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KarenSLP

TSA --When to Get Out?

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Hello!  I am a school based speech and language therapist with over 30 years of teaching in the Pa public schools. I was about to begin fully funding my Security Benefits Variflex Variable Annuity when I found your information and  podcasts. Thank you!!!! I have been listening to them all!  I now know variable annuity plans are very expensive with many hidden fees.   I am wondering though if it is ever a good idea just to hold on to a variable annuity (Does years of paying high fees get me anything of value??????). Can I move the money into the Security Benefits NEA/Directinvest program without penalties.

I began my TSA in 1991 and have faithfully contributed every year. The value is around $205,000. It has a 9 year non-rolling surrender fee ( I believe). I will not retire for 4-5 years and will not need to draw from this account for at least 10 years. I found out that my employer offers Vanguard in the 403b list of providers and have opened an account for future withdraws. I was hoping to get some advice about my current TSA and/or if  I should contact a fee based financial advisor for help.

 

Would be very grateful for any help! Thank you

 

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1 hour ago, KarenSLP said:

Hello!  I am a school based speech and language therapist with over 30 years of teaching in the Pa public schools. I was about to begin fully funding my Security Benefits Variflex Variable Annuity when I found your information and  podcasts. Thank you!!!! I have been listening to them all!  I now know variable annuity plans are very expensive with many hidden fees.   I am wondering though if it is ever a good idea just to hold on to a variable annuity (Does years of paying high fees get me anything of value??????).

 

Because of the ongoing fees of the SB variable annuity (VA), I don't think there's a reason that is good enough to hang on to it. I would guess that you are paying at least 2% per year in fees. Every fund has an expense ratio (ER) and your VA probably has a "mortality & expense" fee of about 1%. By transferring your variable annuity to the SB NEA Direct Invest, your only fees will be the Vanguard Admiral class index fund expense ratio of about 0.05%. That's about $4,100 for the VA, and about $104 for NEA DI, every year!

Do you know the surrender fee schedule? If the fee varies over the 9 years, it's probably a rolling surrender fee. That means that last year's contributions might have a 9% fee, and contributions made 8 years ago might have a 1% fee? You really need to know the total surrender fee in order to decide whether to pull the band-aid off and transfer it all, or just transfer that amount that is surrender fee free. You can call SB and ask for this info. 

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1 hour ago, KarenSLP said:

I began my TSA in 1991 and have faithfully contributed every year. The value is around $205,000. It has a 9 year non-rolling surrender fee ( I believe). I will not retire for 4-5 years and will not need to draw from this account for at least 10 years. I found out that my employer offers Vanguard in the 403b list of providers and have opened an account for future withdraws. I was hoping to get some advice about my current TSA and/or if  I should contact a fee based financial advisor for help.

 

 

 

You could transfer your 403b account with SB to a Vanguard 403b if Vanguard is on the list. What kind of account did you open at Vanguard? IRA, taxable Individual or 403b? You'll get advice here from other retired and working teachers. This website maintains a list of fee-only Certified Financial Advisors that have been checked out. It's at the top of the forum topics

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Honestly, I have no idea how much I am currently paying in fees. I tried getting the information from the SB site but it was very confusing. It looked like about 2.5% plus underlying fund operating expenses .8-1.2% for each subaccount.

 

This is what I found:  Contingent Deferred Sales Charge. If you withdraw Contract Value, the Company may deduct a contingent
deferred sales charge (which may also be referred to as a withdrawal charge) on the withdrawal of Purchase Payments.

Contract Year of Purchase Payment Being Withdrawn /Withdrawal Charge

1 8%
2 7%
3 6%
4 5%
5 4%
6 3%
7 2%
8 1%
9 and later 0%

Does this mean any amount paid in years 1---20 have a 0 % surrender fee? Only the last 9 years of purchases will have the surrender charge? Yes, I will call SB for total surrender fee.
 

The Vanguard account I opened   was a 403b.

I was hoping I could avoid the surrender charge by changing SB accounts ( VB annuity to nea direct invest)....wishful thinking?

 

Thank you!

