! And of course the new regs are job killers.

o When 70% of participants think advice is free and when they find out it's not, those advisers will have a lot to explain.



Years ago on a hunch, I went to the LA Times and got lucky that financial columnist, Kathy Kristof, listened to my story of the impossibility to get my school district to change policy. She published it way back in the of 1998 which I call the "dark ages" of the 403b when deadly silence existed. The 403b is loaded with high fees and conflicts of interest and that I wanted a low cost mutual fund company. As a result of the publication, I received 25 letters mostly from other LAUSD colleagues who shared my frustration and outrage. Later on, our new found 403b informational group started meeting financial professionals who shared our values (Scotty D., Dan Otter, Brian Cressey formerly of TIAA CREF). Still later on it was our own benefits administrator George Tischler who courageously told the LAUSD Board of Education in 2006 that our employees are paying too much to annuities as a justification to create the new lower cost 457b plan and this committee to oversee its operations.


Currently, our TPA of both the 403b and 457b and SST are a result of what the committee recommended to the CFO and the Board. Important to emphasis and remember, we recommended these great team members because TPAs and our consultants share our committee values of full accountability, low costs and objective information. Our committee knew early on that these common sense values will keep our plan in full compliance and it looks out for the best interests of our employees. Our CFO who is the fiduciary and the Board of Education accepted our recommendations.


Fast forward to today. This conference and NAGDCA membership comprise of 95% benefit administrators who want to do the right thing as reflected in our committee’s values. Our committee has been on the right track since our inception date, July 2006 with transparency, accountability and objective financial information.

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Here is NAGDCA's latest newsletter that reports the annual conference. It is worth repeating, this organization is fantastic.

This link provides a video clip on Financial Literacy with young African American Students by the Keynote Speaker: Mellody Hobson, President, Ariel Investments.

It's fantastic: http://www.nagdca.org/content.cfm/id/contributor420121

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Guest Joel L Frank

Has NAGDCA officially endorsed the practice that there should be one statewide 457(b) plan for all public employees in a state? No.

Has NAGDCA officially endorsed the practice that there should be one statewide 403(b) plan for all K-12 employees in a state? No

Has NAGDCA ever published the numbers showing how much more one can save with the payment of 50 basis points rather than 250 basis points? No



The following is from the NAGDCA website:


403(b) Resource Center


New! - 403(b) Pre-Conference Workshop


September 30, 2012

9:00am – 12:00pm PT

Sheraton San Diego ######el & Marina

San Diego, CA

Registration Fee - $85.00 per person (includes breakfast)


Click here to register for the pre-conference workshop!


The workshop is geared toward 403(b) plan sponsors and will cover the following topics.


Fiduciary Issues and Vendor Relations

1. Is your plan covered by ERISA fiduciary requirements?

2. Does your state impose fiduciary requirements similar to ERISA?

3. What are your fiduciary duties as a plan sponsor?

4. How can vendor relations effect your participants' ability to quickly obtain hardship withdrawals and loans?

5. If you provide any type of employer payments to your 403(b) plan, perhaps due to a collective bargaining agreement or for key personnel, how do you assure that funds going to the vendors are being properly handled (i.e., employer paid plans have different distribution rules than employee voluntary funds)?

6. How well do you understand 403(b) terminology (e.g., a custodial account vs. an annuity)?


Selection of TPAs/Review of TPA Functions and Changing Service Providers

1. What are the pros and cons of hiring a TPA?

2. What all of the possible services that a TPA could provide?

3. If we evaluate TPAs how do we know if they are “full service” or “limited service” and know what is best for our organization?

4. How are TPA fees structured? If there are no fees, how do we evaluate the effect of no-cost services on our plan and participants?

5. What is the typical process for changing service providers? What are common pitfalls?

6. How well do you understand 403(b) terminology (e.g., a custodial account vs. an annuity)?


Moderator: Brian McCleave, Prudential Retirement

Featured Speakers: Mike Cochran, JEM Resources; Marilyn Collister, Great-West Retirement Services; Richard Turner, VALIC; Steve Toole, North Carolina; Scott Dauenhauer, SST Benefits, Inc


1. Prudential and Valic are among the major commission based product providers in the nation.

Q.: Why weren't participant paid fees/commissions/mortality expense discussed?

A.: Read number 1.

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