Vanguard 403b Changes

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alpenglow
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Vanguard 403b Changes

Post by alpenglow » Fri Jul 14, 2017 9:53 am

I received a letter this morning from Vanguard describing the changes being made to their 403b plan. It seems they are adding a new layer of bureaucracy via the Newport Trust Company as record keeper. For this added service, there will be a $5 monthly fee. At this time, I'm paying nothing for my 403b through Vanguard. As a plus, they are adding access to Admiral Shares. While this is an advantage for some, it doesn't do much for me as I'm currently investing in LifeStrategy Growth which doesn't have Admiral Shares. I can break that out into individual Admiral funds, though 1) it is an added hassle and 2) threads have pointed to little or no difference in performance between LifeStrategy funds vs. their individual components (viewtopic.php?t=160958). I always associate Vanguard with lowering fees so I'm not very pleased with this change. :?

feehater
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Re: Vanguard 403b Changes

Post by feehater » Fri Jul 14, 2017 10:27 am

I got this letter a few days ago and was similarly annoyed. To be fair, the current system charges you $15 per fund held per year, until you reach Voyager status. So, my plan was to spend my first few years of my recently started job maxing out my 403b, rolling my old IRA into Vanguard, and maybe having my wife do the same. I'd stay in a target retirement fund for the first few years so I only have one fee, and total I'd pay $15 or maybe $30 in fixed fees, and then never pay a fee again. Now it looks like I'll be paying $60 a year for the rest of my career (I'm unlikely to move employers). So for a 30 year career, I just went from paying $15 in fees to $1800.

I'm *trying* to remind myself that access to admiral shares will make up for this fee, once I get a large enough sum in there, and assuming that I go from Target 2050 to a 3-fund. But for the next several years, I will be paying a lot more than I would have.

I also am annoyed that they do this to the accounts where the customers have the least option of moving their money, and not with the accounts where we could vote with our feet tomorrow. Ironically, DW was just about to open up a solo-401k with Vanguard, in part to help us get Voyager status. Now we have no incentive to do that, and she will likely go with Fidelity just because we are annoyed at Vanguard...

edit: I had gotten the current $15 403b fee mixed up with the $20 i401k fee and have corrected my post accordingly.
Last edited by feehater on Fri Jul 14, 2017 1:14 pm, edited 1 time in total.

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FiveK
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Re: Vanguard 403b Changes

Post by FiveK » Fri Jul 14, 2017 11:14 am

Is it Vanguard making the change, or the employer?

Couldn't find anything on the Vanguard website about Newport Trust, but a google search for vanguard 403b newport - Google Search returns - 1150_TSA_Application.pdf (among others). That pdf notes that Newport Trust is the custodian retained by the employer, while employees may choose Vanguard or other funds for investment.

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Re: Vanguard 403b Changes

Post by anonenigma » Fri Jul 14, 2017 11:15 am

FiveK wrote:Is it Vanguard making the change, or the employer?

Couldn't find anything on the Vanguard website about Newport Trust, but a google search for vanguard 403b newport - Google Search returns - 1150_TSA_Application.pdf (among others). That pdf notes that Newport Trust is the custodian retained by the employer, while employees may choose Vanguard or other funds for investment.
+1

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alpenglow
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Re: Vanguard 403b Changes

Post by alpenglow » Fri Jul 14, 2017 11:19 am

This came directly from Vanguard, not my employer nor their processor (OMNI Group).

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alpenglow
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Re: Vanguard 403b Changes

Post by alpenglow » Fri Jul 14, 2017 11:23 am

I have Voyager status, so I'm paying nothing. Similarly to you feehater, I went from $0 in fees to about $1200 in fees until I can rollover at retirement. I will be reaching out to Vanguard with my displeasure. While I can't "vote with my feet" on this account, there is a good chance that I'll be moving about $300k of other IRA accounts to Fidelity over this change. :annoyed

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Pajamas
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Re: Vanguard 403b Changes

Post by Pajamas » Fri Jul 14, 2017 11:28 am

I got the same letter from Vanguard yesterday about a 403(b) from a former employer.

Currently the fees on my account are $15 a year, which I believe is per fund, and the new fees are going to be $60 a year. The fund I hold in the account does not have Admiral shares, so there is no advantage for me in that.

Are there any disadvantages to rolling it over into a Vanguard IRA?

IRAs have the same protection from creditors and judgments in my state as 403(b)s have and I don't care about borrowing from the account.

Rupert
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Re: Vanguard 403b Changes

Post by Rupert » Fri Jul 14, 2017 11:43 am

This all makes me wonder if Vanguard is getting out of the 403b administration business altogether then?

feehater
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Re: Vanguard 403b Changes

Post by feehater » Fri Jul 14, 2017 1:22 pm

Rupert wrote:This all makes me wonder if Vanguard is getting out of the 403b administration business altogether then?

It sure sounds like it. The letter says "We're expanding our 403(b) account retirement services by partnering with Newport Group, a nationally recognized retirement plan services provider. Combining our investment expertise and low-cost funds with the recordkeeping capabilities of Newport Group will allow us to offer a more comprehensive program that can better address your evolving needs..." and later it says that Vanguard Fiduciary Trust will be resigning as custodian and appointing Newport as the successor custodian.

It also says "If allowed under the terms of your employer's plan, you may be eligible to exchange to another approved vendor." I just remembered that when I started my job I was given the option of TIAA, Vanguard, or Fidelity, so I might check to see if I am allowed and if it's worth moving the whole thing to Fidelity if I'm still this annoyed next week.