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3 hours ago, KarenSLP said:

Honestly, I have no idea how much I am currently paying in fees. I tried getting the information from the SB site but it was very confusing. It looked like about 2.5% plus underlying fund operating expenses .8-1.2% for each subaccount. This should be illegal, but is all too common with these variable annuities. Total fees of about 3.5% is outrageous. 

This is what I found:  Contingent Deferred Sales Charge. If you withdraw Contract Value, the Company may deduct a contingent
deferred sales charge (which may also be referred to as a withdrawal charge) on the withdrawal of Purchase Payments.

Contract Year of Purchase Payment Being Withdrawn /Withdrawal Charge
1 8%
2 7%
3 6%
4 5%
5 4%
6 3%
7 2%
8 1%
9 and later 0%

Does this mean any amount paid in years 1---20 have a 0 % surrender fee? Only the last 9 years of purchases will have the surrender charge? Yes, I will call SB for total surrender fee. Yes, only the last 8 years will have the surrender fee. This is what is called a "rolling surrender fee". If you contributed the same amount for each of the 8 years, the overall surrender fee might work out to about 4% of those 8 years of contributions. 
 

The Vanguard account I opened  was a 403b. OK, that's good. I think you may want to transfer your account to Vanguard, and be rid of having to deal with SB at all. If I were you I would stop contributions to the SB Variable Annuity tomorrow. Call up Vanguard and start the transfer process. They will send you info on their 403b transfer forms. You will no doubt have to fill out transfer forms for SB also. Does your district use a Third Party Administrator? If so, they may have forms to fill out also. This process will probably take weeks, maybe more than a month--it's hard to predict. Each party's forms may have to be signed by you and the other parties?? It's hard to be patient, but you will feel so good when you have escaped SB!

Until you can make contributions to a Vanguard 403b, you could make contributions to an IRA if you are not already doing so. Or to a taxable account for retirement at Vanguard.

I was hoping I could avoid the surrender charge by changing SB accounts ( VB annuity to nea direct invest)....wishful thinking? Probably. I'd be surprised if SB waived the surrender fees for a transfer from their VA to the NEA Direct Invest. I guess it doesn't hurt to ask for a waiver. 

The 3.5% fee times $205,000 is $7,175 per year. Vanguard will charge an admin fee of $60 per year and about 0.05% expense ratio, or $60 plus $104 for a total fo $164. You probably know that Vanguard has contracted out their school district 403b plans to Newport Group. Vanguard (and Newport Group) do not use reps that sell on commission like SB does. 

 

Thank you!

 

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Hi Karen,

Thank you for the kind words. We are really happy that our resources have been helpful. Please spread the word to your colleagues! krow36 is giving you some good advice. It's great that you have Vanguard available. It also seems that a good chunk of your SB money is no longer subject to a surrender charge. I would contact Vanguard about initiating a transfer. Explain the surrender charge situation. They should be able to provide guidance. Since they are potentially receiving the money, they should be more motivated to help than SB! 🙂 Stay in touch and let us know how it goes. - Dan

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You are making a very good move by switching your 403b to Vanguard.  You will be able to invest more of your own money in the next 4-5 years until you retire because of the lower expenses.  You will also continue to save on the expense ratio after you retire as you spend down your account.

The exchange of funds can be somewhat frustrating, but it's worth it.  A few things you may have to deal with when making the exchange...

1.  Contact Vanguard/Newport to initiate the process. Since they have the financial interest to help you move the funds, they should be more helpful, although some of the people at the Newport Group that I have talked to are not all that knowledgeable.

2.  Vanguard/Newport will have you fill out and sign an "Exchange/Transfer In" form.

3.  Vanguard may require a Medallion Signature Guarantee.  This is kind of like getting something notarized and can be done at a bank.

4.  If you have a TPA (Third Party Administrator), their signature will also be required on the Transfer In form.

5.  The out going custodian will probably require a "Transfer Out Form" that may also need to be signed by you and your TPA.

6.  Expect the outgoing company to drag their feet a bit with the exchange.  This is their last ditch attempt to get you to give up, so that they can continue to rip you off.  Be persistent, don't let them do it!

