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Bringing Low Cost Options To District

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It's conceivable to me that the PlanMember and especially the Lincoln Investment Group people you spoke with do not know about the DIY options! They are trained to sell products that are profitable and these DIY options are not very. I've been told that some PlanMember reps are aware of the Direct plan and don't fight it, while others don't seem to be aware of it, although of course they should be!

 

As for the LIG Participant Directed Platform, they haven't published anything on it as far as I know. And the application form must be asked for from a main office?? It's like they want to keep it a secret. Of course it does bypass Retirement Premier 403b plan with it's 0.90% add on to Vanguard's ERs.

 

Did I mention that the PDP makes traditional and Roth 403b and 457 plans available?

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One of the plan providers has a sales rep who often sets up a table in our main hallway with a few boxes of donuts and coffee. I have spoken with her on a few occasions and at one time asked about their 457 plan options. I think I even mentioned that in a previous post here.

 

Well she and her colleague were back again this past Friday and I brought up the 457 option again asking "what mutual funds do you offer?" Her response "We offer only annuities in our 457." I said "Oh, I thought that the 457 unlike the 403(b), which began by offering only annuities, primarily offers mutual funds." (Something I had read in Dan Solin's Smartest 401(K)* book). She said "well, ours offers only annuities."

 

For some reason, especially after today's conversation on this board, I don't entirely trust her response to me.

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I'm not familiar with the Solin book. Anyway you can probably cross off the donut lady's firm from your 457 possible venders list.

I’m a bit confused about your TPA. If it’s TSA Consulting Group, when I look up Maryland, and go through the districts listed, I don’t see the same list of eight 403b providers that you gave. Is your list different than the one provided by the TSA website? Is your district not listed?

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OK, I see 9 county school districts listed by TSA Consulting Group’s website for MD. Most of them have neither Lincoln Investment Group nor PlanMember Services on their 403b list and none of them have both providers. No matter, assuming your 403b list is correct, what’s important is what the TSACG, the Third Party Administrator, lists. The TPA is the gatekeeper for 403b and the 457 plans that are allowed by the district. If Lincoln Investment Group is on the 403b list, you should consider it a possibility for a low cost 403b. If it’s not on the 457 list (even though Lincoln Invest. Gp. can be a 457 provider), you won’t be able to use it for a 457. Contact me by PM is you want to look over the Lincoln DIY application form.

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I have spoken with representatives from both Lincoln Investment and PlanMemeber.

 

The person from Lincoln said that PDP is only offered in a very few districts and mine is not one of them. However, they'd be happy to offer me the same Vanguard index funds for a much higher fee!

 

I am still waiting for the person from PlanMember to get back to me. At first the person said "I emailed you that information two years ago." Well, that person emailed me no information and it was not in the literature that had been given to me when I visited the office. It is quite disappointing how they appear to be obfuscating my choices. Yes, yes, I get that they get a higher commission off the others, but if I am saying "This is what I want..." and they respond "We don't have that" or "We don't offer that" when in fact they do that is downright dishonest.

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Have you looked at this webpage for PlanMember Direct? https://pdfs.planmember.com/PDFs/PMPARTNERS_SALESandMARKETING/FloridaModelPlan/PartFactPMDirectFactSheet.pdf

". . .but if I am saying this is what I want..." and they respond "We don't have that" or "We don't offer that" when in fact they do that is downright dishonest.”

 

PlanMember Direct doesn’t use the local advisors or reps, so it is probably something they do not “have” or “offer”. They may think it’s not their job to inform you about how to avoid using their services. PM Direct is designed for investors who can manage their 403b over the internet without the help of reps/advisors. I think whether the local office knows about it or not is probably not relevant.

Here’s the list of mutual funds PM offers. http://www.planmember.com/programinfo/index.cfm?currentpage=Elite%20Program

The Vanguard fund list is not long but you could easily construct a fully diversified account. The funds are Institutional class which have lower ERs than Admiral class and Investor class. Vanguard uses only Investor class in their own 403b plans (TBM Investor has an ER of 0.16%).

You could use the following to get close to a Total Stock Market Index fund:

Growth Index, ER 0.07%

Value Index, 0.07%

Small Cap Value Index, 0.07%

They do have:

Total International Stock Market Index, 0.10%

Total Bond Market Index, 0.05%

The 403bcompare.com website has a somewhat different list of funds for PM Direct with includes Vanguard Total Stock Market Index. https://www.403bcompare.com/Employee/SubProducts/FundingOptions/FundingOptionList.aspx?pid=4595

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Thanks for the information Krow.

 

I am interested in folks' thoughts on 403b vs 457b. Both are offered in my district, I've read about some of the differences, but am not certain which might be a better fit. It also seems possible that I could contribute to both.

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I am interested in folks' thoughts on 403b vs 457b. Both are offered in my district, I've read about some of the differences, but am not certain which might be a better fit. It also seems possible that I could contribute to both.

 

Having both a low-cost 403b and a 457 plan available to you is very fortunate. A lot of folks are envious because most in the non-K-12 world are restricted to a single employer-based plan like a 401k. What does your TPA’s 457 list for your district look like? Frequently there are fewer 457 providers to choose from than 403b providers. Sometimes the 457 plan is much better (lower cost) than the 403b plan, sometimes the reverse. It all depends on what your district has on their provider list. If PlanMember is on both your 403b and 457 provider lists, I’d contribute to both of them to the max I could swing.