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Re: Vanguard 403b Changes

Post by zack907 » Fri Jul 14, 2017 3:17 pm

FiveK wrote:Is it Vanguard making the change, or the employer?

Couldn't find anything on the Vanguard website about Newport Trust, but a google search for vanguard 403b newport - Google Search returns - 1150_TSA_Application.pdf (among others). That pdf notes that Newport Trust is the custodian retained by the employer, while employees may choose Vanguard or other funds for investment.
I called Vanguard. It is Vanguard making the change. Supposedly many people were calling and asking to pay higher fees. Sounds unlikely, but I consider it a complete breach of trust. Vanguard's brand is to think of investors first and was the sole reason I have been steering all of my friends to open accounts with Vanguard instead of lower cost index funds like Fidelity. I assumed that it would be Fidelity that would pull this kind of crap, but no it was Vanguard. I registered on this site just to vent my frustrations with people that would understand how Vanguard is breaking their commitment to their customers with this action!

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alpenglow
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Re: Vanguard 403b Changes

Post by alpenglow » Fri Jul 14, 2017 3:18 pm

feehater wrote: I just remembered that when I started my job I was given the option of TIAA, Vanguard, or Fidelity, so I might check to see if I am allowed and if it's worth moving the whole thing to Fidelity if I'm still this annoyed next week.
You are lucky to have those options. I used to have Fidelity and TIAA as options, but those, along with Vanguard, are no longer offered. I am grandfathered into the Vanguard option. If I could move I would. I have to wonder when the $5/month fee will increase, despite what it might say in the letter.

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alpenglow
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Re: Vanguard 403b Changes

Post by alpenglow » Fri Jul 14, 2017 5:49 pm

zack907 wrote:Supposedly many people were calling and asking to pay higher fees. Sounds unlikely, but I consider it a complete breach of trust.
I'm always looking to pay more fees. :shock:

I completely agree that Vanguard failed their customers here. I guess there aren't too many Vanguard 403b customers on this board - I expected more of a response. I wonder if they will do something similar with 401k accounts?

I am very disappointed. I truly thought Vanguard was better than this. How foolish of me.

InMyDreams
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Re: Vanguard 403b Changes

Post by InMyDreams » Fri Jul 14, 2017 6:08 pm

Some day my 403b with my current employer will be moved. I was debating about Vanguard, vs TIAA. I have access to good VG funds in my TIAA account.

Guess the funds will go to TIAA.

ResearchMed
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Re: Vanguard 403b Changes

Post by ResearchMed » Fri Jul 14, 2017 6:10 pm

alpenglow wrote:
zack907 wrote:Supposedly many people were calling and asking to pay higher fees. Sounds unlikely, but I consider it a complete breach of trust.
I'm always looking to pay more fees. :shock:

I completely agree that Vanguard failed their customers here. I guess there aren't too many Vanguard 403b customers on this board - I expected more of a response. I wonder if they will do something similar with 401k accounts?

I am very disappointed. I truly thought Vanguard was better than this. How foolish of me.
Oh, there are lots of other Vanguard 403b clients here.
We'll be checking in!

We haven't heard a thing... yet.

Was there online notice as well?
(We don't get our USPS reliably, although we are always thrilled when our neighbors' mail lands in our mailbox :annoyed )

I wonder if this is for "all" 403b plans, or maybe the smaller ones, those that are relatively speaking more expensive for Vanguard to spend their time on?

Our plan used to be TIAA (then TIAA-CREF) only, until about 2010.
Then the offerings were severely cut back, but Vanguard and Fidelity were added, both with Brokerage options.
(TIAA didn't have a "brokerage" window, but there were quite a few TIAA funds then, but no outside fund families were allowed. V & F allow just about any outside funds. And, to give credit where due, Vanguard has on a few occasions *added* access to a specific fund we wanted to add. I never bothered to look to see if, then, "anyone" could add those.)

I suppose this is in part thanks to the changing Fiduciary regs?

Thanks.

RM
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Thrifty Investor
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Re: Vanguard 403b Changes

Post by Thrifty Investor » Fri Jul 14, 2017 8:13 pm

Vanguard sickened me with these 403b changes. I have $1.4 million directly with the company and another $400,000 invested in Wellington through the NYS Deferred Compensation Plan and I would love to withdraw it all from Vanguard after these changes.

I received the letter today announcing the $5 monthly fee and the switch to Newport. To say I am outraged would be an understatement. I don't like the direction that Vanguard is moving in.

I am personally responsible for at least 200 co-workers and friends establishing accounts with Vanguard and I am regretting it today. The company has a lot of nerve pulling this on longtime investors.

dkview
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Re: Vanguard 403b Changes

Post by dkview » Fri Jul 14, 2017 8:15 pm

I got the letter today too. Some questions...

What's a custodian and what is their role in a 403b plan?

What is Newport Group role in this 403b plan now?

What is Vanguard's role in this 403b plan now?

Will the Vanguard 403b plan be listed under Newport Group or will it still be under Vanguard?

Thanks

n00b
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Re: Vanguard 403b Changes

Post by n00b » Fri Jul 14, 2017 8:18 pm

My wife got the letter today.

$60/year seems expensive for record keeping. I was hoping for an exemption if paperless or something but no such luck.

It will be nice to have access to admiral shares but this account has some room before it will reach break-even on that.

Yes, it feels somewhat like a bait and switch.

dbltrbl
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Re: Vanguard 403b Changes

Post by dbltrbl » Fri Jul 14, 2017 9:18 pm

This 403b only and not taxable accounts. $5.00 per month is 60.00 per year. I can invest with Vanguard or Fido, I am going with their indexes. I am flagship and still will pay this. This is not employer but Vanguard trying to outsource at a high cost to clients. For comparison Fido charges me $1.00 per year not month.