 

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I appreciate you taking the time  to provide advice Krow 36, Dan and MNGopher!  I spent my entire lunch break today on the phone with SB  trying to get information about transferring my annuity into the NEA Direct Invest. I asked if I was able to do this transfer( Variable Annuity to NEA) and what charges/surrender fees might apply. The first person put me on hold for 15 minutes and came back to tell me they discontinued the NEA DirectInvest back in 2010. I explained that it was currently an option displayed  on their website and that I was confused. Then, I was told that NEA Direct Invest is a mutual fund and I had the wrong department. I was transferred to the mutual fund dept only to be told they could not determine the surrender fees. I was told only the annuity dept. could provide me with that info........30 minutes later and lunch break over, I had no more info than when I first called.  I contacted my personal advisor who "manages "the account and left a message. No response on that end either.

I am taking the above advice to bite the bullet and begin the transfer all funds to the Vanguard 403b account.

  *Really grateful for the  assistance and your willingness to share your knowledge with me. I will definitely be sharing the info with my colleagues.

Thank you!!

Karen

 

 

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27 minutes ago, KarenSLP said:

I spent my entire lunch break today on the phone with SB  trying to get information about transferring my annuity into the NEA Direct Invest. I asked if I was able to do this transfer( Variable Annuity to NEA) and what charges/surrender fees might apply. The first person put me on hold for 15 minutes and came back to tell me they discontinued the NEA DirectInvest back in 2010. I explained that it was currently an option displayed  on their website and that I was confused. Then, I was told that NEA Direct Invest is a mutual fund and I had the wrong department. I was transferred to the mutual fund dept only to be told they could not determine the surrender fees. I was told only the annuity dept. could provide me with that info........30 minutes later and lunch break over, I had no more info than when I first called.  I contacted my personal advisor who "manages "the account and left a message. No response on that end either.

Now this is the classic Security Benefit experience that I’ve gotten used to!

I can’t give you definitive answers, but I suspect you could rollover to NEA DirectInvest and they’d make you pay the surrender fees.

The difference in fees between Vanguard and NEA DirectInvest is quite small. If it were me I’d choose whatever route is easier. Vanguard may even be preferable if you want an all-in-one fund because NEA DirectInvest doesn’t offer a reasonably priced one while Vanguard does. 

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15 hours ago, EdLaFave said:

Now this is the classic Security Benefit experience that I’ve gotten used to!

I can’t give you definitive answers, but I suspect you could rollover to NEA DirectInvest and they’d make you pay the surrender fees.

The difference in fees between Vanguard and NEA DirectInvest is quite small. If it were me I’d choose whatever route is easier. Vanguard may even be preferable if you want an all-in-one fund because NEA DirectInvest doesn’t offer a reasonably priced one while Vanguard does. 

Hi Karen,

Welcome to the 403b world with K12 school districts! Stop wasting your valuable time trying to get anything from SB people and go directly to Vanguard. As MNGopher said, you can transfer your money directly into Vanguard by talking to Vanguard/Newport (Newport is the third party administrator that assists in making Vanguard available to more districts). Both SB and Vanguard are on your 403b list, so I agree with Ed that you can rollover to Vanguard or NEA Diectinvest because they are on your list. 

This is a little technical but that's why trying to get information make people like you go crazy. 

Keep at it because we have all been in your place. It was 25 years ago when I paid $6000 in surrender costs to get out of two horrible annuities and into genuine investments. I was so angry, I vowed to write a book and I ended up writing two books!

You will be on the right course, and that is rare in the 403(b) world with 80% of all educators who are getting shafted by inappropriate products with outrageous fees. 

We are here to support you!

Steve

Retired LAUSD elementary teacher

 

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Karen,

As they say in Disney World, "Welcome Home"!

We'd love to hear about your successes with this and with helping out other teachers like you in your district.

