Vanguard 403b Changes

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sschullo
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Re: Vanguard 403b Changes

Post by sschullo » Mon Jul 17, 2017 12:56 pm

Rupert wrote:
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.
It's even more specific than that. I was only talking about public k-12, not all nonErisa 403b market. TIAA is getting out, and I speculate that Vanguard may be trying a different approach to getting in the non erisa market, especially k12. Vanguard knows that the 4 million public k-12 employees are left out with no protection what so ever from the new DOL fiduciary rules.

From my end of the theory with close ties to how public k12 district bureaucrats think and behave and what Vanguard and TIAA has said and behaved for the last 20 years, not much has changed despite all of the print media publicity and investment forums available. For years, I have talked and written letters to both Vanguard and my district trying to get Vanguard on my districts 403b list, it's not even close. It will not happen under the current structures.

I am not convinced that hiring Newport will work with the 2nd largest school district in the country, LAUSD either. I'll find out at the next advisory meeting next month. Vanguard will not their stoop to the unrealistic demands of vast majority, but not all, k12 districts, especially here in California. It has never been in Vanguards interest. One district official who understood created the 457b plan to get around the tedious complexities, and now we have several Vanguard funds available including Vanguard Wellington, which I wanted way back in the dark ages of 1993.
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)."

stannius
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Re: Vanguard 403b Changes

Post by stannius » Mon Jul 17, 2017 10:12 pm

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?
Letters are still arriving, my wife's came just today.

I was annoyed at first, but thanks to this thread, I realized
a) It's not a big deal and her plan is still better than the average of what I've gotten with my private sector 401(k)s, which have ranged from decent to terrible.
b) It might actually save us money.

texasdiver
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Re: Vanguard 403b Changes

Post by texasdiver » Tue Jul 18, 2017 1:26 am

My wife got the letter yesterday. Mine arrived today. We both have Vanguard 403(b) plans through previous employers that we have just been letting ride until now out of inertia.

After this I'll be rolling mine into my TSP account which I should have done last year when I changed jobs. My wife will be rolling hers into a Vanguard rollover IRA account that she already holds from another recent 403(b) rollover that was from a far worse plan (Standard Insurance) with far worse fees and therefore much more urgent.

pyld76
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Re: Vanguard 403b Changes

Post by pyld76 » Tue Jul 18, 2017 9:39 am

sschullo wrote:
It's even more specific than that. I was only talking about public k-12, not all nonErisa 403b market. TIAA is getting out, and I speculate that Vanguard may be trying a different approach to getting in the non erisa market, especially k12. Vanguard knows that the 4 million public k-12 employees are left out with no protection what so ever from the new DOL fiduciary rules.

From my end of the theory with close ties to how public k12 district bureaucrats think and behave and what Vanguard and TIAA has said and behaved for the last 20 years, not much has changed despite all of the print media publicity and investment forums available. For years, I have talked and written letters to both Vanguard and my district trying to get Vanguard on my districts 403b list, it's not even close. It will not happen under the current structures.

I am not convinced that hiring Newport will work with the 2nd largest school district in the country, LAUSD either. I'll find out at the next advisory meeting next month. Vanguard will not their stoop to the unrealistic demands of vast majority, but not all, k12 districts, especially here in California. It has never been in Vanguards interest. One district official who understood created the 457b plan to get around the tedious complexities, and now we have several Vanguard funds available including Vanguard Wellington, which I wanted way back in the dark ages of 1993.
I'm the guy with the other theory, and I find your post fascinating.

In the "public, k-12, non-ERISA space" at least in PA, Vanguard has always been leery (or simply unwilling) to work with any district who didn't/wouldn't sign the information sharing stuff prior to the 2008/2009 law/reg changes, and the only way they'd do so after is to work with TPAs who were able to handle things "at scale." They all but said they wanted nothing to do with chasing agreements with every tiny 400 person district plan across the state (and every set of business managers and solicitors). They were really kind of shamed (in the "A PA company sticking it to poor, PA teachers? That's impossible!") into dealing with the bigger TPAs in order to maintain access to VG for the districts/employees who had it prior to 2008/2009 (where an individual could basically open a VG 403b on their own if they could get VG to execute the paperwork and their district to properly process the payroll).

I honestly parse the move to Newport for custodial services (and that's all it really is, near as I can tell from the letter) as one more step into "we don't mind the AUM, but have no time for the individualized process nightmare that is dealing with the non-ERISA 403b space."

In the case of DW's district (maybe 500-600 total faculty participants, and the number who use VG unknown), my working theory is the only reason VG is on the list is that the admin types who are on the 403 side of the fence rather than the 457 side of the fence are almost all with VG. But I'm amazed that VG can't work get it working with the hyperscale/sized districts in California. My inclination is that almost has to be a political breakdown on the district side, since it seems to me that VG prefers that kind of scale on the other side of the table to eliminate process differences.

And yeah, DW is one of those for whom this represents kind of a kick (the $60 charge). It'll be overcome with the Admiral shares shift, but it's not what you'd expect from VG.

sschullo
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Re: Vanguard 403b Changes

Post by sschullo » Tue Jul 18, 2017 10:06 am

Can Vanguard's letter be posted here? Or who would I call to request a copy?
Since I am a retired teacher, I am no longer a district employee.
thanks,
Steve
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)."

sschullo
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Re: Vanguard 403b Changes

Post by sschullo » Tue Jul 18, 2017 10:11 am

pyld76 wrote:
sschullo wrote:
It's even more specific than that. I was only talking about public k-12, not all nonErisa 403b market. TIAA is getting out, and I speculate that Vanguard may be trying a different approach to getting in the non erisa market, especially k12. Vanguard knows that the 4 million public k-12 employees are left out with no protection what so ever from the new DOL fiduciary rules.

From my end of the theory with close ties to how public k12 district bureaucrats think and behave and what Vanguard and TIAA has said and behaved for the last 20 years, not much has changed despite all of the print media publicity and investment forums available. For years, I have talked and written letters to both Vanguard and my district trying to get Vanguard on my districts 403b list, it's not even close. It will not happen under the current structures.

I am not convinced that hiring Newport will work with the 2nd largest school district in the country, LAUSD either. I'll find out at the next advisory meeting next month. Vanguard will not their stoop to the unrealistic demands of vast majority, but not all, k12 districts, especially here in California. It has never been in Vanguards interest. One district official who understood created the 457b plan to get around the tedious complexities, and now we have several Vanguard funds available including Vanguard Wellington, which I wanted way back in the dark ages of 1993.
I'm the guy with the other theory, and I find your post fascinating.

In the "public, k-12, non-ERISA space" at least in PA, Vanguard has always been leery (or simply unwilling) to work with any district who didn't/wouldn't sign the information sharing stuff prior to the 2008/2009 law/reg changes, and the only way they'd do so after is to work with TPAs who were able to handle things "at scale." They all but said they wanted nothing to do with chasing agreements with every tiny 400 person district plan across the state (and every set of business managers and solicitors). They were really kind of shamed (in the "A PA company sticking it to poor, PA teachers? That's impossible!") into dealing with the bigger TPAs in order to maintain access to VG for the districts/employees who had it prior to 2008/2009 (where an individual could basically open a VG 403b on their own if they could get VG to execute the paperwork and their district to properly process the payroll).

