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MattP

Act 5: Pennsylvania Pension Reform

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In Pennsylvania, Act 5 is changing the pension system for all new hires. It also mandates that districts must have a minimum of four vendors. My local union is meeting with our district next week to discuss the vendor selection process. Our district has been very supportive and open with our union in these matters. However, Act 5 is headed into uncharted territory for all parties. 

Any suggestions on how to proceed with this discussion?

 

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I don’t think we have enough background on the PA teacher pension and 403b/457 plans to be able to understand your situation. A bit of googling indicated that it’s complicated. Reading in the PSERS document below, it looks like PSERS offers a state-wide 403b to teachers. It’s a 3rd option for new hires under Act 5’s 2 hybrid pension plans, and is “allowed” to be offered by the TPA that administers the new 401a to teachers in pension plans prior to Act 5. Is that actually happening?

Quote

 

Further, Act 5 will allow the Third Party Administrator (TPA), chosen by PSERS to administer the 401(a) plan for new members, to offer its services to existing 403(b) plans sponsored by the school districts. PSERS Retirement Code §8411.1(a) If the TPA chooses to offer its services, then all existing members will also effectively have access to the statewide plan.

https://www.psers.pa.gov/About/Board/Resolutions/Documents/2017/res43.pdf

 

 

Is the requirement that the district allow 4 403b vendors mean the 4 TPAs, and only those 4 TPAs, all are allowed to offer a 403b? Or are the 4 vendors chosen from the 8 shown in the bar graph on page 6? Does the pension board determine the funds and fees? Can you give us a link to the funds and fees?

WA state’s teacher pension plan offers the same funds and fees to both hybrid pension and to the state 457 plan. It uses low-cost index funds.

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On 3/27/2019 at 9:05 PM, MattP said:

It also mandates that districts must have a minimum of four vendors.

I don't have time to read up on Act 5, but if you MUST have four vendors then I'd do everything you can to make sure only the best vendors are selected. I documented and ranked the best vendors I've found in the state of Florida (which is a good proxy for the nation) here.

  1. Fidelity
  2. Vanguard
  3. Security Benefit's NEA DirectInvest
  4. Aspire
  5. PlanMember DirectInvest

The problem is that both Security Benefit and PlanMember have predatory plans that they push hard. If you could find a fourth vendor local to your area that could be added to Fidelity, Vanguard, and Aspire, then you might be able to entirely eliminate predatory vendors from your district.

I'd use this opportunity to nip this in the bud before folks like AXA can establish a foothold and sink their teeth into people.

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