Funny thing about NEA DirectInvest. They are not on my vendor list directly but they are endorsed by my union. I went on their website and found out how to open up an account. I first had to see if I was deemed "eligible". I was and quickly received the 'code" via email and created an account. I completed the paper work online and faxed it in too. I called OMNI and asked about being able to contribute, as they were not directly listed on my district's vendor list. This is what OMNI told me: "As long as I have an account number at the vendor, NEA, they will direct my payroll there, as per my contribution instructions." (When I tried doing that with Vanguard, I was told no, several years ago.)

I will believe it when I see it. Is this a lesson in futility? I don't know but I felt like trying.

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I said that wrong. I meant Security Benefit’s DirectInvest, not NEA. 

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I have been following the above advice and it has been very helpful!

Good news! The broker on my current VA account sent this info:

The Variflex annuity contract has an eight year non rolling surrender.  Your contract issue date was 9/16/1991 so the contract has been out of surrender since September of 1999.  That means that there would not be any surrender charge associated with moving your account from its current product.  It would not matter if you went to a mutual fund program through Security Benefit or another 403b provider. 

I have stopped SB withdrawals from my paycheck.

I decided I am going to try to transfer out all the funds to Vanguard even though I could transfer to NEA DirectInvest.

The paperwork is a bit overwhelming! I have completed the Vanguard exchange transfer in form. On my third call, the Newport Group employee walked me through filling out the the form step by step. (First 2 calls were not helpful at all). I completed the outgoing funds request for SB. Next, I have an appointment to get the signature medallions on Monday. Then, I have to send all the paperwork off to our Third Party Administrator.

Getting closer to being free of the SB fees! Thanks again!

Karen

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One additional heads-up.  If the time between when Newport Group receives your transfer-in paperwork and SB sends them the money is more than one month, Newport may make you resubmit the form.  That's what they did do me just about half a year ago when I transferred my last account over to them. (I have done 3 transfer/exchanges total over the last 4 years).

 

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On 5/10/2019 at 4:16 PM, KarenSLP said:

I have been following the above advice and it has been very helpful!

Good news! The broker on my current VA account sent this info:

The Variflex annuity contract has an eight year non rolling surrender.  Your contract issue date was 9/16/1991 so the contract has been out of surrender since September of 1999.  That means that there would not be any surrender charge associated with moving your account from its current product.  It would not matter if you went to a mutual fund program through Security Benefit or another 403b provider. 

I have stopped SB withdrawals from my paycheck.

I decided I am going to try to transfer out all the funds to Vanguard even though I could transfer to NEA DirectInvest.

The paperwork is a bit overwhelming! I have completed the Vanguard exchange transfer in form. On my third call, the Newport Group employee walked me through filling out the the form step by step. (First 2 calls were not helpful at all). I completed the outgoing funds request for SB. Next, I have an appointment to get the signature medallions on Monday. Then, I have to send all the paperwork off to our Third Party Administrator.

Getting closer to being free of the SB fees! Thanks again!

Karen

My wife is in a somewhat similar situation. She has been in a 403b plan here in Wisconsin with WEA Benefits which is a local company with ties to a teacher health and life insurance company, as well as too our state teachers union (which was rendered powerless by union busting laws in 2010). Anyway her 403b plan is about 20 years old and she will retire in about 10 years. I recently moved from public school teaching into the private sector (long story) and to consolidate things I moved a small Roth IRA (~45K) from the same company (WEA Benefits) into Fidelity where my new employer keeps our 401k. It was a  6-month nightmare of phone calls, multiple forms, waiting, etc, just to transfer the funds over into Fidelity.

After doing some digging, I have realized we are paying significant fees and expenses (would be more but the cap the admin fees at $500) for extremely limited choices at the current vendor.  She has had about 70% of the money in stock funds (with pretty high expense ratios) and 30% of the money in a "Guaranteed Investment" vehicle through Prudential, which I recently realized is so stupid - A TSA inside a 403b - Dumb Dumb Dumb. At least I got that stupidity exchanged for 

The district offers a number of other vendors, which are all insurance companies except one - Fidelity!!! WAY lower fees and WAY better investment choices. But now the nightmare of getting that money transferred over will begin. I will start by contacting the school district to see if they will offer any help. Then I will contact Fidelity to set things in motion over there. Finally I will call the current vendor and they will put me on hold. 🙂

 

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