I honestly parse the move to Newport for custodial services (and that's all it really is, near as I can tell from the letter) as one more step into "we don't mind the AUM, but have no time for the individualized process nightmare that is dealing with the non-ERISA 403b space."

In the case of DW's district (maybe 500-600 total faculty participants, and the number who use VG unknown), my working theory is the only reason VG is on the list is that the admin types who are on the 403 side of the fence rather than the 457 side of the fence are almost all with VG. But I'm amazed that VG can't work get it working with the hyperscale/sized districts in California. My inclination is that almost has to be a political breakdown on the district side, since it seems to me that VG prefers that kind of scale on the other side of the table to eliminate process differences.

And yeah, DW is one of those for whom this represents kind of a kick (the $60 charge). It'll be overcome with the Admiral shares shift, but it's not what you'd expect from VG.
There are some districts in California that have Vanguard on their 403(b), but VG will not disclose why some districts are acceptable. They have told me why LAUSD is not acceptable because of a list of demands my district required, different pension laws between PA and CA, but this is way before the new IRS changes in 2007. Now VG says they will not pay our 403b TPA (TSA Consulting Group) their fee to play. TSA Consulting Group is a ringer for the 403(b) insurance industry.
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)."

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FiveK
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Re: Vanguard 403b Changes

Post by FiveK » Tue Jul 18, 2017 11:25 am

sschullo wrote:Can Vanguard's letter be posted here? Or who would I call to request a copy?
Since I am a retired teacher, I am no longer a district employee.
thanks,
Steve
One is available at Vanguard to begin charging $5 a month on 403(b) plans.

ResearchMed
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Re: Vanguard 403b Changes

Post by ResearchMed » Tue Jul 18, 2017 11:34 am

FiveK wrote:
sschullo wrote:Can Vanguard's letter be posted here? Or who would I call to request a copy?
Since I am a retired teacher, I am no longer a district employee.
thanks,
Steve
One is available at Vanguard to begin charging $5 a month on 403(b) plans.
I'm getting a link to a forum by Mr. Money Mustache, but no letter content.

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

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FiveK
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Re: Vanguard 403b Changes

Post by FiveK » Tue Jul 18, 2017 11:50 am

ResearchMed wrote:
FiveK wrote:
sschullo wrote:Can Vanguard's letter be posted here? Or who would I call to request a copy?
Since I am a retired teacher, I am no longer a district employee.
thanks,
Steve
One is available at Vanguard to begin charging $5 a month on 403(b) plans.
I'm getting a link to a forum by Mr. Money Mustache, but no letter content.

RM
It's an attachment to the first post in that thread. Hmmm - I just tried going there anonymously and the paper clip icon indicates the attachment, but the attachment doesn't appear.

ETA: Tried displaying the attachment directly while anonymous, and received the following:
It seems that you are not allowed to download or view attachments on this board.
Please login below or register an account with The Money Mustache Community.
It's not hard to register if one wants to see it. ;)

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alpenglow
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Re: Vanguard 403b Changes

Post by alpenglow » Tue Jul 18, 2017 3:56 pm

sschullo wrote:Can Vanguard's letter be posted here? Or who would I call to request a copy?
Since I am a retired teacher, I am no longer a district employee.
thanks,
Steve
Why not rollover to an IRA and avoid the fee?

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FiveK
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Re: Vanguard 403b Changes

Post by FiveK » Tue Jul 18, 2017 5:55 pm

alpenglow wrote:Why not rollover to an IRA and avoid the fee?
That would be good, except most 403b plans don't allow it until one leaves employment with that employer.

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alpenglow
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Re: Vanguard 403b Changes

Post by alpenglow » Tue Jul 18, 2017 5:59 pm

FiveK wrote:
alpenglow wrote:Why not rollover to an IRA and avoid the fee?
That would be good, except most 403b plans don't allow it until one leaves employment with that employer.
He said he was retired.

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FiveK
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Re: Vanguard 403b Changes

Post by FiveK » Tue Jul 18, 2017 6:20 pm

alpenglow wrote:
FiveK wrote:
alpenglow wrote:Why not rollover to an IRA and avoid the fee?
That would be good, except most 403b plans don't allow it until one leaves employment with that employer.
He said he was retired.
Fair enough. Based on viewtopic.php?f=10&t=223355#p3452715 (and other posts...) it seems sschullo has already taken his 403b rollover.
Also seems we agree on what one can and should do. :sharebeer

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alpenglow
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Re: Vanguard 403b Changes

Post by alpenglow » Tue Jul 18, 2017 6:22 pm

FiveK wrote: Also seems we agree on what one can and should do. :sharebeer
Glad to hear he's already done a rollover! :sharebeer

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Re: Vanguard 403b Changes

Post by *3!4!/5! » Tue Jul 18, 2017 6:59 pm

alpenglow wrote:
sschullo wrote:Can Vanguard's letter be posted here? Or who would I call to request a copy?
Since I am a retired teacher, I am no longer a district employee.
thanks,
Steve
Why not rollover to an IRA and avoid the fee?
It appears that "sschullo" has expertise on 403bs, and wants to advocate for better retirement plans, and wishes to see the letter so as to gather pertinent information.

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alpenglow
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Re: Vanguard 403b Changes

Post by alpenglow » Tue Jul 18, 2017 7:09 pm

*3!4!/5! wrote: It appears that "sschullo" has expertise on 403bs, and wants to advocate for better retirement plans, and wishes to see the letter so as to gather pertinent information.
:oops:

whyme
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Re: Vanguard 403b Changes

Post by whyme » Tue Jul 18, 2017 7:49 pm

alpenglow wrote: It appears that "sschullo" has expertise on 403bs, and wants to advocate for better retirement plans, and wishes to see the letter so as to gather pertinent information.
Indeed, Steve Schullo is a rather heroic teacher's retirement activist. He co-wrote a book called "Late Bloomer Millionaires," and appears (along with Bogle, among others) on the PBS Frontline documentary on the retirement crisis.

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Re: Vanguard 403b Changes

Post by sschullo » Tue Jul 18, 2017 9:05 pm

FiveK wrote:
sschullo wrote:Can Vanguard's letter be posted here? Or who would I call to request a copy?
Since I am a retired teacher, I am no longer a district employee.
thanks,
Steve
One is available at Vanguard to begin charging $5 a month on 403(b) plans.
Thank you Fivek
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)."

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Re: Vanguard 403b Changes

Post by sschullo » Tue Jul 18, 2017 9:08 pm

*3!4!/5! wrote:
alpenglow wrote:
sschullo wrote:Can Vanguard's letter be posted here? Or who would I call to request a copy?
Since I am a retired teacher, I am no longer a district employee.
thanks,
Steve
Why not rollover to an IRA and avoid the fee?
It appears that "sschullo" has expertise on 403bs, and wants to advocate for better retirement plans, and wishes to see the letter so as to gather pertinent information.
That's correct.
I wrote a book about my experience with the 403bs at LAUSD. PM me if you are interested in a free PDF copy.

It's also correct that I have retired and rolled over all of my 403b money to Vanguard. My total fees are .066%.
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)."

jpigg
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Re: Vanguard 403b Changes

Post by jpigg » Wed Jul 19, 2017 3:44 pm

Here is a transcription of the letter body.

