Q? re: admin fees paid for 401k/403b (spec at TIAA-CREF)

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Q? re: admin fees paid for 401k/403b (spec at TIAA-CREF)

Postby lindisfarne » Wed Jan 23, 2013 12:57 am

I've just asked my employer to consider adding Vanguard to the options we have in our TIAA-CREF 403b.

I'm quite ignorant of the administrative side. I'm particularly wondering
Does adding investment options to a 403b (or 401k) plan cost the employer more?
Perhaps it doesn't if the company (Vanguard) finds it advantageous to get more customers, although what is the advantage to TIAA-CREF to add outside companies into the mix (although perhaps this helps TIAA-CREF to get & retain big, lucrative accounts?)

Any additional explanation of relevant information anyone want to provide would be appreciated. I'm so ignorant of the factors which would go into an institution's decision of what options to include that I don't even know where to start. We seem to have a quite limited number of options compared to some institutions (I have fewer options now even among T-C & CREF funds than I had at a previous, similar sized employer). I would guess that if cost increases as choice increases, the per capita cost decreases as # of employees increases, so perhaps the size of the institution is a partial factor.
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Re: Q? re: admin fees paid for 401k/403b (spec at TIAA-CREF)

Postby rr2 » Wed Jan 23, 2013 1:44 am

lindisfarne wrote:I've just asked my employer to consider adding Vanguard to the options we have in our TIAA-CREF 403b.

I'm quite ignorant of the administrative side. I'm particularly wondering
Does adding investment options to a 403b (or 401k) plan cost the employer more?
Perhaps it doesn't if the company (Vanguard) finds it advantageous to get more customers, although what is the advantage to TIAA-CREF to add outside companies into the mix (although perhaps this helps TIAA-CREF to get & retain big, lucrative accounts?)

Any additional explanation of relevant information anyone want to provide would be appreciated. I'm so ignorant of the factors which would go into an institution's decision of what options to include that I don't even know where to start. We seem to have a quite limited number of options compared to some institutions (I have fewer options now even among T-C & CREF funds than I had at a previous, similar sized employer). I would guess that if cost increases as choice increases, the per capita cost decreases as # of employees increases, so perhaps the size of the institution is a partial factor.


Just curious -- what TIAA CREF funds are accessible to you.

I have T-C and am quite happy. I agree that the expense ratios could be lower but at below 0.5%, I am satisfied. It has a total of 26 funds (all TIAA CREF) which include about 11 Lifecycle funds. I only use three of the funds.

CREF Stock - An all-in-one fund with Domestic (70%) and International (30% = 25% Developed + 5% Emerging markets)
TIAA Real Estate which provides for direct ownership of real estate
TIAA Traditional - guaranteed 3% minimum

That's it - my perfect 3 fund KISS portfolio. It would be a 2 fund with CREF Stock and TIAA Traditional but the TIAA Real Estate Fund is the spicy sauce on top.

Too much choice can be paralyzing for many people. See

http://www.google.com/webhp?hl=en&tab=ww#hl=en&tbo=d&sclient=psy-ab&q=too+much+choice+in+retirement+accounts

Other than bogleheads, I doubt if the ordinary retirement plan participant would like 50 funds to chose from.
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Re: Q? re: admin fees paid for 401k/403b (spec at TIAA-CREF)

Postby lindisfarne » Wed Jan 23, 2013 2:17 am

I'm mainly interested in my question about costs to the employers who offer 403b/401k plans - I honestly have no idea & this information would help me understand the employer's thought processed.

To answer the question posed above:
Indexed funds are almost non-existent amongst my options (TIQRX is my only chlose index option). That is my biggest gripe, with ERs a close second.
Some T-C plans include Vanguard options, most of which have ERs < .2. That's what I'd like.
I don't think TIQRX is a true index fund but it's close enough that I'm willing to think of it as such, given my alternatives in the plan:
    ... by investing primarily in a portfolio of equity securities selected to track the overall U.S. equity markets based on a market index. It normally invests at least 80% of its assets in equity securities within its benchmark index. The fund buys most, but not necessarily all, of the stocks in the benchmark, and will attempt to closely match the overall investment characteristics of the index.
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Re: Q? re: admin fees paid for 401k/403b (spec at TIAA-CREF)

Postby 555 » Wed Jan 23, 2013 2:41 am

I would definitely prefer Vanguard to TIAA-CREF. The higher expenses make a significant drag on retirement savings. (The fact that many other options are even worse is no consolation. Also I don't care if I have a few choices or a few thousand choices, as long as there are a few good choices.)

So I'd also love to know how to get an employer to switch. I have no idea why employers make these choices.
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Re: Q? re: admin fees paid for 401k/403b (spec at TIAA-CREF)

Postby House Blend » Wed Jan 23, 2013 11:06 am

lindisfarne wrote:I don't think TIQRX is a true index fund but it's close enough that I'm willing to think of it as such, given my alternatives in the plan:
    ... by investing primarily in a portfolio of equity securities selected to track the overall U.S. equity markets based on a market index. It normally invests at least 80% of its assets in equity securities within its benchmark index. The fund buys most, but not necessarily all, of the stocks in the benchmark, and will attempt to closely match the overall investment characteristics of the index.


No, TIQRX really is a true index fund.

Just about every prospectus for every index fund has weasel words about being at least 80% invested in the the target index. Take a look at the prospectus for VTSMX for comparison.

