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krow36

Security Benefit’S Nea/direct Invest & Vanguard Admiral Funds

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I’ve been tacking this topic on to other threads, and I’d like to give it a thread of its own. Security Benefit is reported to pay NEA millions a year to put the NEA logo on two SB 403b products:

NEA Valuebuilder 403b7 with Options 1, 2 and 3
NEA Valuebuilder 403b7 Direct Invest
The first 403b with 3 with options is an expensive product with loads and high ERs.
The Direct Invest 403b is a very interesting product for an insurance/annuity 403b provider to offer.
Direct Invest offers about 30 funds from various providers, most of which have ER’s of about 0.50 to 1.00% and are managed funds. Among the 30 funds are 8 Vanguard Admiral class index funds. The complete list of funds available in the Direct Invest 403b are found at “Product Performance”. http://www.nearetirementprogram.com/#!enrollment/cc0q
The 8 Admiral class Vanguard funds:
Vanguard Total Stock Market Index ER 0.05%
Vanguard Total International Stock Index ER 0.14%
Vanguard Intermediate Term Bond Index ER 0.10%

Vanguard 500 Index ER 0.05%
Vanguard Growth Index ER 0.09%
Vanguard Mid Cap Index ER 0.09%
Vanguard Small Cap Index ER 0.09%
Vanguard REIT Index ER 0.12%

There is a 12b-1 fee of 0.01%, which is probably in addition to the ER’s.

The fees listed in the "Security Benefit Custodial Agreement" (Section ######.) seem reasonable:
An annual fee of $35 for accounts of less than $50,000.
A annual fee of $30 if the employee revokes their agreement to receive all communications by mail instead of electronically.
A $25 withdrawal fee for any withdrawal not requested through the employee’s online account.
There doesn’t seem to be a published explanation for why this insurance company is now offering what looks like an excellent 403b. In 2006 a lawsuit was brought against SB and NEA complaining about the high priced annuity type 403b product a WA couple had been sold. This lawsuit got a lot of press, and although the suit was dismissed in 2010, it was not the kind of publicity that SB and NEA wanted. In 2012, poster dc9husker on the 457 forum was using the Direct Invest 403b but no low cost index funds were included. In 2015, BH and 403bwise poster corysold brought the forums' attention to the Vanguard funds.
So SB, NEA and Vanguard have worked out a very interesting arrangement. Vanguard doesn’t offer Admiral class funds in their own 403b. It seems likely that NEA is subsidizing the Direct Invest 403b, maybe with some of the millions they receive from SB?
In districts where no providers offer a low cost 403b (and a 457b is not available), I think we should discuss why the NEA Direct Invest 403b should not be looked on favorably.
edit: In districts where no providers offer a low cost 403b (and a 457b is not available), should the NEA Direct Invest 403b be looked on favorably?
Edited by krow36

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Krow36,

Your last sentence is confusing. Too many negatives. Please clarify what you want us to do or what you want us to know.

Remember, most of us are skeptical of any teacher union 403b recommendations. There is a long history of sordid and highly secretive back room deals and keeping their members ignorant, knowing that the members trust every word that the unions say.

Thanks,

Steve

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Sorry for not being clear about what I'm asking. Have you looked at the NEA Direct Invest 403b closely enough to decide whether you could recommend it to a teacher with only expensive annuity type 403b providers? Or has the fact that NEA has sold out completely in the past to SB, too outrageous to even consider this option? You are much more experienced with crappy insurance-based 403b's than I am. Is the smell of both NEA and SB repelling you so much that you rule out the Direct Invest 403b?

 

On the BH forum, there are teachers (often teacher's spouses because the teacher doesn't have the time!) asking for help. Their district's list of providers has only insurance companies, but Security Benefit is included in the list. I've been suggesting that they consider the NEA Direct Invest 403b. Am I making a mistake?