Page 1:
Coming soon: Added service and flexibility for your 403(b) plan

Dear <customer>,

For more than 35 years, Vanguard has offered 403(b) account services to investors like you who participate in an employer-sponsored 403(b) retirement plan, and we remain as committed as ever to helping you reach your savings goals. Now we're about to strengthen that commitment.

Here's what's happening

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 (sic) capabilities of Newport Group will allow us to offer a more comprehensive program that can better address your evolving needs. While the enhanced program won't launch until later this year, we want to make you aware of the plans early on and highlight some of the additional services that will be available.

What this means for you

Our 403(b) program - Vanguard 403(b) Services - will offer a variety of added and expanded features, including:
  • Access to the lower-cost Admiral(tm) share class of our mutual funds
  • Ability to make Roth 403(b) contributions.*
  • Loan services.*
  • An enhanced participant website through vanguard.com
What about fees?
The enhanced program will offer transparent pricing as follows:
  • You'll have access to lower-cost Vanguard Admiral Shares.
  • Your monthly flat recordkeeping (sic) fee will be just $5 - a fee that won't increase as your assets grow, as it might with many small- to mid-sized retirement plans
* If allowed under the terms of your employer's plan
Page 2:
What will you need to do?
  • If you're actively participating in an employer-sponsored plan, you don't have to do a thing. Vanguard will automatically transition your account to the enhanced program, giving you full access to the benefits it offers. If allowed under the terms of your employer's plan, you may be eligible to exchange to another approved vendor.*
  • If you're no longer working for the employer who sponsors your plan, you may be eligible to roll over your plan assets to an IRA. Visit vanguard.com/ira_rollover to learn more about rollover eligibility. If you want to roll over to a Vanguard IRA(R), you can download a form or begin the process online.
We'll keep you up to date
Throughout the coming months, you'll receive more news and updates about Vanguard 403(b) Services and the benefits the program offers. One of the first steps we've taken to facilitate the launch later this year is to update certain agreements and documents applicable to the program. Summaries of the changes being made are listed below.

We're required to inform you of these changes, and we encourage you to review them, but no further action is necessary from you.

Custodial Account Agreement amendments
  1. The Vanguard 403(b)(7) Individual Custodial Account Agreement (the "Vanguard Agreement") has added or revised the sections shown in the table below in preparation for the enhanced program. You can read the agreement in its entirety at vanguard.com/caa, or contact us to request a copy.
    Section -- Amendment
    Introduction to Agreement -- Effective date revision
    Article 4.1(a): Participant-Directed Investments -- Content added to clarify available investments.
    Article 6.3: Information Sharing -- Reference to Exhibit A - the Information-Sharing Agreement for 403(b) Contract Exchanges.
    Article 8.2: Amendment to Group Custodial Account (new) -- Provision that permits the custodian and employer to amend into a group custodial account
    Article 8.3: Termination of Agreement -- Revision to clarify that the Agreement doesn't terminate if a successor custodian is appointed.
    Article 9.5: Fees and Expenses -- Content added to reflect service, recordkeeping (sic), and custodial fees.
    Article 9.11: Assignment (new) -- Provision that permits Vanguard Fiduciary Trust Company to assign duties and responsibilities to a parent or an affiliate.
    Article 9.12: Subcontracting (new) -- Provision that permits the custodian or its assigns to subcontract to third parties.
    Exhibit A -- Information-Sharing Agreement for 403(b) Contract Exchanges.
*Contact your plan administrator to determine your eligibility.
Page 3:
  • Newport Trust Company to serve as custodian. At the time of the transition, Vanguard Fiduciary Trust Company will be resigning as custodian of 403(b)(7) custodial accounts and appointing Newport Trust Company as successor custodian. At that time, the Vanguard Agreement will be amended and restated by Newport Trust Company. We'll provide further details as we get closer to the time of the transition.
From now until the program launch time, it will be business as usual. Your service should have little disruption, and ultimately you can expect a smooth transition to Vanguard 403(b) Services.

If you have any questions, please call us at 844-859-0275 Monday through Friday from 8 a.m. to 8 p.m., Easter time, or follow the steps below to send us a secure message anytime:
  1. Log on to your Vanguard account.
  2. From the top menu, choose Client Support, and select the Contact us tab.
  3. Choose Send a secure message.
  4. Select the Compose button, enter all the information requested, type your message, and select Send.
As always, thank you for investing with Vanguard.

Sincerely,

<signature>

Alba E. Martinez
Principal
Retail Investor Group

<lots of white space>

There are important factors to consider when rolling over assets to an IRA. These factors include, but are not limited to, investment options in each type of account, fees and expenses, available services, potential withdrawal penalties, protection from creditors and legal judgments, required minimum distributions, and tax consequences of rolling over employer stock to an IRA.

All investing is subject to risk, including the possible loss of the money you invest.

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Re: Vanguard 403b Changes

Post by *3!4!/5! » Wed Jul 19, 2017 6:27 pm

I would be thrilled to have a plan like that (while working). :happy

MNGopher
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Re: Vanguard 403b Changes

Post by MNGopher » Wed Jul 19, 2017 7:00 pm

Hopefully the outsourcing of the 403Bs to a new custodian will increase efficiency of transactions. I currently average about a 10 day lag between when the funds are withheld from my paycheck until they are purchased at Vanguard. The 60 bucks could be worth it if this gets processed quicker.

letsgobobby
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Re: Vanguard 403b Changes

Post by letsgobobby » Wed Jul 19, 2017 7:53 pm

still have not received the letter, but it seems like if your assets are high enough that Admiral shares offset the monthly $5 fee (per plan), you come out ahead. Depending on the particular investments you chose, that could occur at a relatively low account value in the mid-upper 5 figures. It seems like most Bogleheads will come out ahead with this change over time.

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Re: Vanguard 403b Changes

Post by *3!4!/5! » Wed Jul 19, 2017 8:20 pm

MNGopher wrote:Hopefully the outsourcing of the 403Bs to a new custodian will increase efficiency of transactions. I currently average about a 10 day lag between when the funds are withheld from my paycheck until they are purchased at Vanguard. The 60 bucks could be worth it if this gets processed quicker.
That's almost certainly unrelated, that is, they almost certainly make the purchases as soon as they get the money, and the real problem is the delay in them receiving the money, which is totally not their fault.

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Re: Vanguard 403b Changes

Post by FlyingMoose » Wed Jul 19, 2017 9:41 pm

MNGopher wrote:Hopefully the outsourcing of the 403Bs to a new custodian will increase efficiency of transactions. I currently average about a 10 day lag between when the funds are withheld from my paycheck until they are purchased at Vanguard. The 60 bucks could be worth it if this gets processed quicker.
When I make a contribution as an employer, it goes in the same day if done by 4:00, just as if I were buying funds with my own checking account in my Roth or taxable account. I would take this up with your employer.

dkview
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Re: Vanguard 403b Changes

Post by dkview » Wed Jul 19, 2017 10:01 pm

MNGopher wrote:Hopefully the outsourcing of the 403Bs to a new custodian will increase efficiency of transactions. I currently average about a 10 day lag between when the funds are withheld from my paycheck until they are purchased at Vanguard. The 60 bucks could be worth it if this gets processed quicker.
Wow. That's a long time. My funds are purchased in 4 business days.

