TIAA Expense changes

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Topic Author
GMT-8
Posts: 194
Joined: Fri Mar 26, 2010 5:11 pm

TIAA Expense changes

Post by GMT-8 »

We got a notice this week saying TIAA was adjusting the fees associated with our 403(b) account. Specifically, they announced a relationship between the Fund ER, a "Revenue Sharing" kickback from fund to TIAA, and a "Plan Servicing Fee" that result in a "Total Administrative Fee".

So for example,
T Rowe Price 2010 fund TTRAX has .59 ER, .15 Rev Sharing, to which Plan Servicing adds .10 for Total Admin of .25 (plus the .59)
TIIA Real Estate variable annuity QREARX has .85 ER, .24 Revenue Sharing, to which Plan Servicing adds .01 for Total Admin of .25 (plus the .85)
Vanguard S&P 500 TISPX has .05 ER, 0 Revenue Sharing, to which the Plan Servicing group adds .25 for Total Admin of .25 (plus the .05)
it goes on for about 30 other funds.

It seems that the lower cost funds bear the lion's share of the Plan Servicing costs, because the fund isn't kicking back any to TIAA.

"While this is the first time participants will see this fee, it is not a 'fee increase.' The INSTITUTION Investment Committee has reviewed these fees, and in conjunction with a few lower cost share classes, many participants may incur an overall fee reduction."

By my calculations this increases our costs by $500+ a year, for management/administrative costs that appears to produce one envelope containing one report per annum.

They say that the fee may be a deductible investment expense for Retirement Choice and Retirement Choice Plus accounts, but not for Retirement Annuity accounts.

This is the last straw for me, and we have decided to flee TIAA and roll as much as possible over to VG.

Has anyone else learned about this?
Is there some other interpretation of this new / not new fee letter?
Could it just be her university raising some funds and not TIAA at all?

Thanks for your thoughts,

GMT-8
InMyDreams
Posts: 1886
Joined: Tue Feb 28, 2017 10:35 am

Re: TIAA Expense changes

Post by InMyDreams »

I have a 403b account at TIAA. I have not received a notice like this (yet?).

If I do, my CFP will advise me to transfer my $$ to Vanguard.

I also have a Defined Contribution plan. Ditto for it.
jbuzolich
Posts: 422
Joined: Tue Jun 24, 2014 9:52 pm

Re: TIAA Expense changes

Post by jbuzolich »

Perhaps they are just publishing the fee components for the first time to be more transparent but have always been there? I am on the plan oversight committee for the 457b plan with my county. I personally was frustrated seeing the fund fees, revenue sharing component, minimum revenue requirements for the plan manager, and management expense fees. Although listed separately, at least with ours they just give a final single number as to what the total net expense percent will be. Still though, my small personal retirement accounts with Vanguard are substantially lower than what participants pay in the plan. Doesn't seem right for an account with millions versus what my wife and I have. Thankfully we're aware of the need to push for better fees and we actively have a request for proposals out to see what the providers in the market might be able to offer. There have also been some interesting class action lawsuits against a few major universities for having plans with fees considered less than optimal.
anonenigma
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Joined: Thu Apr 21, 2011 11:58 pm

Re: TIAA Expense changes

Post by anonenigma »

Your plan charge is consistently 0.25%, but two of the funds kick back revenue sharing, which comes off of the plan charge.

That's not a TIAA thing. It's a decision your employer has made about how costs of operating the plan should be raised. Our 457b plan decided to delete all funds with revenue sharing so that decisions about funds could be made without consideration of revenue being kicked back to the plan.
tibbitts
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Joined: Tue Feb 27, 2007 5:50 pm

Re: TIAA Expense changes

Post by tibbitts »

We are in a similar situation with a 457 plan changing this month (not TIAA), however the effect is minimal for most people. Higher annual fee (about 3x higher, now over $30/yr), but more access to institutional funds (.25% less cost on average, resulting in .10% less net cost to participants.) Remaining retail funds will continue to have their .15% kickbacks credited to participant accounts, however now the credit will not be spread among all participants. Participants who own the funds generating the kickbacks will receive them; previously the kickbacks were all put in a pool and shared among everyone according to total account balances, so the new arrangement distributes the kickbacks more appropriately.
DWD
Posts: 153
Joined: Thu Feb 14, 2008 5:38 pm

Re: TIAA Expense changes

Post by DWD »

"TIAA-CREF surrenders in fee war with Vanguard"

http://www.investmentnews.com/article/2 ... h-vanguard

I got the impression that TIAA was no longer focused on a low-cost investing approach for over a decade now.
Dave
Flashes1
Posts: 1431
Joined: Wed May 07, 2008 7:43 am

Re: TIAA Expense changes

Post by Flashes1 »

I detest TIAA for their high fees. We're paying a 0.39% fee on an S&P 500 Index fund.....and this is with a pretty big hospital. Highway robbery.
tibbitts
Posts: 23716
Joined: Tue Feb 27, 2007 5:50 pm

Re: TIAA Expense changes

Post by tibbitts »

GMT-8 wrote: Thu Sep 14, 2017 9:05 pm We got a notice this week saying TIAA was adjusting the fees associated with our 403(b) account. Specifically, they announced a relationship between the Fund ER, a "Revenue Sharing" kickback from fund to TIAA, and a "Plan Servicing Fee" that result in a "Total Administrative Fee".

So for example,
T Rowe Price 2010 fund TTRAX has .59 ER, .15 Rev Sharing, to which Plan Servicing adds .10 for Total Admin of .25 (plus the .59)
TIIA Real Estate variable annuity QREARX has .85 ER, .24 Revenue Sharing, to which Plan Servicing adds .01 for Total Admin of .25 (plus the .85)
Vanguard S&P 500 TISPX has .05 ER, 0 Revenue Sharing, to which the Plan Servicing group adds .25 for Total Admin of .25 (plus the .05)
it goes on for about 30 other funds.