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Hi krow36,
I may be totally wrong, but I sense that you are getting a little defensive. There is no reason for this. Why can't a couple of educators have a simple conversation over the merits of NEA's direct invest plan? Heck, I am a retired teacher just like you. If you have used the plan and know that the costs are fine, go for it. I was wondering what you want us to do, that's all.

 

No, you are not making a mistake. I think many of our colleagues will appreciate this information. And yes, I know about this plan but since I have never heard of anybody using the plan to find out what they say about the low fees is what they actually charge, I remain leery. Are you okay that I am not sold on this until somebody uses it and reports that the fees are what they publicize? Just providing what SB says online is not enough evidence for me. Since the plan was launched almost ten years ago, nobody besides you has reported on this forum about NEA SB direct invest plan.

 

This is why I remain leery. I read the plaintiffs’ attorneys rationale for the lawsuit. If the NEA's 403b was in the 401k world, that is, under ERISA guidelines, people would be in jail. SB is horrible and have been horrible for years. It is hard to believe that they made a 180 degree turn around and are now really really offering a good, low cost product, according to you. The only way to find out is to use it for a year and to examine the statements. I respond positively with evidence.

 

Not just one person’s accolades. Nothing personal, but I would like more people who actually used it to report.

 

Is there anybody out there that has used the plan and can verify what krow36 has said about the plan?

 

Have a great week,
Steve

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Hi Steve,

“A little defensive?” I think maybe you are seeing my frustration. On both this and the BH forum, I’ve asked for discussion, comments on, and most important, input from anyone who has used the the NEA Direct Invest 403b. I guess I’m disappointed that I haven’t been able to stir up more discussion, information and a long term user. This certainly is not your fault. You've helped by contributing to several threads on the subject. Like you, I think we need to find someone who has used the program for a year or more and who can confirm that the fees are only those stated by SB in their Custodial Agreement. I keep hoping that the long term user will notice the topic in the forums, and join in, but no luck so far.

"Are you okay that I am not sold on this until somebody uses it and reports that the fees are what they publicize? Just providing what SB says online is not enough evidence for me.” Sure, I understand your reluctance to endorse it without the numbers that show it’s as good as it looks on the surface.

"Since the plan was launched almost ten years ago, nobody besides you has reported on this forum about NEA SB direct invest plan.” That’s not quite the case. Here’s what I’ve been able to find about users of NEA Direct Invest. Granted, it’s not much.

April 2012, dc9husker, on the 457b forum here, used the NEA Direct Invest 403b to contribute to TR funds from TRPrice. Complains of lack of a low cost index fund provider. I’ve sent dc9husker a PM, but no reply.

http://board.403bwise.com/index.php?showtopic=5444&hl=%2Bsecurity+%2Bbenefit

Aug 2015, Daniel1973 In a BH post indicated he has started using NEA Direct Invest.

"My wife has had a 403b option, but we only just started contributing to it and we are currently contributing $200/month.
$200 balance
60% Spartan Total Market Index Fund - FSTVX - 0.07% Expense Ratio
30% Spartan Global ex US Index Fund - FSGDX - 0.28% Expense Ratio
10% Spartan US Bond index Fund - FSITX - 0.17% Expense Ratio

”It looks like there are some Mutual Fund Custodial options under the Security Benefit Group products, there is an NEA Directinvest option. Under that option, there appear to be some options, (click on "Daily Performance") such as:

-American Century Equity Growth (ER 0.67%)

-Dreyfus S&P 500 Index (ER 0.50%)

-Dreyfus International Stock Index (ER 0.60%)
-PIMCO Total Return (ER 0.71%) This is some type of Intermediate Term Bond Fund?