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Re: Vanguard 403b Changes

Post by A440 » Thu Jul 20, 2017 6:35 am

[quote="Pajamas"]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?

One disadvantage to rolling any 403(b) to an IRA would be you must wait until age 59 1/2 to tap it. Unless you use 72(t) strategy. For those FIRE folks who want to separate service at 55 with current employer, a 403(b) is available for withdrawal without IRS penalty.

slickwillbo
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Re: Vanguard 403b Changes

Post by slickwillbo » Thu Jul 20, 2017 7:28 am

I have a Vanguard 403(b) through my employer - a large, private university. I haven't received such a letter yet. I don't pay any fees other than fund ERs- I assume the university is eating the record keeping fees.

Thrifty Investor
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Re: Vanguard 403b Changes

Post by Thrifty Investor » Thu Jul 20, 2017 8:16 am

Some people on the forum are missing the point on all of this. They are comparing Vanguard to other 403b providers that they are forced to deal with by their employers. Those of us who can use Vanguard already have signed 403b contracts with the company. I have used Vanguard for my 403b for a long time. I did so without a $5 monthly charge. I don't want the Newport Group associated with my account. There is also no reason whatsoever that Vanguard couldn't have offered all of us access to Admiral shares all along. They are now using such access as a cover for the move to the Newport Group and the $60 yearly fee.

Vanguard is now giving us what it could have provided all along. There are people here on this forum who are (rightfully) stating that Vanguard is still better than the alternatives. But, with this action it took a step down the ladder and moved closer to its competitors rather than further setting itself apart. A company motto of "Invest with us because the other guys are even worse" is hardly inspiring.

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Re: Vanguard 403b Changes

Post by sschullo » Thu Jul 20, 2017 9:15 am

Thrifty Investor wrote:Some people on the forum are missing the point on all of this. They are comparing Vanguard to other 403b providers that they are forced to deal with by their employers. Those of us who can use Vanguard already have signed 403b contracts with the company. I have used Vanguard for my 403b for a long time. I did so without a $5 monthly charge. I don't want the Newport Group associated with my account. There is also no reason whatsoever that Vanguard couldn't have offered all of us access to Admiral shares all along. They are now using such access as a cover for the move to the Newport Group and the $60 yearly fee.

Vanguard is now giving us what it could have provided all along. There are people here on this forum who are (rightfully) stating that Vanguard is still better than the alternatives. But, with this action, it took a step down the ladder and moved closer to its competitors rather than further setting itself apart. A company motto of "Invest with us because the other guys are even worse" is hardly inspiring.
Appreciate your comment, and I understand what you are saying and feeling. And you are right it isn't inspiring for those of you who had, fortunately, a very different 403b experience in that you had Vanguard available all along. I said in my earlier post if I had Vanguard on my 403b way back when I wanted Wellington, in the dark ages of 1993 and was investing with Vanguard without the $60 fee, I would be angry too and use the same argument you are using.

But that's not what I have experienced AT ALL. WOW, do my colleagues and I have a long history and I wrote a free book about (Fighting Powerful Interests). Even St. Jack did not want to talk about the 403b as he just said to me "don't get me started on the 403b" at a recent reunion. He was and probably still is very frustrated with up to 4 million teachers with absolutely terrible 403b plans (There have been over 30 print media articles about these horrific plans for public k-12 and because the insurance industry is so strong, not much has changed. NY times series here: viewtopic.php?t=201781).

Have my friends and I experienced one frustration after another for years!!!! Vanguard was never available so I had to pay 12b(1) fee to invest in an another low-cost equity investment (Invesco) in my 403(b), just to get out of those horrible fixed annuities. As a public K12 teacher that never had Vanguard available and tried for years to have it available on my district's 403b, I find the $60.00 per month reasonable.

Here's why: When I had $27,000 in my 403b when I finally transferred it to Vanguard (under the old IRS rules), the 12b1 fee of .25 calculates out to about $68.00. I would have rather had that money go to Vanguard than Invesco, but as we all know here Vanguard never charged 12b(1) fees.

I am not even talking about the Admiral funds! That is NOT going to happen under the current system because districts and state insurance codes rule the selection process, not Vanguard.

I sit on my old employers (L.A. Unified School District) advisory committee that oversees the 403b and 457b. Vanguard is still not available in the 403b side, but we selected Vanguard on the 457b side. Now in order for employees to invest in Vanguard, they have to pay .25% TPA costs for record keeping. Do you see a pattern? Either the 12b1 costs or the TPA costs. The point is that like it or not employer sponsored retirement plans have costs. We have an Award Winning 457(b) plan that now has several Vanguard funds including Wellington, that I wanted way back when. It may not have the $60 cost but there is an equivalent .25% to the third party administrator (VOYA). That's why Bogleheads recommend rolling over 401k, 457b, and 403b money into Vanguard because it makes no sense to keep paying the costs associated with employer sponsored plans.

I am sorry that you have to pay more now, but I am looking at a bigger picture. The vast majority of school districts will never have Vanguard as a 403b option, Admiral funds will absolutely never happen! Not that is about as uninspiring as can be.

Are you suggesting that because the $60 per year required to contract with Newport group so it could reach more of my colleagues is so unethical by Vanguard standards that the vast majority of public K-12 teachers should remain out of reach for Vanguard?

Thanks for your comment. So few people talk about the 403b. It seems the Bogleheads are talking a little more of an interest because it looks like the current system is now affecting how Vanguard charges fees. Now you will realize just how terrible the current 403b system is that Vanguard had to radically change to comply with it. The fact remains that the vast majority of 4 million teachers who are left totally unprotected by the recent DOL fiduciary standards recently implemented, which is another discussion. Vanguard is trying to adapt because nobody else can change the system, my friends and I have tried, and we will keep trying until the system changes and Vanguard will not have to charge $60 any more.

Steve
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
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Re: Vanguard 403b Changes

Post by ResearchMed » Thu Jul 20, 2017 9:32 am

Not ALL 403b plans are bad.

It seems to be K-12 (entirely? only?).

Our large University 403b is very good, and they've been responsive to some suggestions for improvement over the years.
I never realized how great it was until I started reading here about other plans some years ago.

RM
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Thrifty Investor
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Re: Vanguard 403b Changes

Post by Thrifty Investor » Thu Jul 20, 2017 10:08 am

1. Public school districts in New York have nothing to do with whether Vanguard chooses to offer access to Investor or Admiral class shares to 403b account owners.

2. There is absolutely no fee for me to participate in the 403b program through my school district. It just passes along the paperwork that I complete and acts upon my requested salary deferral.

3. Vanguard on its own, decided to affiliate with the Newport Group. Vanguard on its own, chose to take on the expense the Newport Group brings with it.

4. Vanguard now wants to recoup that same expense by charging us $60 a month. To help make it go down a little more smoothly, Vanguard is finally going to give us access to Admiral class shares. I have an account with $830,000 in it. Why wasn't I allowed such access all along? This had nothing to do with my district, my state insurance code, etc. It had everything to do with Vanguard collecting more money on my account. Now it plans to charge me $60 per year and finally give me access to Admiral. Yes, I will more than make up for the $60 charge with a lower expense ratio, however, it's a terrible way to do business and keep the loyalty of its longtime investors.