In any case, the proof is in the pudding:
TIQRX 5 year return (annualized): 1.80%
Russell 3000 index: 2.04%

Tracking error of 0.24%, which is less than the current ER of 0.32%. (I would have used 10 year returns, but the inception date for TIQRX is in 2006.)
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Re: Q? re: admin fees paid for 401k/403b (spec at TIAA-CREF)

Postby grakster » Fri Jan 25, 2013 4:06 am

rr2 wrote:That's it - my perfect 3 fund KISS portfolio. It would be a 2 fund with CREF Stock and TIAA Traditional but the TIAA Real Estate Fund is the spicy sauce on top.


TIAA Real Estate is "spicy"?

http://quote.morningstar.com/fund/chart.aspx?t=FVUSA04B8Y&region=USA&culture=en-US

For something with a real kick, how about TQQQ?

http://quote.morningstar.com/ETF/chart.aspx?t=TQQQ&region=USA&culture=en-us
Last edited by grakster on Sat Jan 26, 2013 3:22 am, edited 1 time in total.
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Re: Q? re: admin fees paid for 401k/403b (spec at TIAA-CREF)

Postby House Blend » Fri Jan 25, 2013 11:07 am

grakster wrote:
House Blend wrote:That's it - my perfect 3 fund KISS portfolio. It would be a 2 fund with CREF Stock and TIAA Traditional but the TIAA Real Estate Fund is the spicy sauce on top.

TIAA Real Estate is "spicy"?


Just for the record, House Blend didn't say that. You're quoting rr2.
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Re: Q? re: admin fees paid for 401k/403b (spec at TIAA-CREF)

Postby Garco » Fri Jan 25, 2013 12:36 pm

TIQRX=SP500=VINIX = the "largest 500." TIAA-CREF's "Equity Index" is the same.

CREF Stock, on the other hand, has a broader base including 30% international (as has been mentioned above).

To the OP: lots of employers who used to offer only TIAA-CREF have over time either added other fund managers (e.g., Vanguard or Fidelity) or turned TIAA-CREF more into the role of agent-manager than a provider of funds. My own "TIAA-CREF 403b" includes just a small number of T-C funds, but also offers options from Fidelity, Vanguard, TRowe, DFA, PIMCO, and others.

So sure, press your employer to broaden the options available to you within your plan. And while you're at it, check to see which "class" of funds (with different ER's) might be offered, both in T-C and from other companies.
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Re: Q? re: admin fees paid for 401k/403b (spec at TIAA-CREF)

Postby rr2 » Fri Jan 25, 2013 2:32 pm

House Blend wrote:
grakster wrote:
House Blend wrote:That's it - my perfect 3 fund KISS portfolio. It would be a 2 fund with CREF Stock and TIAA Traditional but the TIAA Real Estate Fund is the spicy sauce on top.

TIAA Real Estate is "spicy"?


Just for the record, House Blend didn't say that. You're quoting rr2.


By "spicy", I just meant "different" from the usual conventional stocks/fixed income.
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Re: Q? re: admin fees paid for 401k/403b (spec at TIAA-CREF)

Postby MN Finance » Fri Jan 25, 2013 11:05 pm

There's virtually no additional cost for the employer or the retirement plan provider to add funds to the menu. Most of the time, even at very large employers, they just don't have any knowledge or expertise in the area, so they aren't involved in the selection at all. A lot of co's are hiring consulting firms these days with new regulations in place and those places are not any better at fund evaluation than they are. They basically make money to act as a fiduciary buffer for the employer. The retirement plan company is the one that recommends the fund line up to the employer. And the retirement plan company has no interest in adding Vanguard or other very low cost index funds because they make no revenue on those funds. Some fund companies will agree to revenue share with the plan provider, which is a win for them because they have a captive audience to increase assets. VG on the other hand has no need to gain exposure, so they won't revenue share. To combat this, plan providers might charge an administrative fee across the board to cover expenses.
Last edited by MN Finance on Tue May 14, 2013 12:15 pm, edited 1 time in total.
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Re: Q? re: admin fees paid for 401k/403b (spec at TIAA-CREF)

Postby lindisfarne » Fri Jan 25, 2013 11:30 pm

Thank you MN Finance, that is useful information.
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Re: Q? re: admin fees paid for 401k/403b (spec at TIAA-CREF)

Postby Beelzebozo » Sun Mar 24, 2013 8:11 pm

It may depend on the size of the plan but it's very likely you can accomplish exactly what you want while sticking at TIAA-CREF. They do have an open-architecture platform where you can get almost any fund your heart desires, including Vanguard funds. It's newish and TC does not encourage people to switch to it. Therefore if your plan is older than 3 years you may have limited choices.

Luckily since TC is cheap there's not a necessity to change providers. Consider staying with TC as the plan provider and just switching platforms. This normally has no cost and is low hassle. After that you can incorporate Vanguard funds into the designated lineup or look at adding a Self-Directed Brokerage Account feature. An SDB would let you get any fund you could get through Etrade or another online brokerage.

The simplest line of argument to get your employer to jump to the new platform is to explain that you're paying X dollars for 90's technology when you could pay the same amount for the new technology. HR folks see change as pain so less change = higher probability of success. If you're really motivated, call TIAA-CREF and ask for someone in sales who is a "Plan Wholesaler" and see if they will come talk to HR. The sales folks know way more about the new system than the service people you have right now.


Disclosure: I work within the retirement plan industry and over just the past year have analyzed more plans than almost anyone in the nation. I am an Investment Advisor Representative of a fee-only Registered Investment Advisory firm and receive no compensation from plan providers nor investment companies. This post is for education purposes only and should in no way be considered investment advice or a solicitation of business.
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