It looks like the Spartan funds available in Aug 2015 have been replaced by Vanguard Admiral funds by Dec2015. The 4 other funds mentioned remain. I’ve sent Daniel1973 a PM, but no reply.
edit on Mar 9, 2016: Daniel1973 has posted that he was not using NEA Direct Invest for the Fidelity funds. His reference to the funds in NEA Direct Invest seems to indicate it included no Vanguard funds in Aug 2015.
Dec 9, 2015, corysold, asked “…. can there be other fees other than those listed below? If so, how would I go about finding out what they are?" Steve, your answer to corysold certainly make sense to me. corysold went ahead and used Direct Invest, starting in Jan this year. http://board.403bwise.com/index.php?showtopic=6061
Dec 10, 2015 corysold asked on BH forum for info on the NEA Direct Invest. This is the first I had heard of it.
Dec 26, 2015 I posted about the NEA Direct Invest 403b in the hopes of finding a long term user, but no luck so far. It was great to see Steve, Dan and others join in with posts. https://www.bogleheads.org/forum/viewtopic.php?f=2&t=180418
Dec 31, 2015 PEteacher asked this forum about NEA Direct Invest and also Aspire. Steve, Dan and I responded, and PEteacher probably went with Aspire. I’ve listened to your podcast on Aspire (thanks for them--I've learned a lot!), and Aspire seems like a very good way to go.

Feb 15, 2016 griffeyfan04 has turned in the papers to the SB rep. Chose VG TSM and TISM. https://www.bogleheads.org/forum/viewtopic.php?f=1&t=184752

Mar 16, 2016 griffeyfan04We are going this route as well for my wife through NEA/Direct Invest via security benefit because of the offer of Vanguard funds. It has been a lengthy process so be forewarned. They are not exactly in a big hurry to help you. A little complicated filling the forms out and sending it to them but maybe after the ease of dealing with Fidelity I am a little biased. Not saying if they are good or bad just has taken longer than I thought lol" https://www.bogleheads.org/forum/viewtopic.php?f=1&t=186962
When teachers come to the forums with nothing but insurance company 403b and no 457b available, we can direct them to the SB website for a look. But we should warn them that we don't have a year or more's proof that Direct Invest is as good as it appears on the SB's website.
Does anyone have an idea on how to make contact with a long term user of NEA Direct Invest?
krow36
Edited by krow36

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Hi Krow36,

I stand corrected! Thanks for all of the links, and thanks for starting this discussion. Perhaps through your effort somebody will now report that they used SB Direct Invest.

 

I echo what Krow36 wants, a real live person who is investing in SB Direct Invest low cost funds to report to us about this product.

 

We have a lot in common: FRUSTRATION! Yeah, its such a mystery as we know, across this country, there are tens of thousands of public k-12 teachers who are VERY savvy investors, with an interest in investing like us. Yet, it is literally the same 6-7 people who post here regularly for many years!!!!!!

 

Our colleagues have a right to not get involved in any way on these boards and only take the information provided here or read books on their own and got into real investments and control the costs, and let their colleagues continue to attend TSA sales! I think is hideous because the savvy investment educators know better and many of them probably tried to warn their colleagues, but just got the brush off. I DON"T KNOW. Perhaps, too many of our colleagues are afraid to take on the insurance industry, the unions and their benefits department because of erroneous perception of retribution. These institutions are powerful when you take them on as one person, but are weaker when we organize.

 

Have a great week,

Steve

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I'm considering going with them, but, like you all, are concerned about hidden fees and their shady history. I am supposed to be contacted by a "representative" within a few days and will report back.

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If your contact is a face to face, don't be surprised if they don't know much about and aren't really interested in the NEA Direct Invest. That's been the experience of other posters. The reps earn their living selling the other Security Benefit products. Direct Invest has a 12b1 fee of only 0.01%, which may be all he gets? As you probably have read, SB's website says it's a DIY 403b for investors who don't need the services of a rep. Whether there are hidden fees or not is still unknown, unfortunately. Maybe the lack of interest on the reps' part is a sign that there are no hidden fees, at least none that he gets to share?

 

We're looking forward to your report back!

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I'm considering going with them, but, like you all, are concerned about hidden fees and their shady history. I am supposed to be contacted by a "representative" within a few days and will report back.

