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TracyC13

Any Opinions On Planmember Services Direct Accounts?

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Yesterday, I learned that one of our district's 403(b) vendors -- PlanMember Services -- offers teachers a "direct" investment option in addition to their "advisor" accounts. This "direct" plan appears on its face to be the best option on our district's list of high-fee insurance company vendors.

 

According to the PlanMember website & the customer service rep with whom I spoke, I could invest directly into Vanguard funds -- no mutual fund wrappers, no sub-accounts, no nonsense (seemingly). PlanMember Direct lists funds with tickers & it seems straightforward on its face. Your 403(b) contributions go right into self-directed investments -- You get no advice (which is fine by me) & never have to talk to anyone on their sales force. With the "Direct" account, a participant pays Vanguard's internal fund expense, and the only fee collected by PlanMember (according to their site & rep) is a .35% annual asset-based service fee.

 

Of course we'd love to have Vanguard (or TIAA-CREF or anyone reasonable) added to our district's Vendor List, and several of us are still lobbying for this, but it is taking forever to get our district's Benefits Office to review our list of vendors.

 

In the meantime, does anyone know anything about this "Direct" PlanMember Services Program? Are there hidden fees other than the .35% annual service fee? I have read in this forum that this company's advisor-based 403(b) accounts are ridiculously expensive, and so sadly, I just don't have any confidence in the good folks at PlanMember to tell me the truth about their "direct" plan.

 

Thanks so much to anyone who may have any insight into or experience with this plan.

 

Tracy in Wichita, Kansas

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I think everything is straighforward. My only concern is that annual service fee seems a bit high. In my 403b I self direct but I only pay .15 over the fund expense ratio. If you get into a Vanguard fund fee which is very very low than its a good deal. But lets say you get into a Vanguard fund that charges .40 then .40 + .35 =.75 which is not too bad but still not as low as 403bwise people would recommend.

 

Do check the prospectus but I am sure my info is close to correct.

 

Tony

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Also the fact that you get no advice is a bonus. Usually salespeople guys/gals recommend changing course a lot !! or adding goodies you don't need .If you can set up a very basic low cost index portfolio-Domestic Stocks , Bonds,International Stocks plus some small cap value stocks and you can live with the simplicity of it all then its all you really need going forward.

 

If your other choices are much worse than this then its a no brainer going with this. Just see if they will negotiate the fees down.

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Tony,

 

Thanks very much for your insight. I agree that having no advisor is a "bonus" as in my experience they tend to lead teachers down the road to annuity perdition while they rake in financial benefit for themselves....I'm feeling relieved that you believe that the PlanMember Direct is actually not just another 403(b) hidden-fees-galore scam and that the only drawback is the .35 custodial fee (which I agree is high.) Sadly, .35 is far, far lower than any of our other "annuity-with-a-front-load-subaccount-plus-custodial-fee" options currently available. It is a sad state of affairs, as it is in many districts.

 

PlanMember Direct does offer quite a few of Vanguard's index funds that according to the FINRA fund analyzer average about .1% in operating expenses. With the .35 on top, expenses will average around .45, which is more than I'm currently paying for the ETFs & mutual funds in my taxable brokerage account. Another disadvantage is that PlanMember doesn't offer any of Vanguard's sector index funds, which I'd love to have to balance out other holdings in my taxable portfolio. However, the tax savings should make it "worth it" to liquidate taxable accounts & move monies into a 403(b). And the day we get Vanguard approved as a district vendor, our teachers can all jump ship and direct future contributions to Vanguard!

 

I'm intrigued at the idea of "negotiating" the fees downward. I didn't realize that that could even be an option! Do I just call PlanMember & try to work a "deal"? Is there a specific department at these companies who deal with such requests? Are teachers generally successful in trying to do this? (My husband & I plan to fork over $40-46K per year to them for the next 4-6 years -- Is that usable for negotiating leverage?)

 

I'm very glad I decided to investigate here and I really appreciate the information!

 

Tracy

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"And the day we get Vanguard approved as a district vendor, our teachers can all jump ship and direct future contributions to Vanguard"!

