Jump to content
Sign in to follow this  
techteacher

Bringing Low Cost Options To District

Recommended Posts

Great story, techteacher! Be it a 403(b) or 401(k) we all benefit when we push employers. Good for her (and you)! It also shows, that lack of employer knowledge about retirement plans is all too prevalent! - Dan

Share this post


Link to post
Share on other sites

And the data backs up those statements Dan.

 

It can be alarming to hear that two thirds of Americans aren't using employer sponsored plans (http://www.forbes.com/sites/laurashin/2015/04/09/the-retirement-crisis-why-68-of-americans-arent-saving-in-an-employer-sponsored-plan/#147e979119d8) and that the number of employers offering them has declined.

 

I do believe that we can accomplish far more as a group than individuals. That is precisely my intention for joining this cadre. I hope to learn from the experiences of those who have gone through it, while providing inspiration to those who have interest in doing so.

Share this post


Link to post
Share on other sites

Happy New Year to all!

 

It's been a little while, school has been going well and I have a bit of news regarding my efforts.

 

Last night at a monthly meeting the head of our Human Capital office came to speak. He wasn't scheduled to do so, but provided support to one of his colleagues who was. I appreciated his forthrightness and clarity as he spoke on many issues concerning us teachers, such as recertification and pay raises.

 

I waited until the end to approach him and ask about brining low-cost options to our district. He replied that he just rejected two vendors last week as we have nine already and he didn't want to confuse employees with any more. I respected that view, but asked that he consider bringing one, such as Vanguard, that would only charge 0.1% as opposed to most of ours that charge between 1 to 3%. He asked that I email him my request; he would forward it to a consultant for the district to crunch the numbers and would consider the request.

 

I have already emailed him and look forward to a response. I wait with guarded optimism that it might happen.

 

In the meantime, I am considering going with American Century as I believe that a mediocre option is better than not utilizing the plan at all.

Share this post


Link to post
Share on other sites

I m also trying to get a low cost option added to our district. As I mentioned on bogleheads, I work in a small district. We do not have a human resource department, we have 4 overworked women in the Superintendent's office with a multitude of jobs. We have no TPA. There are presently 4 options, AXA, Voya, Horace Mann, and MetLife. I am trying to find a lower-cost option that would be not too daunting a task to get set up. I have everyone's attention, but I am a little uncomfortable pushing a vendor and then having it turn out to be a major disaster in terms of paperwork. I know there are IRS things to consider as well. Vanguard only has access to investor funds in their 403b, and there is a $15 per fund charge yearly. http://www.vanguard.com/pdf/s297.pdf?2210039342

To be honest, Aspire looks more user friendly in many ways, I could be wrong on this! https://www.aspireonline.com/docs/default-source/form-library/plan-establishment-guide---403b-non-erisa-public-education.pdf?sfvrsn=14. I think they allow people to use their own advisor. That's different; not something I would want to do, but some people may like this.

I know Fidelity is an option, although we may be too small for them. There was no enrollment kit on line, I believe you have to contact them via email for information.

Any words of wisdom?

Share this post


Link to post
Share on other sites

Welcome to the forum LibraryLady!

Have you listened to Mark Eichenlaub’s podcast (#32)? He was able to get Fidelity for his small district.

http://teachandretirerich.com/podcasts/

I would actually put Fidelity at the top of the list although Vanguard and Aspire are also excellent. Vanguard seems to be having problems handling a greatly increased volume of traffic and their use of only Investor class in their 403b is a slight negative as you mention.

From what I read on this and the Boglehead forums, the most common way a new low-cost provider gets added is by repeated personal contacts. Talking to the HR department and whoever makes decisions on the provider list, school board members, etc. seems to often get results. Having other teachers join you no doubt helps. It takes persistence and patience to overcome the organizational inertia.

Have you read the NY Times articles on the problems of the K-12 403b? The articles should be useful in recruiting your colleagues to the cause.

http://www.nytimes.com/2016/10/23/your-money/403-b-retirement-plans-fees-teachers.html?smid=tw-share&_r=1

Share this post


Link to post
Share on other sites

I did listen to the podcast, but it seems there was a human resource department and a TPA. We have neither. I'm not sure anyone can answer my questions about the paperwork involved and upkeep once it is approved. It does make a difference in a place as small as our district.

 

Can anyone answer this question? For Fidelity, what are the additional fees? Vanguard charges $15 per fund per year. Aspire charges $40 per year plus .15% of the account. Fidelity doesn't offer a lot of details on their plan online that I could find. You need to leave a name and number for further info. I did pass this info to the business manager, but she is waiting for the union to say this is what we want. I have a feeling for Fidelity it depends on the size of the accounts, and maybe there are add on things they can do that will cost money, I have no idea.

Share this post


Link to post
Share on other sites

Have you checked out Fidelity on 403bcompare. com? The annual fee of $24/year is very reasonable. There’s a long list of available funds, most of which are more expensive managed funds, not index funds. There is however an adequate number of very low-cost (Premier class) index funds available:

500 Index FUSVX, ER 0.07%

Extended Index FSEVX, ER 0.07%

(The above 2, in a 4 to 1 ratio, equal the US Total Stock Market.)