 

bdhirsch, can you tell us how your contact with the rep went? What other choices do you have? What do you think of my theory that if the rep was totally uninterested in the SB NEA Direct Invest 403b, then it is more likely to be a good deal for teachers? Another good sign for teachers may be that on 403bcompare.com, SB doesn't have NEA Direct Invest listed with their other NEA backed products?

 

If we bump this thread from time to time, maybe it will attract the attention of a Direct Investor who will give us a report??

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I'm considering going with them, but, like you all, are concerned about hidden fees and their shady history. I am supposed to be contacted by a "representative" within a few days and will report back.

 

bdhirsch, can you tell us how your contact with the rep went? What other choices do you have? What do you think of my theory that if the rep was totally uninterested in the SB NEA Direct Invest 403b, then it is more likely to be a good deal for teachers? Another good sign for teachers may be that on 403bcompare.com, SB doesn't have NEA Direct Invest listed with their other NEA backed products?

 

If we bump this thread from time to time, maybe it will attract the attention of a Direct Investor who will give us a report??

 

Hi Bdhirsch,

There are a few of us that are anxiously waiting from you.

How did it go?

Were you able to find out more about the fees?

Krow36 has worked hard trying to get a conversation about NEA's SB option.

thx,

Steve

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In addition to corrysold using NEA Direct Invest, griffeyfan04 is now using it. I've included a few lines of his posts in my post above that details what I've been able to discover about users of NEA Direct Invest. I'll also include it here:

 

Feb 15, 2016 griffeyfan04 has turned in the papers to the SB rep. Chose VG TSM and TISM. https://www.bogleheads.org/forum/viewtopic.php?f=1&t=184752

 

Mar 16, 2016 griffeyfan04We are going this route as well for my wife through NEA/Direct Invest via security benefit because of the offer of Vanguard funds. It has been a lengthy process so be forewarned. They are not exactly in a big hurry to help you. A little complicated filling the forms out and sending it to them but maybe after the ease of dealing with Fidelity I am a little biased. Not saying if they are good or bad just has taken longer than I thought lol" https://www.bogleheads.org/forum/viewtopic.php?f=1&t=186962

 

Again, if anyone has had experience using the NEA Direct Invest 403b, please give us a report.

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I went through the process to fill out the paperwork months ago but have been unsuccessful at fully enrolling and having payroll deductions made. I contacted Security Benefit to see what the hold up was. They said they needed to speak to payroll. I gave them the contact information. That was at least a month ago and I still haven't heard back and got confirmation that I can complete a payroll deduction. I think I'm going to give up and contact someone at Aspire. People around here seem to have good things to say about them.

On a positive note, I did manage to stop my deductions going into my old AXA account. Until something else is set up I'm just going to forward the money into a taxable brokerage account.

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I'm so happy to see that this thread has become active again!

 

I recently submitted my paperwork electronically to set up a Direct Invest account. Once I have my account set up and in order I will be transferring all my funds from my existing 403(b)(7) to three of the eight Vanguard funds that are offered with Direct Invest.

 

While setting up this account requires legwork on my part (the financial advisor for Security Benefit who is our school rep does NOT set up this account or assist in ANY way) in terms of initiating the account and rolling over my money, I'm counting on the prospect of MUCH lower fees to make up for years of lost ground.

 

Does anyone have any updated information about how their accounts are doing with the Direct Invest option?

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I appreciate all the comments here. I suspect NEA offers this lower cost option as a hedge against future lawsuits. Quick history lesson: NEA was unsuccessfully sued for their high fee Security Benefits and Nationwide (I guess they are not on our side, Peyton) products. The plaintiffs argued that by endorsing these firms, NEA had assumed a fiduciary/sponsor role. The case was thrown out. It's also clear they are not going to market this or make it easy to sign up. Good for those who have persevered.

 

NEA Lawsuit

http://www.nytimes.com/2007/07/17/business/17suit.html?_r=0

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