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LiT

403b plan for New York State educator

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Hi all! 

I’m in the market for a 403b and just wanted some advice for a New York State teacher. My options are in the attached po. I am not interested in an annuity only 403b. I’d prefer a Roth 403b if available. In my research it seems like the NEA Security Benefit might be my best option, but I would love to get some other opinions. Thank you! 

11391797-4CF7-457B-AA76-263073802786.jpeg

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Hi Lit,

Fortunately, you do not have to wait for a response. Your question has been discussed for the last couple of years on this forum. 

What you want is NEA Security Benefit DIRECT INVEST: here is a discussion on this,

http://board.403bwise.com/topic/7040-aspire-or-nea-direct-invest/?tab=comments#comment-39356 

And one of our esteemed posters, Ed, wrote this on his blog: https://educatorsfightingforfairness.wordpress.com/security-benefits-nea-directinvest/ 

There are other discussion threads, just use the search feature.

Ask your employer if a 403b Roth is available. 

Good luck,

Steve

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LiT, I agree with Steve and you that the NEA Direct Invest plan is excellent and your only low-cost option. That assumes that you choose the Vanguard index funds as discussed in the link that Steve provided. The target retirement funds and other actively-managed funds are too expensive. 

Are you aware of the excellent 457 plan run by NY state?

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I recently heard about the 457 plan from a NYS employee that is NOT a teacher. From my research I don’t believe I can start a 457. Am I off base with this? Is that something I can start? 

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2 hours ago, LiT said:

I recently heard about the 457 plan from a NYS employee that is NOT a teacher. From my research I don’t believe I can start a 457. Am I off base with this? Is that something I can start? 

I think you were misinformed. The NY State 457 plan is being used by many NY state teachers who post on this forum and on the Boglehead forum. You should check on your district's 457 list of vendors. If it is not on the list, it likely possible to add it without much resistance from the district or TPA. Give the plan a call and they can helpful. 

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457 plans are definitely not on my district’s list, but I will definitely do some research into it. Thanks so much. I didn’t realize that even if they didn’t have vendors it was a plan I could still participate in. 

 

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1 hour ago, LiT said:

457 plans are definitely not on my district’s list, but I will definitely do some research into it. Thanks so much. I didn’t realize that even if they didn’t have vendors it was a plan I could still participate in. 

 

The low-cost state 457 plan are usually added to the district's 457 vendor list because an employee has asked for it. Of course a district that was looking out for their employees would have added it, but unfortunately that's not usually the case. Neither the district HR office nor the TPA are usually aware of the importance of low-costs. Any low-cost option is only added to the list due to employee pressure. Sometimes it doesn't take much, sometimes persistence is needed.

The exception might be the NEA Direct Invest option. Security Benefit's main business is selling very expensive annuity and mutual fund 403b plans to unsuspecting teachers. However NEA, the national teachers union, has sponsored the ultra-low-cost Direct Invest plan. NEA also allows the NEA label to be attached to other very expensive Security Benefit 403b plans. Security Benefit pays NEA several million a year for the use of the NEA label. NEA Direct Invest most likely exists because Dan (owner of 403bwise) and Scotty (CFP and contributor) talked to an NEA official. 

All the low-cost 403b plans are internet and phone based, NOT local rep-based. Unfortunately teachers seem to think they need a local rep, mistakenly thinking the rep is looking out for their best interests. 

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8 hours ago, krow36 said:

NEA Direct Invest most likely exists because Dan (owner of 403bwise) and Scotty (CFP and contributor) talked to an NEA official. 

 

 

Hi krow,

Dan and Scotty can speak for themselves but I seriously doubt that NEA would take any outside advice. But I have been wrong before! :- )

Nobody knows the reason why NEA came up with the Direct Invest but the eerie coincidence of NEA creating this option came right after their lawsuit when two teachers sued NEA for breach of fiduciary duties. The general consensus around here is that NEA created this option as an added protection against future lawsuits. They can argue with clear evidence and say with a straight face to future judges and juries, "look we have this fiduciary (and low cost) option but as you can see your honor hardly anybody uses it."

NEA case against them was beaten back twice because the judges threw it out as the 403(b) is not under the department of labor fiduciary regulations. The teacher's attorneys argued a brilliant case IF the 403(b) had fiduciary mandates. In fact, if the 403(b) was under fiduciary mandates as the 401k world, this website could be closed down and we all could go home.

It's that simple. But that isn't going to happen, YET. 

Steve 

 

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7 hours ago, sschullo said:

Hi krow,

Dan and Scotty can speak for themselves but I seriously doubt that NEA would take any outside advice. But I have been wrong before! :- )

 

 

Dan and Scott tell the story on Episode 26 of their April 2016 podcast. By chance, Dan met an NEA Members Benefit official at bus stop in MD where he was living. Some time later, Dan and Scott met with him for dinner. They tried to convince the official that NEA should be offering teachers a low-cost 403b plan, not the very expensive “NEA Value Builder” products. Several years later the official called Dan and asked advice on fund offerings in the low-cost plan. Dan and Scott do not know for a fact that they were instrumental in the establishment of NEA Direct Invest, but it seems highly likely to me. You can listen to this story starting at minute 21 of Episode 26. http://teachandretirerich.libsyn.com/page/2/size/26

I don't doubt that the lawsuit also figured into reasons that NEA and Security Benefits decided to create a very low-cost 403b option.

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17 hours ago, krow36 said:

The low-cost state 457 plan are usually added to the district's 457 vendor list because an employee has asked for it. Of course a district that was looking out for their employees would have added it, but unfortunately that's not usually the case. Neither the district HR office nor the TPA are usually aware of the importance of low-costs. Any low-cost option is only added to the list due to employee pressure. Sometimes it doesn't take much, sometimes persistence is needed.

The exception might be the NEA Direct Invest option. Security Benefit's main business is selling very expensive annuity and mutual fund 403b plans to unsuspecting teachers. However NEA, the national teachers union, has sponsored the ultra-low-cost Direct Invest plan. NEA also allows the NEA label to be attached to other very expensive Security Benefit 403b plans. Security Benefit pays NEA several million a year for the use of the NEA label. NEA Direct Invest most likely exists because Dan (owner of 403bwise) and Scotty (CFP and contributor) talked to an NEA official. 

All the low-cost 403b plans are internet and phone based, NOT local rep-based. Unfortunately teachers seem to think they need a local rep, mistakenly thinking the rep is looking out for their best interests. 

I contacted my district office because I found on the NYS Deferred Compensation 457 site that my district was participating, but my district said they do not participate nor do they have plans to. So the battle begins ...

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Does your district have no 457 plan vendors? If so, it's possible that the school administration needs to have a written and signed 457 plan for their employees, and that they don't have it. From your screen s of the 403b vendor list, the district is using a third part administrator (TPA). Was that who you asked about the 457? If not, see what the TPA says. I’d give the NY state plan a call back and see if they can help you get the district to cooperate. You could also find out who makes the decision about 457 plan. It’s probably not the HR person that you talked to.

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