 

Well sure the teachers can but will they? I am not so sure. I know it defies logic but many will stick with their bad plans because of fear of change or "trust" in their advisor or the feeling of paralyzation. I can testify to that.

 

I have no idea if you can personally reduce the fees but as a school district it might be an option that can be pursued.Tony

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Yup. Even if given a "good" choice, many will stay with their current plans. They trust the "nice man" who brings pizza, cookies and platters of subs to the lounge and who dazzles them with talk of "dollar cost averaging" and the "time value of money." They are led like sheep to slaughter by annuity hucksters. In general, these poor folks are not very saavy about investment options, don't read or understand the prospectus, and have blind trust in their "advisors." You're right -- Even with an option like Vanguard, "all" teachers are not likely to jump ship!

 

However, some will. I have several teacher friends who have a good understanding of the situation & who would quickly sign with Vanguard (or other low-cost provider) when one is added -- these include one teacher who is a Certified Financial Planner who teaches business at the high school level and a retired CPA who now teaches math. These are people who have a clear understanding of the damage that fees can do to erode savings... And we talk.

 

Instead of using our district's outrageous 457 & 403(b) options, there is a sizable group of us across the district who routinely discuss the dearth of viable district 403(b) options -- This group includes both teachers and administrators who "get" that there is a problem. We talk among ourselves about retirement savings & strategies -- All of these people have been funding IRAs (both Roth & Traditional, depending on family income) and most of us also use taxable brokerage accounts for nest eggs beyond the IRA. Several of us were previously in a TIAA-CREF 403(b) plan, but since that is not an "approved" vendor for us, we can no longer fund the 403(b)s we hold there. Like me, my friends refuse to put money with our current crop of Shylocks. Unfortunately, our central office people are really too busy to care about our concerns....

 

I guess all we can do is educate our colleagues... Dan's book (Teach & Retire Rich) should be required reading for all first year teachers!

 

Thanks again, and keep the faith!

Tracy

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Guest Joel L Frank

Here is the link to the Kansas Deferred Compensation Plan--it is available to municipal governments--I assume this includes school boards. It hosts many Vanguard funds--did you know of this plan?

 

Joel

 

https://ingcustom.ingplans.com/einfo/planinfo.aspx?cl=INGSTKS&pl=KS457PU&page=enrollmentwhoseligible&domain=ingcustom.ingplans.com&s=&d=3a35b75c53063278b3773323d849d3ea52a9aac1

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Joel -

 

I investigated the Kansas Deferred Compensation Plan last year after reading about it in this forum. School districts don't participate, from what I was told by our central office. We teachers are employees of our individual Boards of Education. Our BOE has approved one 457 provider, and it is the Hartford (now MassMutual) - A fairly costly option, alas, even if you forgo the annuity option in favor of direct investments into mutual funds. While there are some NTF funds, there are no Vanguard funds & they impose a .75-.85% annual fee on assets on top of the fund fees.

 

I like the idea of presenting a petition to the board to add a low-cost 403(b) vendor, but I worry that if the BOE starts to think that they have a group of litigious employees on their hands, they may decide to take away all 403(b) and 457 options altogether to avoid the hassle. Teachers are also about to lose due process rights (tenure) in Kansas and become "at will" employees, so I think we'd be a bit nervous about pulling the potential lawsuit card. We've only talked with the Benefits Office on this matter. Perhaps the members of the district BOE will be more sympathetic....

 

Ah, the joys of teaching in a right-to-work state....

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Its hard to believe Kansas is going "at will". Just look at somebody the wrong way and you could be fired. Just doesn't seem fair or very smart . Education is full of landmines .In Virginia we are a right to work state too but they are raising the waiting period from three years to five years before granting tenure which now seems reasonable considering what your state is going through.

 

Keep in mind that getting a low cost provider benefits everyone. It should not be approached or seen as a negative. Approach it as a positive. Even the school board might learn something.

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Guest Joel L Frank

The State's website says in includes municipalities---can't we make an argument that the school board is part and parcel of municipal government?

