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EdLaFave

Adding Vanguard Or Fidelity To Ocps (Fl) 403(B)/457(B) Plan.

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After speaking with Orange County representatives they've told me they follow this process:

 

  1. Every 5 years they put out an RFP.
  2. Any interested financial institution can reply to the RFP.
  3. A committee (OCPS administrators and union representatives) select which financial institutions can participate.
  4. OCPS tells their third party plan administrator (TSA Consulting Group) to go through the mechanics of setting up the vendors.

I've called Vanguard and they seem insistent on the notion that they simply do not reply to RFPs. They say that the third party plan administrator can simply reach out to Vanguard and add them as a vendor. Of course the third party plan administrator has told me they simply don't do that and only set things up with the financial institutions that OCPS has selected through the RFP process. Any suggestions?

 

After listening to the podcast with Fidelity's Scott Senseney from November of 2015, I was hopeful Fidelity would reply to the RPF from OCPS. However, when I call Fidelity I can't seem to get a hold of anybody who knows anything. Any suggestions?

 

Any suggestions for reaching out to other low-cost, total market, index fund providers?

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Have you looked into Aspire? Aspire can connect you to Fidelity/Vanguard through a self direct brokerage account. Its the only way for many school systems to tap into good low cost funds.

 

 

Tony

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Yes, I am looking at ASPire, Vanguard, and Fidelity because those are the low cost options I've seen in other districts in the state.

 

Although Aspire looks to be the worst of the three because they add on the 0.15% fee. Still much better than all of the sky high costs from most vendors out there.

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EdLaFave

 

We all want to get fees as low as possible but we shouldn't go to the extreme of worrying about 0.15 %. If you can get Vanguard or Fidelity Index funds at 0.07% whats an extra O.15% fee? Seriously !You will be paying very little compared what most others are paying. No-one works for free.Not even Aspire. When we talk about lowering fees we are talking about getting rid of those ridiculously high fees many of us had to pay before we had access to aggregators like Aspire. With Aspire you are doing pretty darn good. Just trying to keep things in perspective.

 

Tony

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  • A quantifiable answer, an extra 0.15% fee (over 30 years, 6% market return, and 3% inflation) will consume 6.5% of real profits.
  • Huge improvement relative to a 2% fee that consumes 73% of real profits, which is why I'm considering ASPire as a real option.
  • I'll definitely be leading with Vanguard and Fidelity because I think their fees are lower and their fund selection is less overwhelming.

 

...still if the compromise is to use ASPire, that is a big win!

 

...although this isn't personal for me, we're at NEA DirectInvest with absolute rock bottom costs. Couldn't be happier for our personal circumstances.

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EdLa Fave

 

Your math equation may be correct straight on but there are so many variables in investment returns that your equation may not pan out like that over 30 years.

 

I am not arguing that 0.15 doesn't matter . But having paid over 2% a year expense ratio during some years of my career before figuring it all out and coming out alright even with all the mistakes i made, I think things can be much worse in regards to expenses. We have many school systems that still only offer insurance products that are fleecing their employees. Getting a company like Aspire would be a major win for them.

 

I know in our case we could not get Fidelity or keep Vanguard in our vendor choices after the new regs happened. Aspire for us was a Godsend as was Blackrock in our 457b plan. Both charge a reasonable administrative fee but still gave us access to rock bottom fees.

 

Tony

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It looks like 23 counties in the state of Florida use some combination of Fidelity, Vanguard, or Aspire in their 403(b) and/or 457(b). So as I have time I'll probably give some of those counties a call...but if anybody has suggestions for how to bring these companies on board, I'm all ears.

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The difference in the 403b fees of Vanguard direct and Aspire Self-directed using Vanguard funds isn’t just the Aspire’s added 0.15%. Vanguard direct uses Investor class funds (TSM 0.15%) while Aspire allows use of Admiral class funds (TSM 0.04%). That difference of 0.11% almost cancels out the 0.15% that Aspire adds. Vanguard charges $15/yr per fund (with a limit of 5 funds), the fee being waived for household account balances over 50k. Aspire charges $40/yr.

Vanguard

TSM Adm 0.04%

TSM Inv 0.15%

difference of 0.11%

TISM Adm 0.11%

TISM Inv 0.18%

difference of 0.07%

TBM Adm 0.05%

TBM Inv 0.15%

difference of 0.10%

Using a single Target Retirement fund (which only come in Investor class) reduces the cost difference and also Vanguard’s per fund fee.

