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403b - 457

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======== LC004769 ========
2020 -- H 7701
STATE OF RHODE ISLAND
IN GENERAL ASSEMBLY
JANUARY SESSION, A.D. 2020 ____________
AN ACT
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RELATING TO PUBLIC OFFICERS AND EMPLOYEES -- DEFERRED COMPENSATION PLANS
Introduced By: Representatives Casey, Craven, O'Brien, Morin, and Blazeski Date Introduced: February 26, 2020
Referred To: House Finance
It is enacted by the General Assembly as follows:
SECTION 1. Sections 36-13-1 and 36-13-1.1 of the General Laws in Chapter 36-13 entitled
"Deferred Compensation Plans" are hereby amended to read as follows:
36-13-1. Deferred compensation plans authorized.
(a) The state or any city, town, or other political subdivision may, by contract, agree with any employee to defer, in whole or in part, any portion of that employee's compensation, and may subsequently contract with financial institutions for the purchase of government securities or with other financial entities for the purchase of mutual funds, and procure a fixed or variable life insurance or annuity contract for the purpose of providing funds to meet its obligations under a deferred compensation program for the employees from any financial institutions or from any life underwriters duly licensed by this state who represents an insurance company licensed to contract business in this state.
(b) In the administration of a deferred compensation plan for state employees in the state plan authorized under this chapter, after October 1, 1998, the state shall engage three companies ("Authorized Companies") to administer such deferred compensation plans. After October 1, 1998, only such Authorized Companies shall be entitled to enroll state employees in such the state deferred compensation plans in accordance with the following guidelines:
(1) Employees must have the option of purchasing or investing in alternative financial products referred to herein which have been approved by the State Investment Commission;
       
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(2) The alternative financial products shall include, without limitation, a variable product and a fixed product;
(3) The Authorized Companies (or an entity related thereto) must:
(i) Be selected in accordance with the provisions of this chapter,
(ii) Covenant that all employees covered under any plan authorized under this chapter shall,
at all times, be granted the unfettered right to cancel, change, liquidate, amend or interchange any investment contract or product purchased in any such plan without such employees incurring a financial penalty or fee of any kind or nature imposed by contract, and
(iii) Be granted equal access to all eligible employees;
(4) Procedures shall be established to ensure that personalized information regarding employees shall not be provided to third parties by the Authorized Companies. "Personalized Information" shall include, without limitation, social security numbers, home addresses, telephone numbers, amounts invested, medical or disability information; and
(5) The Authorized Companies shall be permitted to offer any financial product referred to herein which shall have been approved by the State Investment Commission. Notwithstanding any other provisions of this section (b), if the department of administration determines that less than three companies are qualified to be engaged as Authorized Companies because of (a) insufficient experience in the administration of deferred compensation plans or (b) a failure to assure adherence to the guidelines set forth herein, the state may engage less than three Authorized Companies.
(6) If any provision of this section or the application thereof to any person or circumstances is held invalid, that invalidity shall not affect other provisions or applications of the section which can be given effect without the invalid provision or application, and to this end the provisions of this section are declared to be severable.
(c) Effective January 1, 2021, any participating municipality as defined in § 45-21-2 may elect to offer to its municipal employees the deferred compensation plans offered by the state. The account of any municipal employee who participates in the state deferred compensation plan shall be subject to the same administration, charges, costs, rules, and regulations as are applicable and applied to the accounts of employees in the state deferred compensation plan.
36-13-1.1. State investment commission.
The state investment commission shall, from time to time, select the financial institutions and/or entities in which the state shall invest the funds under the deferred compensation plan for state employees in the state plan.
        LC004769 - Page 2 of 4

1 SECTION 2. This act shall take effect upon passage.
======== LC004769 ========

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EXPLANATION
BY THE LEGISLATIVE COUNCIL OF
AN ACT
RELATING TO PUBLIC OFFICERS AND EMPLOYEES -- DEFERRED COMPENSATION PLANS
***
This act would provide that effective January 1, 2021, any participating municipality as
defined in § 45-21-2 may elect to offer to its employees the deferred compensation plans offered by the state. The account of any municipal employee who participates in the state deferred compensation plan would be subject to the same administration, rules, and regulations as are applicable and applied to the accounts of employees in the state deferred compensation plan.
This act would take effect upon passage.
======== LC004769 ========
LC004769 - Page 4 of 4

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My objective is to be able to buy individual stocks in my 403b, using in my case Fidelity. Even if one simply chooses to use a stock index fund from a mutual fund company, having the ability to  purchase individual stocks is a benefit  for those  who hope to get a higher return than the index.  Strongly advise not to  purchase an annuity, transfer any  insurance company products,  to a company  Vanguard, Fidelity, etc. I am in favor of insurance as insurance, not as providers of investment products.

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IRS regulations of 403b plans do not allow investing in individual stocks. You’ll have to lobby Congress if you want to change that.

Quote

 

Assets in a 403(b) plan can be placed in any of the following investment types:

an annuity contract provided through an insurance company;

a custodial account invested in mutual funds; or

a retirement income account set up for church employees.

https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-403b-tax-sheltered-annuity-plans

 

 

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12 minutes ago, krow36 said:

IRS regulations of 403b plans do not allow investing in individual stocks. You’ll have to lobby Congress if you want to change that.

 

This is a case of the IRS saving the OP from himself.  There is absolutely no reason to buy individual stocks in a retirement account.  If a person wants to play the market with expendable cash, then they can do that in a taxable account (still not recommended).

 

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18 hours ago, krow36 said:

MNGopher, I agree totally. 

Me too.

There is a lot of evidence that individual stock picking is a fool's game because of the lure of "beating the averages" with speculation. Speculation is not investing, it is gam bling. And there is nothing wrong with getting the average over time, about 9.6%. Ben Graham in his big tome The Intelligent Investor implied that individual stock pickings are not for the everyday investor. In today's world, a spreadsheet or an expensive program that searches companies do not compete with the thousands of highly trained and the smartest people on the planet, using powerful computer technology in Wall Street or the big financial firms are all doing the same thing, and nobody so far has a strategy for beating the averages. Yeah, we heard the Warren Buffett argument, but what's interesting is that day trader who loves to quote WB don't follow his strategy of buy and hold good value companies for years. 

But if you want to gamble, I get it. The local casinos here are always full of people--Sad. Look for the brokerage account in just about any 457b plan which usually a deferred compensation plan. At my school district, it is called "Self-Directed Brokerage Services Account by TD Ameritrade." Of the 11,000 LAUSD employees invested in the 457b mutual and index funds, about 39 are invested in SDBSA. So this service is already allowed. Not sure why your state needs a bill passed. 

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I thought some retirement accounts 401k do allow the purchase of individual stocks but I agree it's not smart.  I also know our 457b account allowed individual stock purchases through a brokerage account if my memory is correct.

My dad is an example in that  he saved for his retirement  in  the stock of the company he worked for and lost all of it or most of it. I was too young at the time to prevent him from doing it. I was able to help him out after I got older but by then the damage was done.

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