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krow36

403Bcompare And D I Y Options?

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I have a question about the 403bcompare website that is run by the CA State Teachers Retirement System (CalSTRS). As I understand it, 403b vendors of K-12 plans in CA are required by CA State law to participate by submitting information on their offerings. Are there any consequences if the vendor omits one of the plans it sells? Is the vendor allowed to omit their low-cost option and continue to provide information on only their high-cost options? I believe this is the case with Security Benefit’s NEA Direct Invest 403b plan, and with Lincoln Investment Group’s Participant Directed Platform 403b/457 plans.

I see that a school district “may not forward annuity or custodial account consideration to the vendor of any unregistered 403(b) product,” except for employee accounts started before 2004 which are grandfathered in. (403bcompare.com) In CA neither of the above self-direct low-cost plans would be legal.

In a document sent to the school districts, employers are encouraged to notify the 403bCompare.com Administrator at Administrator@403bCompare.com if: The employer suspects materially inaccurate information has been provided by a vendor.

and

Vendor Removal Process
California Education Code Section 25103 gives authority to the Teachers’ Retirement Board to remove a vendor for
submission of materially inaccurate information, not submitting assessed fees within 60 days of invoice, or failing to submit notice of material changes to registered products. https://www.403bcompare.com/Documents/ED2004-04_403bCompare.pdf

Scotty and Steve, what do you think? Can 403bcompare force the vendors to include all their products? Or does the school district have to start the process?

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Krow36,

 

A vendor does not have to offer any particular product that they offer outside in California, but any product sold in California must be disclosed on Compare. If they do not disclose it, then code section 25107 would be applicable, it states "A vendor may not charge a fee that is not disclosed." A literal reading would indicate that if a company chooses to sell a product, but does not list that product, any fees charged would not be legal.

 

But to answer your question, no, Compare can't force a company to offer a product, only threaten to remove them if they are caught selling something not disclosed.

 

Does that help?

 

ScottyD

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403bcompare needs to update their website. I know some vendors are now available for my district but it doesn't show them as being available on the 403bcompare website.

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DK,

 

403bCompare is undergoing a complete redesign and will re-launch later this year. With that said, keeping the vendor information up to date is the responsibility of the district (and/or their compliance administrator). If the CTPA/District don't update it regularly, it will still be incorrect.

 

ScottyD

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Thanks DK,

I glanced at it, and its very different than the old design.

 

I find it humorous to see that some insurance companies have surrender costs but charge no commissions.

 

Steve

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krow,

Several months ago, when you reported here that Direct Invest was not on 403bcompare.com, I asked our 403b TPA to check into this omission. SB made it available ASAP.

Steve

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Someone should double check the information on the website. For example, if you go to fees under Vanguard, instead of being $15 per fund; it says 15% per fund. If I saw that and didn't know about Vanguard, I would not sign up for that.

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I did check the Vanguard website, and it is $15 per fund. The classic 3 fund Portfolio at $45 is not unreasonable. Using a Target Retirement or Life Strategy fund certainly makes sense. And the fee is waived if the household balance is 50k. https://personal.vanguard.com/us/whatweoffer/smallbusiness/403b7

 

That brings up another question. All of Vanguard's TR and LS funds are given an ER of 0.0%?? In fact the TR funds of Fidelity, USAA etc. are also given an ER of 0.0%. Surely this is a toothing problem?

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