ResearchMed
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Re: Vanguard 403b Changes

Post by ResearchMed » Fri Jul 14, 2017 9:25 pm

dbltrbl wrote:This 403b only and not taxable accounts. $5.00 per month is 60.00 per year. I can invest with Vanguard or Fido, I am going with their indexes. I am flagship and still will pay this. This is not employer but Vanguard trying to outsource at a high cost to clients. For comparison Fido charges me $1.00 per year not month.
Is this for ALL 403b plans, large and small?

We've heard nothing.

Thanks.

RM
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TTGO808
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Re: Vanguard 403b Changes

Post by TTGO808 » Fri Jul 14, 2017 10:47 pm

My employer charges me a monthly fee for its third-party 403b administrator. Is this another monthly fee added on the vanguard side?

What's the minimum investors need to qualify for admiral shares in their 403bs?

Thanks!

*3!4!/5!
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Re: Vanguard 403b Changes

Post by *3!4!/5! » Fri Jul 14, 2017 11:06 pm

This actually sounds like a completely normal fee for this kind of account. There are legitimate costs to be covered, and it is fair to pay for them. It sounds like an unfair subsidy is being removed. If I had a chance at a Vanguard 403b with a $5/month fee I would jump at it, and I'm sure a lot of other people would too.

I think I can confirm Vanguard doesn't really want to be in the 403b business (i.e. they want to supply the funds but don't want to do the record keeping administration etc). Our reasonable sized employer has TIAA (which is okay not great) and a few terrible providers for 403b, and they tried to get more low cost ones. Fidelity said yes, but Vanguard said no, so they don't sound interested.

I know it sucks to suddenly have a new fee, but I really think it's fair and reasonable.

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alpenglow
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Re: Vanguard 403b Changes

Post by alpenglow » Sat Jul 15, 2017 6:44 am

ResearchMed wrote:
Is this for ALL 403b plans, large and small?

We've heard nothing.

Thanks.

RM
I'm assuming this is for all 403b plans, though I don't know for certain. If I were at work I'd scan the letter and post it.

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CyclingDuo
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Re: Vanguard 403b Changes

Post by CyclingDuo » Sat Jul 15, 2017 7:58 am

alpenglow wrote:
zack907 wrote:Supposedly many people were calling and asking to pay higher fees. Sounds unlikely, but I consider it a complete breach of trust.
I'm always looking to pay more fees. :shock:

I completely agree that Vanguard failed their customers here. I guess there aren't too many Vanguard 403b customers on this board - I expected more of a response. I wonder if they will do something similar with 401k accounts?

I am very disappointed. I truly thought Vanguard was better than this. How foolish of me.
Hey, we'd take the $5 per month fee over what we are paying!

There are those of us who invest in Vanguard funds through other plan providers offered by our employers. We both have a 403b plan. One is with TIAA, and the other with VALIC. Both have wrap fees.

Here's what we pay for our Vanguard low-cost funds within those plans...

Spouse #1 403b
(TIAA plan which comes with their .17 ER annual charge, plus the underlying funds ER expense. The employer matching makes this plan worth having, but I do not like paying that .17 fee!)

Vanguard 500 Index Fund Admiral 40% (ER .05) +.17 = .22
Vanguard Extended Market Index Fund Admiral 15% (ER .09) +.17 = .26
Vanguard Total International Stock Index Fund Admiral 15% (ER .12) +.17 = .29
Vanguard Total Bond Market Index Fund Admiral 30% (ER .06) =.17 = .23

Spouse #2 403b (Voluntary Plan) AIG/VALIC which includes an administrative ER fee of .18 added to each fund as listed here...

Vanguard Institutional Index Fund 40% (total ER .22 - includes .18 administrative fee)
Vanguard Total International Stock Index Fund Admiral 20% (total ER .30 - includes .18 administrative fee)
Vanguard Total Bond Market Index Fund Admiral 40% (total ER .25 - includes .18 administrative fee)

We'd much rather pay $5 a month than a percentage of the balance! Not a problem for low balance 403b investors, but once you've been contributing for years and your balance has built up into the 6 figure area and beyond, the annual wrap ER fee charged by the administrator of the program adds up. So consider yourselves lucky compared to what most of us in the 403b world with high balances have to deal with and pay!!!!

Rupert
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Re: Vanguard 403b Changes

Post by Rupert » Sat Jul 15, 2017 8:53 am

dkview wrote:I got the letter today too. Some questions...

What's a custodian and what is their role in a 403b plan?

What is Newport Group role in this 403b plan now?

What is Vanguard's role in this 403b plan now?

Will the Vanguard 403b plan be listed under Newport Group or will it still be under Vanguard?

Thanks
I can answer a couple of your general questions, but I don't know anything about this Newport Group business. A 403b typically involves 3 entities: the custodian, who holds the money; the recordkeeper, who is essentially the accountant for the plan and also the entity that interfaces with employees and runs the plan website, etc.; and, sometimes, an advisor, who may advise just the employer re investments in the plan or may advise the employer and also educate employees re investments in the plan. Sometimes, especially when you are dealing with plans run by insurance companies, two or all of these functions will be performed by a single entity. This is called a "bundled" plan. The plan can buy investments from any mutual fund company. So just because you might have Vanguard funds in a plan doesn't mean that Vanguard plays any role in running the plan.