The 457 is unique in allowing penalty free distributions at any age if no longer employed by the plan’s sponsor. This provides a valuable option which may or may not be used. The 403b plan requires age 55 and no longer being employed by sponsor before penalty-free distribution (with a few exceptions). Teachers frequently decide to leave the profession after less than the years needed for full retirement.

If you anticipate both a pension and Social Security, as well as a large 403b and/or 457, it might make sense to contribute to a Roth 403b or Roth 457. Otherwise you might find yourself in a higher tax bracket in retirement, especially after age 70.5 when Required Minimum Distributions start. Of course a spouse’s tax deferred accounts need to be considered also.

 

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Thank you for the advice.

 

Apparently PlanMember does have both 403b and 457 with all PlanMember Direct funds available. Presently we have no Roth options available.

 

All things being equal the 457 seems more attractive, since it has less restrictions. I did read elsewhere that it may be more difficult to roll the 457 into an IRA or other plan if changing employers, whereas the 403b can readily be rolled over.

 

I have not researched it much, but read a fellow's account of converting his 401k to an IRA upon leaving the company and then a Roth IRA post-retirement when his income was $0. Therefore, the tax liability of the conversion was at the lowest tax bracket. Seems like the same can be done with the 404b. Wonder if it could be done with 457?

 

http://www.madfientist.com/traditional-ira-vs-roth-ira/

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A quick check on IRS.gov appears to indicate that both 403b and 457b accounts can be rolled over to traditional and Roth IRA's. I wonder if direct institutional transfers (avoiding the 20% withholding) is also allowed for both?

 

Of course I would plan to do this during a time when I had very low or no income.

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A quick check on IRS.gov appears to indicate that both 403b and 457b accounts can be rolled over to traditional and Roth IRA's. I wonder if direct institutional transfers (avoiding the 20% withholding) is also allowed for both?

 

Of course I would plan to do this during a time when I had very low or no income.

 

Yes I think it can be done with either a 403b or a 457. It’s a great idea to pay the IRA tax when your tax bracket is 0%, or even just 10%! The article does mention that ideally you have a taxable account you can live off of after retirement. Selling from a TSM fund in the 15% or lower bracket results in 0% rate on dividends and cap gain distributions. If you retire and your pension starts, those 2 lower brackets will be filled. Maybe quitting and postponing the pension for a few years would work? Most folks don’t have a large taxable account that they can use for living expenses including medical insurance, so they need to take the pension. At any rate, most retirees’ tax brackets are lower than during working years, which makes contributing to tax-deferred rather than Roth employer plans a better idea.

"The Case Against Roth 401(k)” by The Financial Buff, Harry Sit

I don’t think there’s a problem doing either a “trustee to trustee” transfer of either the 403b or the 457 to an IRA. Some trustees seem to want to do a “direct rollover” which means they send you a check made out to the new trustee “For the Benefit of (your name)”, which you then mail in within 60 days. In neither case is income tax withheld. When the old provider does an “indirect rollover” where the check is made out to you, there’s income tax withheld, you have 60 days to get the check to the new provider, and only one indirect rollover is allowed each year.

All things being equal the 457 seems more attractive, since it has less restrictions. I did read elsewhere that it may be more difficult to roll the 457 into an IRA or other plan if changing employers, whereas the 403b can readily be rolled over.

 

Not every employer offers a 457 plan so it might not be possible to transfer the old plan to the new employer. I don’t think there’s a problem moving a 457 to an IRA after leaving the employer if the 457 is a “government 457” (such as a school district’s 457). Doing so would loose the 457 special distribution rules. IRAs have a 10% penalty if distributed before age 59.5. It would be a shame to loose that early distribution option.

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Another difference to consider between a 403b and a 457 (At least in my state not sure about yours) You can take money out as a loan with the 403b but you can't with a 457. Just another trinket to consider,

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Hello all, I am new to the forum and a little late to this thread, but I do have experience with getting my school district to add a low cost vendor. So I thought I would share my story.

 

I was with AXA and like many others, was uneducated and unaware of the crazy fees I was paying. When I tried to transfer my 403b to another district sponsored provider, I found out that my only other choice was MetLife. I was comfortable managing my own 403b funds, and wanted a self-directed and much less expensive option. I came across an article about a math teacher from New Jersey named Bruce McNutt. Seems Bruce was not too happy about the fees he was paying either and he wanted a better option, namely Vanguard. He gained the support of some of his peers and lobbied the school board to add Vanguard. It worked! So I started my crusade to add Vanguard to my school district list of approved vendors.

 

I wasn't quite sure how get started. But I knew I had to act. So, I contacted my district's union president and was invited to give a presentation to union building reps. I shared with them the power of compounding interest, and how numbers that seem relatively small like 1% and 2%, can crush long term growth. And why it is important for our district to offer a low cost, self-directed option. I made myself available after school to do presentations to any school in my district (I teach in a large suburban district in Pennsylvania which has 23 schools). I gave several presentations, including a presentation to the faculty at the high school in which I teach and started to educated my peers about the importance of having choices and paying lower fees. Momentum started to build and I collected several hundred signatures on a petition to include Vanguard as an approved vendor (as it turns out, I never needed the petition).

 

My union president arranged a meeting with the district business manager and head of payroll. I gave my presentation to them and approximately a year later, Vanguard was added to our approved vendor list. Now, there were several follow up discussions and emails, to make sure that the subject didn't just go away, but I never had to approach the school board or superintendent personally.

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