It seems that the lower cost funds bear the lion's share of the Plan Servicing costs, because the fund isn't kicking back any to TIAA.

"While this is the first time participants will see this fee, it is not a 'fee increase.' The INSTITUTION Investment Committee has reviewed these fees, and in conjunction with a few lower cost share classes, many participants may incur an overall fee reduction."

By my calculations this increases our costs by $500+ a year, for management/administrative costs that appears to produce one envelope containing one report per annum.

They say that the fee may be a deductible investment expense for Retirement Choice and Retirement Choice Plus accounts, but not for Retirement Annuity accounts.

This is the last straw for me, and we have decided to flee TIAA and roll as much as possible over to VG.

Has anyone else learned about this?
Is there some other interpretation of this new / not new fee letter?
Could it just be her university raising some funds and not TIAA at all?

Thanks for your thoughts,

GMT-8
Was that word-for-word from the announcement? I'd thought the .15 was built into the .59, and in you're case the administrator is keeping the .15 and adding .10 to it so you be at .69. Maybe that's wrong, I don't know. In our case with that fund they'd been giving us the .15 back after we'd payed in the .59.
Topic Author
GMT-8
Posts: 194
Joined: Fri Mar 26, 2010 5:11 pm

Re: TIAA Expense changes

Post by GMT-8 »

I extracted it from a table with about 6 columns and 40 rows. It's not clear from the table headings if the Rev Sharing fees are additive to the ER or subtracted from them. As the tone of the letter was "Don't worry, we are charging more but not that much more", I presumed that they were additive.

But you could certainly be right, and it would give the higher-priced plans a way to prevent being priced out of the ballpark.

In any case, we've given up on TIAA and are trying to get rolled over and out.

One difficulty is the roll-over document asks for a signature from the (part-time) retirement benefits person at the college confirming my wife is no longer employed there. Since her last day was in 1992, nd no funds have been added since, that should be obvious. But we have to get the papers over to them for signatures before proceeding. What if we lived thousands of miles away?

GMT-8
Last edited by GMT-8 on Sat Sep 16, 2017 6:43 pm, edited 1 time in total.
livesoft
Posts: 86075
Joined: Thu Mar 01, 2007 7:00 pm

Re: TIAA Expense changes

Post by livesoft »

GMT-8 wrote: Sat Sep 16, 2017 6:39 pm What if we lived thousands of miles away?
I routinely use e-mail for such things.
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Topic Author
GMT-8
Posts: 194
Joined: Fri Mar 26, 2010 5:11 pm

Re: TIAA Expense changes

Post by GMT-8 »

Can you just email a page (of 19-pg document) and have someone print, sign and return it?

I'd assumed that wouldn't be allowed.
livesoft
Posts: 86075
Joined: Thu Mar 01, 2007 7:00 pm

Re: TIAA Expense changes

Post by livesoft »

You can e-mail attachments of many sizes including 19 pages which sounds small. You can e-mail scanned pages with signatures.
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Topic Author
GMT-8
Posts: 194
Joined: Fri Mar 26, 2010 5:11 pm

Re: TIAA Expense changes

Post by GMT-8 »

Thanks for the tip. We will use it to save ourselves some hassle on this.

GMT-8
Topic Author
GMT-8
Posts: 194
Joined: Fri Mar 26, 2010 5:11 pm

Re: TIAA Expense changes

Post by GMT-8 »

UPDATE:

Wife and I did all the TIAA transfer paperwork online, then printed out the forms and signed them. We marched into the retirement office at her former university, and had a quick cheery conversation with the benefits counselor who confirmed my wife hadn't worked there for 25 years. We all signed the paperwork (no notary req because the benefits lady qualified as a witness), I took the 18 pages back home and scanned them and uploaded to TIAA. Two days later TIAA confirmed the shares have been sold and the rollover to VG was underway.

Thanks for the tips and it wasn't as bad as expected (although to get the rest from her TIAA "transfer payout annuity" will take another 4.5 years)

GMT-8
student
Posts: 10761
Joined: Fri Apr 03, 2015 6:58 am

Re: TIAA Expense changes

Post by student »

Thanks for the update.
The Wizard
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Location: Reading, MA

Re: TIAA Expense changes

Post by The Wizard »

Flashes1 wrote: Fri Sep 15, 2017 8:50 pm I detest TIAA for their high fees. We're paying a 0.39% fee on an S&P 500 Index fund.....and this is with a pretty big hospital. Highway robbery.
I have their institutional class S&P 500 index fund, TISPX.
ER of 0.05%.
I'm happy with that...
Attempted new signature...
columbia
Posts: 3023
Joined: Tue Aug 27, 2013 5:30 am

Re: TIAA Expense changes

Post by columbia »

I'm happy with my decision to only own Traditional in my TIAA account. The rest of the operation appears to be a scam.
student
Posts: 10761
Joined: Fri Apr 03, 2015 6:58 am

Re: TIAA Expense changes

Post by student »

columbia wrote: Sat Sep 23, 2017 3:06 pm I'm happy with my decision to only own Traditional in my TIAA account. The rest of the operation appears to be a scam.
Some of their non-institutional funds are more expensive but I think scam is too harsh, they are just not as efficient as Vanguard. I think it is a reputable place. John Bogle himself thinks highly of it. However, if you truly think that the rest of the operation appears to be a scam, then you should rethink your investment in TIAA Traditional. After all, it is opaque and it is only back by its claimability, and surely, you don't want to place your trust in a company that has scamming operations.
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