5. Once again I must state, some people here on this forum have been put through the ringer by their own employer. They haven't had access to Vanguard, have been forced into high expense funds or even insurance company annuities. So they have difficulty understanding why those of us who have been with Vanguard for decades would object to this new development.

6. I don't want the Newport Group involved with my account. I do want Admiral class shares, but don't see why I have to pay $60 a year for the privilege of having access to them. Does a store charge you an entrance fee at the door for the right to shop there and buy their products? The shine has come off Vanguard for me.

ResearchMed
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Re: Vanguard 403b Changes

Post by ResearchMed » Thu Jul 20, 2017 10:14 am

Thrifty Investor wrote:1. Public school districts in New York have nothing to do with whether Vanguard chooses to offer access to Investor or Admiral class shares to 403b account owners.

2. There is absolutely no fee for me to participate in the 403b program through my school district. It just passes along the paperwork that I complete and acts upon my requested salary deferral.

3. Vanguard on its own, decided to affiliate with the Newport Group. Vanguard on its own, chose to take on the expense the Newport Group brings with it.

4. Vanguard now wants to recoup that same expense by charging us $60 a month. To help make it go down a little more smoothly, Vanguard is finally going to give us access to Admiral class shares. I have an account with $830,000 in it. Why wasn't I allowed such access all along? This had nothing to do with my district, my state insurance code, etc. It had everything to do with Vanguard collecting more money on my account. Now it plans to charge me $60 per year and finally give me access to Admiral. Yes, I will more than make up for the $60 charge with a lower expense ratio, however, it's a terrible way to do business and keep the loyalty of its longtime investors.

5. Once again I must state, some people here on this forum have been put through the ringer by their own employer. They haven't had access to Vanguard, have been forced into high expense funds or even insurance company annuities. So they have difficulty understanding why those of us who have been with Vanguard for decades would object to this new development.

6. I don't want the Newport Group involved with my account. I do want Admiral class shares, but don't see why I have to pay $60 a year for the privilege of having access to them. Does a store charge you an entrance fee at the door for the right to shop there and buy their products? The shine has come off Vanguard for me.
About the previous lack of access to Admiral share class, we had that same fight with our large University 403b plan admins.
For too long, they insisted it "wasn't possible" for the core portion.
And the core portion was what most participants used by default and/or lack of interest, and where ALL participants had to put at least 5% of new money coming in even if they had a brokerage portion.

But it was possible!
They just didn't bother to try (or try hard enough).

Now, about a year or so after they offered it, many plans are being sued precisely because of this.
Perhaps they had a whiff of that a year or two ago, and decided to beat the clock...

RM
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EdLaFave
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Re: Vanguard 403b Changes

Post by EdLaFave » Thu Jul 20, 2017 10:36 am

My understanding is that...
  • Vanguard 403(b)s didn't have access to Admiral shares because Vanguard needed the extra revenue from Investor shares to pay for all of the overhead associated with dealing with 403(b)s.
  • Vanguard is now offloading that work and is therefore happy to provide access to Admiral shares. As a result of this arrangement, we're now paying $60/year to cover all of the 403(b) overhead.
You can argue that...
  • Vanguard didn't really need the revenue from Investor shares to run 403(b) plans and they were price gouging us all along.
  • Vanguard could have kept everything in house, switched to a flat fee structure, and gotten the fee below $60/year.
I haven't looked at their books but if that is what you think then you're obviously irritated by the $60/year fee. However, it is a fact that a Vanguard 403(b) just got cheaper for everybody that has more than $66,666 and is willing to use a 3 fund portfolio.

ResearchMed
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Re: Vanguard 403b Changes

Post by ResearchMed » Thu Jul 20, 2017 10:51 am

I forgot to specify that not only was it "possible" for our 403b plan to offer non-Investor class shares, but where available, in the core section, our plan then offered the best "Institutional" class, with the lowest Vanguard ER possible.

Nice change.

But there are other "good" things, such as offering the Institutional shares of PIMCO funds with just $25k, not the regular $100k.
(That's been nice for PIMIX instead of PONDX, but it works for all (or most?) of the PIMCO funds.)

My point is that a lot of it IS up to the plan (Employer), and not just up to Vanguard.

I remain baffled how the "bad" 403b's, like the K-12 types, can continue to exist the way they are.
And because they are non-ERISA, there is nothing that can be done legally to get better plans??
Is there nothing about some sort of fiduciary responsibility (even if phrased differently) that can be pursued?

Why do the school districts still do this, given there are so many other lower-cost types of plans to use for comparison?

Yes, no doubt I am being naive about the power of the insurance lobby and their $$...

RM
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Re: Vanguard 403b Changes

Post by cusetownusa » Thu Jul 20, 2017 10:52 am

EdLaFave wrote:My understanding is that...
  • Vanguard 403(b)s didn't have access to Admiral shares because Vanguard needed the extra revenue from Investor shares to pay for all of the overhead associated with dealing with 403(b)s.
  • Vanguard is now offloading that work and is therefore happy to provide access to Admiral shares. As a result of this arrangement, we're now paying $60/year to cover all of the 403(b) overhead.
You can argue that...
  • Vanguard didn't really need the revenue from Investor shares to run 403(b) plans and they were price gouging us all along.
  • Vanguard could have kept everything in house, switched to a flat fee structure, and gotten the fee below $60/year.
I haven't looked at their books but if that is what you think then you're obviously irritated by the $60/year fee. However, it is a fact that a Vanguard 403(b) just got cheaper for everybody that has more than $66,666 and is willing to use a 3 fund portfolio.
I agree with this...these changes work out great for us and will save us a lot of money.

A440
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Re: Vanguard 403b Changes

Post by A440 » Thu Jul 20, 2017 11:52 am

FWIW,
Sorry if this has already been discussed...

I called Vanguard about the letter and had my questions/concerns answered.

1- Does this only affect the 403(b)7 I hold at Vanguard, or does it also affect the account I use for my current deductions through our Board approved vendor (in my case, Lincoln Investment).
Answer: It only would be applied to the account I hold at Vanguard, not any outside 403(b)account.

2- Would all the shares convert to Admiral shares? If this is the case, the savings in switching to Admiral shares would more than offset the cost of the $60 fee.
Answer: Yes, if Admiral shares are available for those funds. There would be no minimum balance required to obtain Admiral shares. In your (my) case, the reduction in expense ratio would more than cover the cost of the fee

Since our school district does not have an information sharing agreement with Vanguard, we cannot use them as a 403(b)7 vendor. Lincoln Investment's Participant-Directed Plan is the cheapest option if I want Vanguard Admiral share class funds. My current fees to Lincoln are $35/year. I have yet to see any charge from our TPA(Omni).

pretzelfisch
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Re: Vanguard 403b Changes

Post by pretzelfisch » Thu Jul 20, 2017 1:30 pm

sschullo wrote:
Thrifty Investor wrote:Some people on the forum are missing the point on all of this. They are comparing Vanguard to other 403b providers that they are forced to deal with by their employers. Those of us who can use Vanguard already have signed 403b contracts with the company. I have used Vanguard for my 403b for a long time. I did so without a $5 monthly charge. I don't want the Newport Group associated with my account. There is also no reason whatsoever that Vanguard couldn't have offered all of us access to Admiral shares all along. They are now using such access as a cover for the move to the Newport Group and the $60 yearly fee.

