457(b) Dividends Reflected in Share Price of Funds?

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Frank2012
Posts: 41
Joined: Fri Jan 25, 2013 7:16 pm

457(b) Dividends Reflected in Share Price of Funds?

Postby Frank2012 » Sat Jan 26, 2013 4:28 pm

My 457(b) contains some very good Blackrock index funds that are very low in cost (for example, their S&P 500 fund is only .01 basis point....wow!).

However....my quarterly statements never seem to reflect income from dividends, even though these funds have a yield and supposedly distribute dividends.

The 457(b) is managed by ING, so I called customer service and was told that the dividends are indeed distributed, but...through some magical accounting wizardry that I don't understand, the dividends are reflected somehow in the share price of the index fund and not as actual dividend distributions.

Does anyone else have a retirement vehicle like this where your dividends are reflected in the share price of the fund? And doesn't this make it hard to reinvest the dividends in the fund?

Be curious if anyone know how this works....seems fishy to me.

Thanks for any insights!

skylar
Posts: 235
Joined: Sat Oct 04, 2008 11:28 am

Re: 457(b) Dividends Reflected in Share Price of Funds?

Postby skylar » Sat Jan 26, 2013 6:47 pm

I also have a 457b plan with a Blackrock-managed S&P 500 CIT with a 0% ER (although the plan has a 0.129% admin fee). Every quarter, I tend to get 20 cents or so as dividends. Comparing the annual performance to Morningstar's S&P 500 growth information (price + dividends) shows that they track very closely, so it appears that the dividends are rolled into the NAV.

There was a thread a few weeks ago discussing this situation in a 401k plan with CITs:

viewtopic.php?f=2&t=108250

Skylar

Frank2012
Posts: 41
Joined: Fri Jan 25, 2013 7:16 pm

Re: 457(b) Dividends Reflected in Share Price of Funds?

Postby Frank2012 » Sat Jan 26, 2013 7:01 pm

Thank you for the info, Skylar. Much appreciated. I had not heard about a "Collective Investment Trust" before. Many thanks!

skylar
Posts: 235
Joined: Sat Oct 04, 2008 11:28 am

Re: 457(b) Dividends Reflected in Share Price of Funds?

Postby skylar » Sat Jan 26, 2013 7:16 pm

Frank2012 wrote:Thank you for the info, Skylar. Much appreciated. I had not heard about a "Collective Investment Trust" before. Many thanks!


You're very welcome. If it makes you feel better, I hadn't heard of CITs before I started using this 457b either. Since they're not regulated like mutual funds and don't have a ticker symbol, I would be very leery about investing in any CIT that's not an index fund. At least with index funds you can go to Morningstar and compare performance easily.

Skylar

sscritic
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Joined: Thu Sep 06, 2007 8:36 am

Re: 457(b) Dividends Reflected in Share Price of Funds?

Postby sscritic » Sat Jan 26, 2013 7:55 pm

While not exactly the same thing, many people invest in the TIAA-CREF variable annuities. There are never any dividends paid out. A mutual fund is required to pay out the dividends it receives which for stock funds results in a drop in NAV (and prompts all the questions on that topic). Your CIT and the T/C variable annuities are not required to pay out the dividends received, and the NAV only drops when the underlying assets drop in value. You can think of your CIT as reinvesting all the dividends it gets within each share, so the NAV doesn't drop when it receives and reinvests those dividends. You don't get more shares, but the shares you have are worth more than if the dividends were paid out and actually reinvested.

stonerolled
Posts: 29
Joined: Sun Sep 30, 2012 8:16 am

Re: 457(b) Dividends Reflected in Share Price of Funds?

Postby stonerolled » Sat Jan 26, 2013 8:16 pm

I think I had the same question a while back

http://www.bogleheads.org/forum/viewtopic.php?f=1&t=107227

our expense ratio is .03%. I still dont really understand the investment trust thing.

Default User BR
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Joined: Mon Dec 17, 2007 7:32 pm

Re: 457(b) Dividends Reflected in Share Price of Funds?

Postby Default User BR » Sun Jan 27, 2013 2:05 pm

Frank2012 wrote:Does anyone else have a retirement vehicle like this where your dividends are reflected in the share price of the fund? And doesn't this make it hard to reinvest the dividends in the fund?

As noted, those will be collective investment trusts, and not having specific dividends is pretty typical. It's the same for all funds at MyMegaCorp, except the company stock fund. That pays dividends, which can be distributed in-service for some reason or the other.


Brian

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ofcmetz
Posts: 1903
Joined: Tue Feb 08, 2011 8:09 pm
Location: Louisiana

Re: 457(b) Dividends Reflected in Share Price of Funds?

Postby ofcmetz » Sun Jan 27, 2013 2:17 pm

Collective Investment Trusts make it easier to think in terms of total return. Also its easier to track things on a spreadsheet. I get the Blackrock funds in my 457B for 0.03% ER.
NEWS ALERT: Rich cop was caught investing his bribes in low cost index funds.


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