US Bond Index FSITX, ER 0.17%

International Index FSIVX, ER 0.17%

So Fidelity can certainly compete with Vanguard and Aspire/Vanguard when it comes to low-cost funds and the flat annual charge. Fidelity is trying to compete with Vanguard on index funds and recently lowered the ERs on many of their index funds. I think the above Premium ERs have been reduced and 403bcompare isn't up to date.

Share this post


Link to post
Share on other sites

It's been a bit over a month since I asked the head of Human Capital to add a low cost option. After a couple of unanswered emails to him, he wrote back this week saying that they do not intend to add any new vendors at this time. Some additional context may also help in understanding HC's decision. Our district recently announced a $129 million deficit for the coming year: the superintendent has floated the idea of laying off 1,000 employees, many of them being teachers, as well as several furlough days. We are nearly a year into negotiations for a new teacher contract, which expired at the end of last school year; salary decrease, salary freeze, higher costs of benefits are all on the table. Giving us a low cost option seems like the lowest priority at this point. I believe in light of these serious issues it is all the more reason to give us something good that really doesn't cost them anything more. I replied expressing disappointment with the decision. It may be effective to have several dozen employees who are interested all write him. I may also reach out the the teacher's union to see if they would support the effort, though I am not optimistic on that front.

 

We do presently have American Century as a choice, so I may ask though here who have used them about their experiences. I see they have a couple of relatively low expense ratio funds that track similarly to the S&P 500. I prefer total market funds, but in the meantime I might just go ahead and start with what we have.

Share this post


Link to post
Share on other sites

TechTeacher, sorry about the district’s problems resulting in no addition of a low cost vender to the list. I agree with you that American Century appears to be a usable 403b provider in the mean time. Their Equity Growth, BEQGX, an active large cap blend fund with an ER of 0.67% looked like a reasonable choice. Are you using 403bcompare to look at all the funds available? Or does AC use a different list in your district’s case? Would you mind posting the other 8 vendors?

How did your wife fair with her district’s vendors?

Share this post


Link to post
Share on other sites

I am not certain if I am restricted to certain funds with American, but believe I would have access to all. A representative I had spoken with a few weeks ago recommended their Equity Growth as about the closest thing to an index fund. That was the one I was referring to in my previous post.

 

The other vendors are:

1. AXA

2. Lincoln Financial Advisors

3. Lincoln Investment

4. MetLife

5. New York Life

6. Plan Member Services

7. Valic

8. Voya

 

My wife is an adult educator who works with the government. Her contract has been held up the past 7 months, but looks like the issue might be resolved soon. I was just speaking with her today about our plan once she can start contributing. I am hoping her 401(k) will have some decent choices. She maintains another 401(k) with another company she does occasional work with and they offer Vanguard funds.

Share this post


Link to post
Share on other sites

Lincoln Investment Group has come up with a DIY plan that looks very good but they are not making it easy to learn about it. Here’s a link to a recent thread on this forum, which links to a current Boglehead thread.

http://board.403bwise.com/index.php?showtopic=6361

 

It’s not possible to put a link to the pdf application form, but needs to be emailed. If you send me a private msg, I’ll email you the link to the form. Or you can call up a main office of Lincoln Investment Group (not the local rep) and they can provide the pdf link.

Share this post


Link to post
Share on other sites

I reached out to all companies and explained how I wished to have low cost passively managed index funds. Several of the companies replied saying they do not offer them. Lincoln might be like Plan Member Services who offered index funds, but charged a 2% fee on top of the 0.1% expense ratio to access them. However, it certainly couldn't hurt to double-check.

Share this post


Link to post
Share on other sites

PlanMember Services has an option called PlanMember Direct that adds 0.35% to Vanguard Investor class funds. Not a bad deal, certainly better than American Century. You need to make use of 403bcompare.com so you know what the possibilities are!! (Although that doesn't help with the DIY Lincoln program.) The local reps and offices won’t tell you about the low-cost options because there’s no money in it for them! Anyway, we’ll tell you about them! The folks here and on the Boglehead forums have spent years looking for low-cost options! And we're still looking for new ones.

Share this post


Link to post
Share on other sites

Thank you very much Krow. I shall devote some time to looking over 403bcompare.

 

I am looking over the paperwork I received from PlanMember Services about two years ago. They gave me the Elite, Select and annuity options. The person's exact words were "You have three options..." and I was handed the paperwork. I find it quite disappointing that they would neglect to mention Direct. I shall call them this week and confirm it is an option available in my district.

 

I have in my notebook that I called Lincoln Investment and would receive a call back from a representative. I can't recall whether I ever received it, but if so it probably went like this:

me: I am interested in low cost passively managed index funds.

Rep: We don't offer that.

 

Like PlanMember it appears as though I was not given all of the information.

 

I would like to return to my Human Capital director and let him know what is going on with our current vendors. He may not care, but I find it abhorrent that they would deliberately mislead potential clients. I asked everyone of them whether they would sign a letter stating they would act as my fiduciary. All of them said yes, yet they wouldn't even honestly tell me which products they offered despite me clearly explaining what I am looking for.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

×
×
  • Create New...