Why don't you get a call into the State's 457(b) plan and ask them directly if local school boards are invited to join?

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Guest Joel L Frank

Joel -

 

I investigated the Kansas Deferred Compensation Plan last year after reading about it in this forum. School districts don't participate, from what I was told by our central office. We teachers are employees of our individual Boards of Education. Our BOE has approved one 457 provider, and it is the Hartford (now MassMutual) - A fairly costly option, alas, even if you forgo the annuity option in favor of direct investments into mutual funds. While there are some NTF funds, there are no Vanguard funds & they impose a .75-.85% annual fee on assets on top of the fund fees.

 

I like the idea of presenting a petition to the board to add a low-cost 403(b) vendor, but I worry that if the BOE starts to think that they have a group of litigious employees on their hands, they may decide to take away all 403(b) and 457 options altogether to avoid the hassle. Teachers are also about to lose due process rights (tenure) in Kansas and become "at will" employees, so I think we'd be a bit nervous about pulling the potential lawsuit card. We've only talked with the Benefits Office on this matter. Perhaps the members of the district BOE will be more sympathetic....

 

Ah, the joys of teaching in a right-to-work state....

 

 

I just hung up the phone with a rep from the State of Kansas 457(b) Plan. She asserted and she doubled checked with a supervisor. GOOD NEWS! School Districts are invited to join the plan. Now you can go back to that person in your Central Office and use your good graces to get the school district to officially adopt the Plan. The MassMutual plan is eating into your profits UNFAIRLY!! HAVE IT CANNED!!

 

Joel

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Although I didn't enroll, I recently considered PMS myself (unfortunate acronym to be sure). When comparing them to a Vanguard-as-Vendor plan, there are a couple things to consider. When Vanguard acts as the vendor of a 403b, they don't do Roths. (They may have made some exceptions for larger institutions, but as a rule they don't do Roth 403bs). So going through PMS, you could do 403b roth investment using Vanguard Funds. Also, with Vanguard-as-Vendor plans you only have access to Investor Share class Funds, regardless of how much you invest. Admiral shares are NOT available. However, with PMS, they let you access a better share of Vanguard Funds.

 

As an example, say you have Vanguard-as-Vendor and invest $20,000 in their 500 IN fund. Outside of a 403b plan you would qualify for the admiral share class which has a Total Expense Ration of 0.05%. But you are in a 403b plan so you can only get Investor shares, which means you'll pay 0.17%, a 0.12% difference.

 

Going through PMS, you'll pay the 0.35% fee, but you'll have access to a Signal class share of the 500 IN fund (VIFSX) which can be likened to an admiral share because it too is 0.05%.

 

So my point is, you have to look at the funds. In this case the difference between PMS an Vanguard isn't 0.35%. It's really only a 0.23% difference and Roth investment wouldn't be possible with Vanguard. I do believe PMS charges a flat annual account rate, so you might want to double check that. Probably less than $30. Vanguard waives this fee after you have enough money invested with them and they assess across all your investments in and out of retirement plans.

 

I think you should still push for Vanguard, especially if you don't use the Roth option. But other companies like Fidelity and Tiaa-cref do offer no-load low-fee index funds but also offer a roth. If you're interested in Roth investment you may want to push for them instead of Vanguard. However, these companies do demand a threshold of invesment before they'll agree to be a vendor, usually about a million dollars. Even so, if your workplace has enough employees and they see potential, they might make an exception.

 

If your employer uses a TPA, be warned, there's a fair chance they are deliberatly dragging the process out. TPAs sometimes get a small commision or kick back from certain Vendors so there's a conflict of interest in many cases that dissuades them from signing on no-load low-fee vendors like Vanguard who simply refuse to pay these fees to them. I do not know if PMS pays the TPA any fees or not.

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Guest Joel L Frank

http://www.forbes.co...icke_print.html

 

3.17% average total fees for tax-deferred accounts

4.17% average total fees for taxable accounts

 

These are averages so your investments will be less or more than these average costs.

 

Having said that, we all need to realize that the investing public pays a whole lot more than just an "expense ratio". This is an excellent article.

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