Vanguard is now giving us what it could have provided all along. There are people here on this forum who are (rightfully) stating that Vanguard is still better than the alternatives. But, with this action, it took a step down the ladder and moved closer to its competitors rather than further setting itself apart. A company motto of "Invest with us because the other guys are even worse" is hardly inspiring.
Appreciate your comment, and I understand what you are saying and feeling. And you are right it isn't inspiring for those of you who had, fortunately, a very different 403b experience in that you had Vanguard available all along. I said in my earlier post if I had Vanguard on my 403b way back when I wanted Wellington, in the dark ages of 1993 and was investing with Vanguard without the $60 fee, I would be angry too and use the same argument you are using.

But that's not what I have experienced AT ALL. WOW, do my colleagues and I have a long history and I wrote a free book about (Fighting Powerful Interests). Even St. Jack did not want to talk about the 403b as he just said to me "don't get me started on the 403b" at a recent reunion. He was and probably still is very frustrated with up to 4 million teachers with absolutely terrible 403b plans (There have been over 30 print media articles about these horrific plans for public k-12 and because the insurance industry is so strong, not much has changed. NY times series here: viewtopic.php?t=201781).

Have my friends and I experienced one frustration after another for years!!!! Vanguard was never available so I had to pay 12b(1) fee to invest in an another low-cost equity investment (Invesco) in my 403(b), just to get out of those horrible fixed annuities. As a public K12 teacher that never had Vanguard available and tried for years to have it available on my district's 403b, I find the $60.00 per month reasonable.

Here's why: When I had $27,000 in my 403b when I finally transferred it to Vanguard (under the old IRS rules), the 12b1 fee of .25 calculates out to about $68.00. I would have rather had that money go to Vanguard than Invesco, but as we all know here Vanguard never charged 12b(1) fees.

I am not even talking about the Admiral funds! That is NOT going to happen under the current system because districts and state insurance codes rule the selection process, not Vanguard.

I sit on my old employers (L.A. Unified School District) advisory committee that oversees the 403b and 457b. Vanguard is still not available in the 403b side, but we selected Vanguard on the 457b side. Now in order for employees to invest in Vanguard, they have to pay .25% TPA costs for record keeping. Do you see a pattern? Either the 12b1 costs or the TPA costs. The point is that like it or not employer sponsored retirement plans have costs. We have an Award Winning 457(b) plan that now has several Vanguard funds including Wellington, that I wanted way back when. It may not have the $60 cost but there is an equivalent .25% to the third party administrator (VOYA). That's why Bogleheads recommend rolling over 401k, 457b, and 403b money into Vanguard because it makes no sense to keep paying the costs associated with employer sponsored plans.

I am sorry that you have to pay more now, but I am looking at a bigger picture. The vast majority of school districts will never have Vanguard as a 403b option, Admiral funds will absolutely never happen! Not that is about as uninspiring as can be.

Are you suggesting that because the $60 per year required to contract with Newport group so it could reach more of my colleagues is so unethical by Vanguard standards that the vast majority of public K-12 teachers should remain out of reach for Vanguard?

Thanks for your comment. So few people talk about the 403b. It seems the Bogleheads are talking a little more of an interest because it looks like the current system is now affecting how Vanguard charges fees. Now you will realize just how terrible the current 403b system is that Vanguard had to radically change to comply with it. The fact remains that the vast majority of 4 million teachers who are left totally unprotected by the recent DOL fiduciary standards recently implemented, which is another discussion. Vanguard is trying to adapt because nobody else can change the system, my friends and I have tried, and we will keep trying until the system changes and Vanguard will not have to charge $60 any more.

Steve
But are they paying more? Or was the cost hidden in the plan. In our district we have a 3 dollar a month cost for using vanguard for our 403(b) because they won't kick back a management fee to TDS.

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Post by sschullo » Thu Jul 20, 2017 3:24 pm

pretzelfisch wrote:
sschullo wrote:
Thrifty Investor wrote:Some people on the forum are missing the point on all of this. They are comparing Vanguard to other 403b providers that they are forced to deal with by their employers. Those of us who can use Vanguard already have signed 403b contracts with the company. I have used Vanguard for my 403b for a long time. I did so without a $5 monthly charge. I don't want the Newport Group associated with my account. There is also no reason whatsoever that Vanguard couldn't have offered all of us access to Admiral shares all along. They are now using such access as a cover for the move to the Newport Group and the $60 yearly fee.

Vanguard is now giving us what it could have provided all along. There are people here on this forum who are (rightfully) stating that Vanguard is still better than the alternatives. But, with this action, it took a step down the ladder and moved closer to its competitors rather than further setting itself apart. A company motto of "Invest with us because the other guys are even worse" is hardly inspiring.
Appreciate your comment, and I understand what you are saying and feeling. And you are right it isn't inspiring for those of you who had, fortunately, a very different 403b experience in that you had Vanguard available all along. I said in my earlier post if I had Vanguard on my 403b way back when I wanted Wellington, in the dark ages of 1993 and was investing with Vanguard without the $60 fee, I would be angry too and use the same argument you are using.

But that's not what I have experienced AT ALL. WOW, do my colleagues and I have a long history and I wrote a free book about (Fighting Powerful Interests). Even St. Jack did not want to talk about the 403b as he just said to me "don't get me started on the 403b" at a recent reunion. He was and probably still is very frustrated with up to 4 million teachers with absolutely terrible 403b plans (There have been over 30 print media articles about these horrific plans for public k-12 and because the insurance industry is so strong, not much has changed. NY times series here: viewtopic.php?t=201781).

Have my friends and I experienced one frustration after another for years!!!! Vanguard was never available so I had to pay 12b(1) fee to invest in an another low-cost equity investment (Invesco) in my 403(b), just to get out of those horrible fixed annuities. As a public K12 teacher that never had Vanguard available and tried for years to have it available on my district's 403b, I find the $60.00 per month reasonable.

Here's why: When I had $27,000 in my 403b when I finally transferred it to Vanguard (under the old IRS rules), the 12b1 fee of .25 calculates out to about $68.00. I would have rather had that money go to Vanguard than Invesco, but as we all know here Vanguard never charged 12b(1) fees.

I am not even talking about the Admiral funds! That is NOT going to happen under the current system because districts and state insurance codes rule the selection process, not Vanguard.

I sit on my old employers (L.A. Unified School District) advisory committee that oversees the 403b and 457b. Vanguard is still not available in the 403b side, but we selected Vanguard on the 457b side. Now in order for employees to invest in Vanguard, they have to pay .25% TPA costs for record keeping. Do you see a pattern? Either the 12b1 costs or the TPA costs. The point is that like it or not employer sponsored retirement plans have costs. We have an Award Winning 457(b) plan that now has several Vanguard funds including Wellington, that I wanted way back when. It may not have the $60 cost but there is an equivalent .25% to the third party administrator (VOYA). That's why Bogleheads recommend rolling over 401k, 457b, and 403b money into Vanguard because it makes no sense to keep paying the costs associated with employer sponsored plans.