An example: My company has a completely unbundled plan (often called an "open architecture" plan). TD Ameritrade is our custodian. Our employees have no relationship with TD at all and wouldn't even know that TD played a role if we didn't tell them in the plan paperwork. A regional accounting firm (that also provides employee benefits services) is our recordkeeper, called a "third party administrator" in this scenario. They run our plan website and are the entity our employees know, call with problems/questions, etc. We have an independent, fee-only advisor, who both advises the plan committee re funds in the plan and educates employees about the funds in the plan, model portfolios, etc. All of the funds in our plan are Vanguard or DFA funds, but we could buy any fund offered for sale by TD Ameritrade. Vanguard and DFA play no role in our plan at all. They are just products. We, i.e., our advisors, do have to negotiate with them from time to time re expense ratios (did you know those are negotiable to an extent? they are).

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Re: Vanguard 403b Changes

Post by Johnnie » Sat Jul 15, 2017 11:51 am

When I turned 60 I rolled my VG 403b into an IRA specifically for the Admiral option. I'm still contributing and now roll it over on an annual basis.

I didn't know I could do that until I called VG and tried to move 403b accounts into Admiral shares. Thankfully an on-the-ball VG rep noticed I had just turned 60, which is a "qualifying event" (or whatever) that allows you to roll it over into an IRA and get the promotion to "flag rank."
"I know nothing."

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Re: Vanguard 403b Changes

Post by EdLaFave » Sat Jul 15, 2017 5:35 pm

I fight tooth and nail for 403(b)/457(b) reform and I do everything I can to help teachers navigate the system. Having said that, I think this thread represents a significant overreaction. I'll call Vanguard to get the exact details this week.

It sounds like Vanguard is allowing you to build a 3 Fund Portfolio for roughly 0.07% and $60/year. The access to Admiral shares saves you roughly 0.09%, which means that it'll pay for the $60/year fee when your account hits $66,666.66. Of course I'd love for access to Admiral shares without the $60/year fee and maybe the fee would be cheaper if Vanguard did everything in house.

Anybody thinking about moving to TIAA better be getting a better deal than they offer here in OCPS (FL). I wrote about TIAA at https://educatorsfightingforfairness.wo ... lans/tiaa/, they charge you 0.63% to build a 3 Fund Portfolio using Vanguard funds. It is even more expensive to build a 1 Fund Portfolio. Do you really want to make that trade? I certainly don't.

Anybody thinking about moving to Fidelity is probably making a rational decision but the difference here in Florida isn't huge. I wrote about Fidelity at https://educatorsfightingforfairness.wo ... 7b-vendors, they charge you about 0.06% and $24/year to build a 3 Fund Portfolio and as far as I know their 1 Fund Portfolio options are quite expensive.

So sure, fight for lower fees, but show me where the grass is greener before we start talking about rebellion and voting with our feet. I view this change as a net-positive because if my district ever gives me access to Vanguard, I'll be paying less in fees than I otherwise would have been.

pyld76
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Re: Vanguard 403b Changes

Post by pyld76 » Sat Jul 15, 2017 10:16 pm

Thrifty Investor wrote:Vanguard sickened me with these 403b changes. I have $1.4 million directly with the company and another $400,000 invested in Wellington through the NYS Deferred Compensation Plan and I would love to withdraw it all from Vanguard after these changes.

I received the letter today announcing the $5 monthly fee and the switch to Newport. To say I am outraged would be an understatement. I don't like the direction that Vanguard is moving in.

I am personally responsible for at least 200 co-workers and friends establishing accounts with Vanguard and I am regretting it today. The company has a lot of nerve pulling this on longtime investors.
If you have a 1.4 million in a VG 403b, you are likely to save upwards of $1000/year in expenses merely by getting access to Admiral share classes. It should more than offset the 60 bucks.

My DW got the letter. She doesn't have enough to make a grand/year difference, but on balance the ability to access Admiral shares is going to save 3-4x the $60.

With that said, I think it's a crap move on Vanguard's part. They are touting it as an enhancement. It's going to smack the little guy and early saver hard. And it's not like most teachers aren't already facing a raw deal,with the sorry state of most 403b plans. If DW had access to anyone else's index products at a decent price in her plan, I'd be sorely tempted to move.

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Re: Vanguard 403b Changes

Post by StretchArmstrong » Sun Jul 16, 2017 12:17 am

I'm reading the letter again, seems like vanguard is turning its back on "35 years of service". Anyway, they were pretty restrictive with their plans (no Roth, no loans, no vesting calculations), looks like loans and Roth will be opened up.

I have a question about this part from the letter (edited as I am typing on my phone)-

2. Newport Trust Company to serve as custodian. Vanguard resigning as custodian and appointing Newport as successor custodian.

and a little later down-

In the event you do not want to transition you may exchange your 403b contract or custodial account prior to the transition date, scheduled for the 4th quarter of 2017.


So, what does this custodial transition mean? Right now when I log in to vanguard all my accounts are in one spot, including 403b. Do you think those will stay, or will those assets be transferred out to Newport and you have to set up another account / login at Newport?

sharpjm
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Re: Vanguard 403b Changes

Post by sharpjm » Sun Jul 16, 2017 7:13 am

EdLaFave wrote:I wrote about TIAA at https://educatorsfightingforfairness.wo ... lans/tiaa/, they charge you 0.63% to build a 3 Fund Portfolio using Vanguard funds. It is even more expensive to build a 1 Fund Portfolio. Do you really want to make that trade? I certainly don't.