Fidelity allows the use of Premium class funds in their direct 403b and charges $24/yr.

TSM Prem 0.05%

TISM Prem 0.08%

TBM Prem 0.05%

(from 403bcompare; M* slightly different)

Security Benefit NEA Direct Invest, charges $35/yr fee, waived for accounts over 50k.

TSM Adm 0.04%

TISM Adm 0.11%

Interm-term Bond Index Adm 0.07%

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Krow , you are amazing with numbers and facts. When I type Krow, this site auto corrects your name to "Know" I now know why.

 

I DO REMEMBER that in a 403b direct invest with Vanguard, I could not get Admiral fees. When I retired and moved everything over to Vanguard IRA my fees went down due to availability of admiral shares. But I remember the annual fee to be $40.00. So perhaps they lowered that fee.

 

 

Still either way ED you are doing well.

 

Tony

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krow, I have every reason to believe you're 100% correct. Where can I find an "official" source for this? When I lay out this info for OCPS I want to point to an official document.

 

...also thanks, I had no idea vanguard restricted you to investor shares.

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I think Vanguard doesn’t want the costs of administering an employer based retirement account to be shared by all its other customers, so defrays the cost by not allowing Admiral class shares. Makes sense to me.

Here’s the Vanguard 403b information: https://personal.vanguard.com/pdf/0020.pdf?2210110187 403bcompare is incomplete on Vanguard’s $15 fee because it omits the per fund and the 5 fund limit.

I got the fees for Fidelity and SB NEA/Direct Invest fees from 403bcompare. Aspire’s fees are on their website’s FAQ.

Tony, thanks, but I know for a fact that I can screw up! My wife will confirm it. So don’t take anything for gospel, check it out!

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You just reminded me my wife still has a 403b account with Vanguard. I need to transfer it to a Vanguard IRA so I can lower her fees.

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If I processed all of the information correctly it looks like the "best" vendors in the K-12 403(b)/457(b) market (at least in FL) allow you to build a diversified portfolio for about:

 

Great

Fidelity: 0.06% + $24/year (can't be waived)

Security Benefit's NEA DirectInvest: 0.07% + $35/year (waived if you have $50,000)

 

Good

Vanguard: 0.16% + $15/year (can be waived)

ASPire: 0.21% + $40/year (can't be waived)

 

Mediocre

PlanMember Direct: 0.41%

 

...if I got anything wrong please correct me.

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I think you've got it right. Just realize Fidelity sells many fund and some are not cheap. The super low cost only applies to a few of their funds, specifically their index funds.Other Fidelity funds are mostly active management and sport much higher fees. This is a distinction investors need to understand.

 

In all other areas Vanguard would offer a wider array of funds at much lower cost. Target funds they offer would be a great option for teachers and they are comprised of index funds and are self managed. Thats huge for a less savvy investor.This would offer an investor more good choices. As long as you understand your chart is for index funds only then you are accurate.

 

Also, many uninformed teachers will look past the expense ratios and focus on the yearly fee. This is a huge error as the expense ratio is more important to consider. The yearly fee is largely inconsequential.

 

Hope this helps.

 

Tony

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OCPS webpage for 403b/457 providers:

https://www2.ocps.net/departments/risk_management/retirement_services_homepage/tax_deferred_annuities/

TIAA should probably be investigated just to cover all bases. Maybe you already have? The link to TIAA website on OCPS’s provider list doesn’t give any information on fees. TIAA does have index MF’s and their ERs depend on which class their 403b would allow. The Retirement class broad-based index fund’s ERs are around 0.30%. Those of the Institutional class are around 0.05% but I doubt that those are available in their generic 403b plan. https://www.tiaa.org/public/investment-performance?defaultview=mfinstonly

In March I wrote up a Wiki article on the K-12 403b and at that time TIAA wasn’t discontinued in 403bcompare. I included it in a list of possible providors with fees under 1.0%:

"TIAA offers moderately priced annuity-based plan. Fee of 0.45% is added to index fund ERs of about 0.35%, with no flat annual fee."

After the revised 403bcompare showed TIAA discontinued in CA, I removed TIAA because I couldn’t confirm the fees with 403bcompare. https://www.bogleheads.org/wiki/403b_plans_for_K-12_public_school_district_employees

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