I am sorry that you have to pay more now, but I am looking at a bigger picture. The vast majority of school districts will never have Vanguard as a 403b option, Admiral funds will absolutely never happen! Not that is about as uninspiring as can be.

Are you suggesting that because the $60 per year required to contract with Newport group so it could reach more of my colleagues is so unethical by Vanguard standards that the vast majority of public K-12 teachers should remain out of reach for Vanguard?

Thanks for your comment. So few people talk about the 403b. It seems the Bogleheads are talking a little more of an interest because it looks like the current system is now affecting how Vanguard charges fees. Now you will realize just how terrible the current 403b system is that Vanguard had to radically change to comply with it. The fact remains that the vast majority of 4 million teachers who are left totally unprotected by the recent DOL fiduciary standards recently implemented, which is another discussion. Vanguard is trying to adapt because nobody else can change the system, my friends and I have tried, and we will keep trying until the system changes and Vanguard will not have to charge $60 any more.

Steve
But are they paying more? Or was the cost hidden in the plan. In our district we have a 3 dollar a month cost for using vanguard for our 403(b) because they won't kick back a management fee to TDS.
As I said before Vanguard has never been available in the 403b side at my district, the 2nd largest in the country.
We have Vanguard on the 457b plan. How does the following look to you about "hidden fees?"

Image



We have one of the most knowledgeable committees in the country, and we know all about hidden fees, and we demanded transparency in the 457b plans.

HOWEVER, we have no control over the selection, sales, and delivery of those hideous 403(b) annuities to our employees. A few years ago, our committee simply discussed the possibility of a competitive bidding process for the 403b, and the insurance industry caught wind of it, and immediately threatened the district with a lawsuit for violating the equally hideous insurance code.

Thats the 403b system with public K12 school districts with the vast majority of k12 public school districts. NY City seems to be an exception. The state of Wisconsin has a pretty good 403b plan too.
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)."

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Re: Vanguard 403b Changes

Post by sschullo » Thu Jul 20, 2017 3:36 pm

EdLaFave wrote:My understanding is that...
  • Vanguard 403(b)s didn't have access to Admiral shares because Vanguard needed the extra revenue from Investor shares to pay for all of the overhead associated with dealing with 403(b)s.
  • Vanguard is now offloading that work and is therefore happy to provide access to Admiral shares. As a result of this arrangement, we're now paying $60/year to cover all of the 403(b) overhead.
You can argue that...
  • Vanguard didn't really need the revenue from Investor shares to run 403(b) plans and they were price gouging us all along.
  • Vanguard could have kept everything in house, switched to a flat fee structure, and gotten the fee below $60/year.
I haven't looked at their books but if that is what you think then you're obviously irritated by the $60/year fee. However, it is a fact that a Vanguard 403(b) just got cheaper for everybody that has more than $66,666 and is willing to use a 3 fund portfolio.
Thank you Ed, that's my thinking too. I am looking at the big picture, and I think that's what Vanguard is looking at too. Trying to reach more public k12 teachers.
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)."

student
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Re: Vanguard 403b Changes

Post by student » Thu Jul 20, 2017 3:44 pm

Thrifty Investor wrote: 6. I don't want the Newport Group involved with my account. I do want Admiral class shares, but don't see why I have to pay $60 a year for the privilege of having access to them. Does a store charge you an entrance fee at the door for the right to shop there and buy their products? The shine has come off Vanguard for me.
You made many good points. However, many warehouse type stores do charge membership fee.

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Re: Vanguard 403b Changes

Post by sschullo » Thu Jul 20, 2017 3:49 pm

ResearchMed wrote:Not ALL 403b plans are bad.

It seems to be K-12 (entirely? only?).

Our large University 403b is very good, and they've been responsive to some suggestions for improvement over the years.
I never realized how great it was until I started reading here about other plans some years ago.

RM
Yeah!!! You are so right that not all 403b plans are bad. Right next door to LAUSD, my former district, is the UC system. Their 403b plans are what we in the 403b activist community dream for!!! OMG! They have Vanguard all through their plan. When I worked for the UC system they had a 401a plan that the UC system contributed 100% to Fidelity. It wasn't much but that will never happen in public k12.

To answer your question: YES I DID MEAN THAT THE 403b Tax Sheltered Annuity (TSA) is one of the most hideous retirement plans ever created, sold and delivered in the history of 20th-century retirement plan for PUBLIC K12 school districts. The 403b has been hijacked by the insurance industry to replace Social Security for public k12 educators, since the 403b was created by Congress in 1958.

Higher education loves TIAA, but the k-12 unions have hated TIAA viscerally for over a decade, so much so, that rumors say they are backing out of the k12 market. This cultural difference between public k12 and higher ed is truly amazing, and how the classroom teachers are kept in the dark for over half century by school districts, unions and the very savvy and aggressive sales force.

Here is the problem with public k12 after involved in this for 25 years. Higher education, MDs, Attorneys, Engineers are vastly different cultures from the public k12 profession. Even though we have graduate degrees and certificates, our profession is isolated and protected by the unions. There is very little access directly to the classroom teachers. The conferences are dominated by the unions and they would NEVER let somebody like me make a presentation. The major teachers' unions have never organized any on going sub committees just to talk about the 403b. It is hardly if ever discussed anywhere publically, outside of http://www.403bwise.com.

Get this. The largest teachers union, National Education Association, in the world has an outstanding 401k plan for its employees but a terrible plan for the members. Yeah, there is the self-directed low-cost plan, but Security Benefit will deny that it exists and will not help ANYBODY enroll! You guessed it, they don't make money and SB has ZERO fiduciary responsibility and a perverse incentive to steer the teachers towards the expensive products.
Last edited by sschullo on Thu Jul 20, 2017 6:03 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)."

jdouge
Posts: 42
Joined: Thu Jul 30, 2009 2:15 pm

Re: Vanguard 403b Changes

Post by jdouge » Thu Jul 20, 2017 5:31 pm

I got my letter today, so they are still going out.
A440 wrote: 2- Would all the shares convert to Admiral shares? If this is the case, the savings in switching to Admiral shares would more than offset the cost of the $60 fee.
Answer: Yes, if Admiral shares are available for those funds. There would be no minimum balance required to obtain Admiral shares. In your (my) case, the reduction in expense ratio would more than cover the cost of the fee
Read literally, this implies that there would be no minimum level of investment to get Admiral shares once the accounts are transferred. Do they really mean to say that you can get Admiral shares with just, say, a $3000 investment, for example?

student
Posts: 1127
Joined: Fri Apr 03, 2015 6:58 am

Re: Vanguard 403b Changes

Post by student » Thu Jul 20, 2017 6:22 pm

jdouge wrote:I got my letter today, so they are still going out.
A440 wrote: 2- Would all the shares convert to Admiral shares? If this is the case, the savings in switching to Admiral shares would more than offset the cost of the $60 fee.
Answer: Yes, if Admiral shares are available for those funds. There would be no minimum balance required to obtain Admiral shares. In your (my) case, the reduction in expense ratio would more than cover the cost of the fee
Read literally, this implies that there would be no minimum level of investment to get Admiral shares once the accounts are transferred. Do they really mean to say that you can get Admiral shares with just, say, a $3000 investment, for example?
This is how I read it. I think this is not unusual. We have Fidelity and we can buy their premium version of index funds with no minimum.

terententen
Posts: 1
Joined: Thu Jul 20, 2017 6:27 pm

Re: Vanguard 403b Changes

Post by terententen » Thu Jul 20, 2017 6:47 pm

So this does seem beneficial to those that have a decent amount of money in their 403(b) however in my wife's circumstance, she only paid into the 403(b) for a year while her employer had a match and when they took the match away, we started putting the money in other vehicles. There's only a few thousand in there now. What options do we have at this point? Feels like they're just going to start stealing money from us cause we aren't remotely close to that $66,666 number.