Anybody thinking about moving to Fidelity is probably making a rational decision but the difference here in Florida isn't huge. I wrote about Fidelity at https://educatorsfightingforfairness.wo ... 7b-vendors, they charge you about 0.06% and $24/year to build a 3 Fund Portfolio and as far as I know their 1 Fund Portfolio options are quite expensive.

So sure, fight for lower fees, but show me where the grass is greener before we start talking about rebellion and voting with our feet. I view this change as a net-positive because if my district ever gives me access to Vanguard, I'll be paying less in fees than I otherwise would have been.

If you want people to take your website seriously I would recommend adding caveats to your webpage stating that these were the experiences of yourself and whomever else were part of these anecdotes. TIAA has a wide range of funds with ERs that vary from being competitive to being a bit over the top. Your experience does not mean that TIAA doesn't have low cost funds. It means that your employer does not have a good plan negotiated with TIAA. For anyone without good options in a TIAA 403b, I would petition your employer to get the funds TIEIX, TCIEX, and TEQLX, among others added to the plan.

EdLaFave
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Re: Vanguard 403b Changes

Post by EdLaFave » Sun Jul 16, 2017 8:12 am

sharpjm wrote:If you want people to take your website seriously I would recommend adding caveats to your webpage stating that these were the experiences of yourself and whomever else were part of these anecdotes. TIAA has a wide range of funds with ERs that vary from being competitive to being a bit over the top. Your experience does not mean that TIAA doesn't have low cost funds. It means that your employer does not have a good plan negotiated with TIAA. For anyone without good options in a TIAA 403b, I would petition your employer to get the funds TIEIX, TCIEX, and TEQLX, among others added to the plan.
A few things:

1. My original post said "Anybody thinking about moving to TIAA better be getting a better deal than they offer here in OCPS (FL)"

2. The URL includes the text "inferior-ocps-403b-457b-plans".

3. To access the TIAA page you go through a page that says, "Use the links below to read our summary of the plans that we didn't choose as well as our experiences dealing with the vendors that offer them. We've tried to be as accurate as possible but these financial institutions often make it extremely difficult to gather information so as a result there may be some unintentional inaccuracies."

4. The TIAA page itself begins with the text "We didn't choose TIAA because you can build the same wonderful portfolio with less expensive vendors."

5. Adding better funds won't help. If you read the page you'd know we have access to Vanguard's 500, extended market, developed markets, and total bond for 0.04%-0.08%.

6. If you read the page you'd know the real cost comes from the 0.58% TIAA charges you for the pleasure of having a TIAA 403b/457b account.

So I don't understand why you think nuance is being hidden and I definitely don't understand why you have to be insulting by implying you don't take what we've done seriously. Have a good one.

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MossySF
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Re: Vanguard 403b Changes

Post by MossySF » Sun Jul 16, 2017 8:23 am

Reality is this stuff (401k/403b admin/record-keeping) does cost money. Most of the time, you just don't know the costs being covered by the employer. (For our 401K, it's about $100 per employee.) The 403b structure itself seems a wacky in that record-keeping is separated out amongst the different fund families instead of one administrator coordinating everything.

sharpjm
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Re: Vanguard 403b Changes

Post by sharpjm » Sun Jul 16, 2017 8:50 am

EdLaFave wrote: 4. The TIAA page itself begins with the text "We didn't choose TIAA because you can build the same wonderful portfolio with less expensive vendors."

5. Adding better funds won't help. If you read the page you'd know we have access to Vanguard's 500, extended market, developed markets, and total bond for 0.04%-0.08%.

6. If you read the page you'd know the real cost comes from the 0.58% TIAA charges you for the pleasure of having a TIAA 403b/457b account.

So I don't understand why you think nuance is being hidden and I definitely don't understand why you have to be insulting by implying you don't take what we've done seriously. Have a good one.
Because your points 4, 5, and 6 are incorrect.

4. You can build a less expensive fund with TIAA if your employer negotiates the correct funds into your plan.

5. You don't need access to any vanguard funds if you have equivalent TIAA funds that I mentioned.

6. TIAA doesn't charge 0.58% to everyone... again this is plan specific.

If you don't like your plan options with TIAA petition your employer to change them. Don't make blanket statements about TIAA when your employer is at fault.

FlyingMoose
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Re: Vanguard 403b Changes

Post by FlyingMoose » Sun Jul 16, 2017 8:57 am

I, for one, am happy about this. It will save me about twice the $60 fee by changing to Admiral shares. Vanguard charged a stealth fee by only allowing Investor shares, so I consider this to be more transparent and better reflect actual cost (since a huge account doesn't cost any more to administer but pays much higher fees under the Investor-shares-only system).

But the main reason I'm happy is because I want a Roth 403(b) (it will be very useful in my specific circumstances) and I've tried without success to find a company that will offer one.

pyld76
Posts: 131
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Re: Vanguard 403b Changes

Post by pyld76 » Sun Jul 16, 2017 9:05 am

MossySF wrote:Reality is this stuff (401k/403b admin/record-keeping) does cost money. Most of the time, you just don't know the costs being covered by the employer. (For our 401K, it's about $100 per employee.) The 403b structure itself seems a wacky in that record-keeping is separated out amongst the different fund families instead of one administrator coordinating everything.
In the case of a 401k, it's trivial to get those costs. You pull the form 5500 filing, where they tend to exist in black and white.

In 403bs which aren't necessarily ERISA, it's a murky cesspool. Keep in mind that what VG is doing is exiting the custodial business (the letter indicates as such).

I got to thinking about this. If I have an individual/solo 401k at VG, they charge $20/fund/year for custodial services. That's $60 for a three fund portfolio. With the solo, it's a single known business process.