Ron Ronnerson
Posts: 736
Joined: Sat Oct 26, 2013 6:53 pm
Location: Bay Area

Re: Vanguard 403b Changes

Post by Ron Ronnerson » Thu Jul 20, 2017 7:40 pm

I've been putting money into an IRA and 457b for a while but only started a 403b a few months ago. I have several good options available and the primary reason I chose not to set up my 403b with Vanguard was because I couldn't buy their admiral shares. I wish they'd changed to this new structure just a little earlier. Personally, I'd rather pay $5/month and have lower expense ratios, but I do understand that this doesn't work to one's advantage if balances are below a certain level. Overall, I think this is a change for the better.

pretzelfisch
Posts: 31
Joined: Thu May 11, 2017 5:22 pm

Re:

Post by pretzelfisch » Thu Jul 20, 2017 11:37 pm

sschullo wrote: As I said before Vanguard has never been available in the 403b side at my district, the 2nd largest in the country.
We have Vanguard on the 457b plan. How does the following look to you about "hidden fees?"
Sorry, I was referring to those complaining about the now transparent 5 dollar a month charge, not to your work. We are up north in SJUSD and are lucky to have a nice 403b with many choices. But the vultures are in our 457b plan, I am very jealous of what you have access to. If you wouldn't mind maybe you could pm me some pointers on how to effect change on our 457b plan.

sschullo
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Location: Rancho Mirage, CA
Contact:

Re: Re:

Post by sschullo » Fri Jul 21, 2017 9:03 am

pretzelfisch wrote:
sschullo wrote: As I said before Vanguard has never been available in the 403b side at my district, the 2nd largest in the country.
We have Vanguard on the 457b plan. How does the following look to you about "hidden fees?"
Sorry, I was referring to those complaining about the now transparent 5 dollar a month charge, not to your work. We are up north in SJUSD and are lucky to have a nice 403b with many choices. But the vultures are in our 457b plan, I am very jealous of what you have access to. If you wouldn't mind maybe you could pm me some pointers on how to effect change on our 457b plan.
Okay Pretzel, you got me started! I am so happy you are interested in how we made the change to a 457b plan. It’s a great story! I wrote it all down in my FREE book! Yeah! you should be jealous. :happy If you are ever in the LA area, let me know and I will let you know when our committee meets (link is below).

If anybody else is interested in how a small group of 3-4 teachers with the help of a rare giant, George Tischler, now retired, an actual, real, but extremely rare LA Unified School District benefits administrator who understood the 403b problem started the 457b plan for LAUSD. I documented the entire process from 2006 when the 457b plan was launched through 2014. George also wanted an oversight committee composed of a rep from each of the 8 unions associated with LAUSD! This was unprecedented! Little ole me, a nobody, was asked to be Member at Large, and have been there since.

George understood that the hideous insurance code of our state will not be reformed for another generation of educators (it was tried twice in 2002 and 2012 both bills never got out of committee the insurance industry and CTA stopped it cold). So, George created the 457b to get around the code. BRILLANT man, a giant in the 403b world with public K12 school districts.

St. Jack should invite him to his office and interview George.
Anyway, as the author of this free download, I am shameless when I think that the book I wrote contains a fascinating story of what our committee went through to get an award for plan design in 2014. We had to first get rid of excess costs and demand transparency of those costs and the arguing with our first financial consultant about revenue sharing. Then our TPA hired this terrible consultant to be employed with them right after the contract was over with LAUSD, and arguing against the committee to lower revenue sharing costs to benefit the TPA! This happened because the industry thinks people are stupid and ignorant and nobody will notice. But we found out!

You cannot believe what the profession tries to do AT EVERY OPPORTUNITY to make more money, but our committee not only stopped them cold but reduced costs. We know the excessive cost game 100%, we know indexing, diversification, keeping it simple. I latest development is auto enroll with one of the unions and the default fund is one of the target date funds! This is huge especially in California with the anti garnishment laws. But our committee decided and the CFO accepted the default low-cost Blackrock TR fund matched to the employee's age. We are thrilled as this may be a game changer to get people away from the annuity machine!

Every educator in the country should read my FREE PDF downloadable book, Fighting Powerful Interests link and permission from Boglehead leaders are below. Bogleheads might be interested if you have a friend or relative that is a public k12 teacher. There are four reviews on Amazon, BUT DO NOT BUY THIS BOOK. It's free forever on my blog.

BTW, our committee was filmed by the producers of the PBS Frontline documentary film crew for the now famous The Retirement Gamble (broadcasted in April 2013), but the producers, unfortunately, dropped the 403b issues and went with the 401k instead. It was disappointing. I am hoping they will reconsider producing a documentary just for the 403b with public k12 school districts.

Find the links to my Free Book and permission granted by Mel, LadyGeek, Taylor and the Boglehead's Advisory Board. Thank you Board members for considering this low-key, unsophisticated issue a huge problem for the 4,000,000 public school k-12 educators who also deserve protections and information too.
viewtopic.php?t=161747
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)."

Mickey7
Posts: 9
Joined: Tue Jun 20, 2017 1:52 pm

Re: Vanguard 403b Changes

Post by Mickey7 » Fri Jul 21, 2017 8:52 pm

Just returned from vacation and received my letter from Vanguard. So of course I jumped to the forum to see what the gist of the matter was. I only opened my Vanguard account a couple of months ago to see how it stacked up with the 403b I have had for the last several years to see which performed best. (As you can see I am a relative newbie at this.) I only found out that I could access Vanguard after calling the Texas Retirement System and not the district. Needless to say Vanguard is smoking what I have in my other 403b.
While I am somewhat upset to find that it will now cost me an extra $120 a year (2 accounts Wellington and Equity Income), I will now receive Admiral fees for both. In looking at an increased cost I looked at my other fund, which is more expensive and not as productive, Vanguard still comes out ahead. I will be moving this fund over to Vanguard and dividing it equally to both approximately $15,000 to each.
Regarding the fee, all I can do is hope for good returns. The option at staying with Oppenheimer is not as good by my calculations.
I think that after retirement the fund can be moved to an IRA. Am I correct on this?

letsgobobby
Posts: 10488
Joined: Fri Sep 18, 2009 1:10 am

Re: Vanguard 403b Changes

Post by letsgobobby » Fri Jul 21, 2017 9:06 pm

We still have not received a letter. Is this limited to certain 403b plans (ie, K-12 or other)?

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