My working theory is that 403bs are so small and Balkanized (dealing with so many different entities, TPAs, etc all of whom are slightly different from a process perspective) that VG finally decided the business of being a 403b custodian was more trouble than it was worth and they partnered it out. This is disappointing but not surprising: they don't seem to do anything they cannot standardize and run at hyper scale (at least from a business process perspective).

ResearchMed
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Re: Vanguard 403b Changes

Post by ResearchMed » Sun Jul 16, 2017 9:07 am

FlyingMoose wrote:I, for one, am happy about this. It will save me about twice the $60 fee by changing to Admiral shares. Vanguard charged a stealth fee by only allowing Investor shares, so I consider this to be more transparent and better reflect actual cost (since a huge account doesn't cost any more to administer but pays much higher fees under the Investor-shares-only system).

But the main reason I'm happy is because I want a Roth 403(b) (it will be very useful in my specific circumstances) and I've tried without success to find a company that will offer one.
Have you determined that this is what *your* employer's 403b plan will offer?

Or even whether this affects you/your 403b plan?

I'm still trying to figure out if this is "Vanguard-wide" for ALL 403b accounts, or just for some/certain Employers' Plans.
Does it vary by plan size?
(Not all 403b plans are "small".)

Anyone have any info about that latter question?
Or how one can find out?

Thanks.

RM
This signature is a placebo. You are in the control group.

EdLaFave
Posts: 268
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Re: Vanguard 403b Changes

Post by EdLaFave » Sun Jul 16, 2017 9:14 am

sharpjm wrote:Because your points 4, 5, and 6 are incorrect...Don't make blanket statements about TIAA when your employer is at fault.
This'll be my last reply to you because you're being intentionally dense.

1. All of the points I made are accurate.
2. All of my statements have come from the OCPS (FL) perspective and acknowledge the possibility of better TIAA offerings elsewhere.
3. My web site is from an OCPS (FL) perspective.

Best of luck to you.

student
Posts: 1379
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Re: Vanguard 403b Changes

Post by student » Sun Jul 16, 2017 9:16 am

EdLaFave wrote:Anybody thinking about moving to TIAA better be getting a better deal than they offer here in OCPS (FL). I wrote about TIAA at https://educatorsfightingforfairness.wo ... lans/tiaa/, they charge you 0.63% to build a 3 Fund Portfolio using Vanguard funds. It is even more expensive to build a 1 Fund Portfolio. Do you really want to make that trade? I certainly don't.
Who negotiated with TIAA? At my mid-size university, we can invest in its institution class mutual funds such as S&P 500 for 0.05% ER.

Edit: We do not have any other fees.

I learned something from your article, I did not realize that one can enter the plan number to get the list of available investments without logging on.

ResearchMed
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Re: Vanguard 403b Changes

Post by ResearchMed » Sun Jul 16, 2017 9:30 am

student wrote:
EdLaFave wrote:Anybody thinking about moving to TIAA better be getting a better deal than they offer here in OCPS (FL). I wrote about TIAA at https://educatorsfightingforfairness.wo ... lans/tiaa/, they charge you 0.63% to build a 3 Fund Portfolio using Vanguard funds. It is even more expensive to build a 1 Fund Portfolio. Do you really want to make that trade? I certainly don't.
Who negotiated with TIAA? At my mid-size university, we can invest in its institution class mutual funds such as S&P 500 for 0.05% ER.

Edit: We do not have any other fees.

I learned something from your article, I did not realize that one can enter the plan number to get the list of available investments without logging on.
The use of Institutional class funds in a 403b is not a given.

We had to fight for a few *years* to get our (large) 403b plan to allow anything other than "Investor share class" funds within the Vanguard Core offerings.
(And Employer seems to have done this in the nick of time, just before a load of class action suits hit, some involving this specific issue.)

In general, we have a great 403b plan, but this little glitch (now fixed) meant that those who didn't use a Brokerage window, couldn't get the lower ER funds. Further, everyone must have at last 5% of new Employer money coming in to go into the Core part. So that affected us, although just a bit.

At least our Employer was responsive, if stubborn and working at a snail's pace.

Still trying to figure out if what's being written here about overall changes to Vanguard 403b's is for ALL, or just a subset.

Thanks.

RM
This signature is a placebo. You are in the control group.

student
Posts: 1379
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Re: Vanguard 403b Changes

Post by student » Sun Jul 16, 2017 9:38 am

ResearchMed wrote:
student wrote:
EdLaFave wrote:Anybody thinking about moving to TIAA better be getting a better deal than they offer here in OCPS (FL). I wrote about TIAA at https://educatorsfightingforfairness.wo ... lans/tiaa/, they charge you 0.63% to build a 3 Fund Portfolio using Vanguard funds. It is even more expensive to build a 1 Fund Portfolio. Do you really want to make that trade? I certainly don't.
Who negotiated with TIAA? At my mid-size university, we can invest in its institution class mutual funds such as S&P 500 for 0.05% ER.

Edit: We do not have any other fees.

I learned something from your article, I did not realize that one can enter the plan number to get the list of available investments without logging on.
The use of Institutional class funds in a 403b is not a given.
I understand that. We have a union at our place, which may partially explained why we have access to it. I suppose they have to be competitive as we can also open an account with Fidelity. The bottom line is one has to press/negotiate with/lobby one's employer to arrange for a better plan.

EdLaFave
Posts: 268
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Re: Vanguard 403b Changes

Post by EdLaFave » Sun Jul 16, 2017 10:07 am

student wrote:Who negotiated with TIAA? At my mid-size university, we can invest in its institution class mutual funds such as S&P 500 for 0.05% ER.

Edit: We do not have any other fees.

I learned something from your article, I did not realize that one can enter the plan number to get the list of available investments without logging on.
You're fortunate to be at a University, that is a far more ethical environment than K-12. Every 5 years the following people determine which new vendors will be added and which existing vendors will be kept:

1. OCPS (FL) staff. Oddly this collection of people isn't static based on job title, but you might expect to see people like the head of risk management, head of retirement services, chief financial officer, etc.

2. Representatives from the unions (instructional and non-instructional). However, when I spoke to the union they seemed unaware of their right to participate so I'm not sure they even send somebody.

The fees for each fund are great at 0.04%-0.08%, but it isn't clear to me how/why we got that 0.58% AUM. Possible explanations range from corruption to ignorance to not caring to not having sufficient time. Like most school districts we're overrun with unethical companies sending their exploitative agents onto campus to take advantage of teachers. As far as I know TIAA doesn't do that and as a result perhaps the number of people that enroll in TIAA is quite small so the cost per investor has to be jacked up. I don't know.

I'm glad my site was helpful for you!

*3!4!/5!
Posts: 1256
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Re: Vanguard 403b Changes

Post by *3!4!/5! » Sun Jul 16, 2017 2:41 pm

Retirement plan fees/costs/expenses can be structured in many ways, as some have been pointing out. Anyone with the old or new Vanguard 403b is very lucky compared to most. There are really no grounds for complaint. The new model is fair, and the fees are reasonable.

My TIAA 401a has their institutional class funds, but we pay a wrap fee, which for me is several hundred dollars per year! (The other available 401a vendors are much worse.)

My 457b plan (only 1 available vendor) has low cost funds, but has a capped percentage-based AUM fee (e.g. 20bp of first $50k so max $100, but smaller balances pay less), so I pay $100 per year.

The TIAA 403b has no low cost funds, more like 40bp (and has TIAA trad and TREA), but no additional fee. (Most other available 403b vendors are much worse.) A few years ago our employer added Fidelity for 403b, which has low cost funds and no fees, which is great for informed investors like me, but is a treacherous minefield of high fees/costs/expenses for the unaware, so on average it's high cost. Our employer (4 fig # employees) also tried to get Vanguard 403b, but Vanguard said no.

This new Vanguard 403b is totally fair and reasonable, and those of you that have it should realize how lucky you are (though they could tweak the fees so small balances don't pay full fee, like my abovementioned 457b plan).

SteveinVanvcouverWA
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Re: Vanguard 403b Changes

Post by SteveinVanvcouverWA » Sun Jul 16, 2017 6:04 pm

My wife has a Vanguard 403b with her employer and we have received no such letter from Vanguard. I understand from the Bogleheads wiki that k-12 employee 403b's can be slightly different than other 403b's, and my wife is in healthcare. Maybe that's why?

sharpjm
Posts: 657
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Re: Vanguard 403b Changes

Post by sharpjm » Sun Jul 16, 2017 6:11 pm

EdLaFave wrote:
sharpjm wrote:Because your points 4, 5, and 6 are incorrect...Don't make blanket statements about TIAA when your employer is at fault.
This'll be my last reply to you because you're being intentionally dense.

1. All of the points I made are accurate.
2. All of my statements have come from the OCPS (FL) perspective and acknowledge the possibility of better TIAA offerings elsewhere.
3. My web site is from an OCPS (FL) perspective.

Best of luck to you.
Then I suggest when you link your website in a discussion and make blanket statements about TIAA you make it clear that your comments and dissatisfaction with plan options are a result of the employer plan and not TIAA. It is misleading to start the conversation about TIAA having fees when, in fact, the problem lies with the employer.

*3!4!/5!
Posts: 1256
Joined: Fri Sep 02, 2016 1:47 pm

Re: Vanguard 403b Changes

Post by *3!4!/5! » Sun Jul 16, 2017 7:24 pm

^ In the case of my TIAA plans, I definitely believe that problems are primarily due to TIAA itself, rather than the employer.

FlyingMoose
Posts: 300
Joined: Wed Mar 04, 2009 10:48 pm

Re: Vanguard 403b Changes

Post by FlyingMoose » Sun Jul 16, 2017 7:58 pm

ResearchMed wrote:
FlyingMoose wrote:I, for one, am happy about this. It will save me about twice the $60 fee by changing to Admiral shares. Vanguard charged a stealth fee by only allowing Investor shares, so I consider this to be more transparent and better reflect actual cost (since a huge account doesn't cost any more to administer but pays much higher fees under the Investor-shares-only system).

But the main reason I'm happy is because I want a Roth 403(b) (it will be very useful in my specific circumstances) and I've tried without success to find a company that will offer one.
Have you determined that this is what *your* employer's 403b plan will offer?

Or even whether this affects you/your 403b plan?

I'm still trying to figure out if this is "Vanguard-wide" for ALL 403b accounts, or just for some/certain Employers' Plans.
Does it vary by plan size?
(Not all 403b plans are "small".)

Anyone have any info about that latter question?
Or how one can find out?

Thanks.

RM
I am my own employer, so I got the employer version of the letter (which says a similar letter will be sent to all participants, haven't received that yet). I will be calling them to see if I can add a Roth 403(b) once they switch over, I sure hope so. As a data point for size, I am the only participant, and it's a non-ERISA plan.

Rupert
Posts: 2712
Joined: Fri Aug 17, 2012 12:01 pm

Re: Vanguard 403b Changes

Post by Rupert » Mon Jul 17, 2017 8:44 am

SteveinVanvcouverWA wrote:My wife has a Vanguard 403b with her employer and we have received no such letter from Vanguard. I understand from the Bogleheads wiki that k-12 employee 403b's can be slightly different than other 403b's, and my wife is in healthcare. Maybe that's why?
That's an interesting idea. Perhaps Vanguard is concerned about liability and is leaving the non-ERISA 403b market. Hope someone finds out the answer. (Ron Lieber at the New York Times: If you're reading this, find out the answer!).

letsgobobby
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Re: Vanguard 403b Changes

Post by letsgobobby » Mon Jul 17, 2017 8:59 am

wife has not received letter yet for her vanguard 403b. but does she really have a vanguard 403b? she has access to vanguard funds and they appear in her 403b and 401k accounts at vanguard.com.

at any rate my question is who was paying the equivalent of the $5/mo fee beforehand?

sschullo
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Contact:

Re: Vanguard 403b Changes

Post by sschullo » Mon Jul 17, 2017 10:51 am

Lots of debate over TIAA. Yeah, it's had issues with K-12 when it tried to be a major player in the K12 market, but it never understood the K-12 culture, as it has a century of experience with higher education and research institutes. I still like them. They are still miles better than any of the other large insurance carriers selling those terrible and expensive TSAs in the 403(b) plan.

I have about 20% of my 403(b) rollover fixed account with TIAA traditional annuity in which I pay no ERs (except, of course, the spread that is built in between what is credited to me 3.0% and what TIAA gets on the open market). Furthermore, it is 100% liquid, principal protection, and no ERs makes it an excellent fund for my fixed account allocation for this old man! :happy

My take on Vanguard hiring Newport is to expand their reach to public K-12 districts. I have never had Vanguard in my districts 403b, from my experience I would be happy. Back in the day, I only an invesco and they charged 12b1 fees, but I took them because it was NOT an annuity and it was a noload that invested in equities.

I believe Vanguard sees what I see, 80% of public k12 educators who have a 403(b), getting sold those horrific annuities, so they hired Newport to at least get Vanguard within reach of tens of thousands more teachers than they do now. Yeah, if you have already had access to Vanguard and they start charging $5.00 a month, I would probably be angry too, but I would not withdraw my money from Vanguard.

Because 403b with public k12 is so corrupted and conflicted with absolutely no fiduciary standards from the aggressive sales force that are EVERYWHERE on district property, this is the best way Vanguard could reach and SAVE more teachers from high cost with pathetic returns that are a whole lot worse than $60.00 a year (I was not happy with Invesco's 12b1 fees either).
Last edited by sschullo on Tue Jul 18, 2017 9:05 pm, edited 1 time in total.
Public School K-12 Educators: "Ask NOT what your annuity sales person can do for you, ask what you can do to be a Do-It-Yourselfer (DIY)."

ResearchMed
Posts: 5470
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Re: Vanguard 403b Changes

Post by ResearchMed » Mon Jul 17, 2017 11:07 am

Rupert wrote:
SteveinVanvcouverWA wrote:My wife has a Vanguard 403b with her employer and we have received no such letter from Vanguard. I understand from the Bogleheads wiki that k-12 employee 403b's can be slightly different than other 403b's, and my wife is in healthcare. Maybe that's why?
That's an interesting idea. Perhaps Vanguard is concerned about liability and is leaving the non-ERISA 403b market. Hope someone finds out the answer. (Ron Lieber at the New York Times: If you're reading this, find out the answer!).
Okay... is this then only about NON-ERISA 403b plans?

We've got an ERISA plan, so maybe that's why neither of us has (yet?) heard anything?

Thanks.

RM
This signature is a placebo. You are in the control group.

Rupert
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Re: Vanguard 403b Changes

Post by Rupert » Mon Jul 17, 2017 12:31 pm

sschullo wrote:Lots of debate over TIAA. Yeah, it's had issues with K-12 when it tried to be a major player in the K12 market, but it never understood the K-12 culture, as it has a century of experience with higher education and research institutes. I still like them. They are still miles better than any of the other large insurance carriers selling those terrible and expensive TSAs in the 403(b) plan.

I have about 20% of my 403(b) rollover fixed account with TIAA traditional annuity in which I pay no ERs (except, of course, the spread that is built in between what is credited to me 3.0% and what TIAA gets on the open market). Furthermore, it is 100% liquid, principal protection, and no ERs makes it an excellent fund for my fixed account allocation for this old man! :happy

My take on Vanguard hiring Newport is to expand their reach to public K-12 districts. I have never had Vanguard in my districts 403b, from my experience I would be happy. Back in the day, I only an invesco and they charged 12b fees, but I took them because it was NOT an annuity and it was a noload that invested in equities.

I believe Vanguard sees what I see, 80% of public k12 educators who have a 403(b), getting sold those horrific annuities, so they hired Newport to at least get Vanguard within reach of tens of thousands more teachers than they do now. Yeah, if you have already had access to Vanguard and they start charging $5.00 a month, I would probably be angry too, but I would not withdraw my money from Vanguard.

Because 403b with public k12 is so corrupted and conflicted with absolutely no fiduciary standards from the aggressive sales force that are EVERYWHERE on district property, this is the best way Vanguard could reach and SAVE more teachers from high cost with pathetic returns that are a whole lot worse than $60.00 a year (I was not happy with Invesco 12b fees either).
Now we have competing theories: (1) Vanguard is trying to get out of the nonERISA 403b market and (2) Vanguard is trying to expand its presence in that market.

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