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Why am I allowed to pick Vanguard Admiral Shares in my new 403(b) when it has $0 instead of $10,000?

Posted: Sat Mar 17, 2018 6:37 pm
by Naturally Brilliant
So I took a new job and signed up for their tax-deferred annuity plan/403(b). They obviously had their funds to choose from, and one of them was Vanguard Mid Cap Index Admiral (VIMAX) with an expense ratio of 0.06%. I thought, "Wow! This seems like a good pick" and put myself down for 100% of it.

Obviously, my 403(b) account is currently at $0. But when monies from my pre-tax income starts rolling in, then I should be snapping up the VIMAX admiral shares. However, I have a separate Vanguard account (where I keep my IRA monies), and there I can't get Admiral Shares unless I spend $10,000 on them :'( So my question is, how am I getting Admiral Shares in my 403(b) without the minimum $10K requirement?

Re: Why am I allowed to pick Vanguard Admiral Shares in my new 403(b) when it has $0 instead of $10,000?

Posted: Sat Mar 17, 2018 6:39 pm
by FiveK
Possibly due to all the other people in your 403b plan, and the millions of dollars collectively invested by them.

Re: Why am I allowed to pick Vanguard Admiral Shares in my new 403(b) when it has $0 instead of $10,000?

Posted: Sat Mar 17, 2018 6:40 pm
by prudent
The 403(b) plan has negotiated the ability to offer Admiral to plan members. You'll see the same thing with some 401k plans where they offer institutional class funds ($1 million minimum investment or more) to participants.

Re: Why am I allowed to pick Vanguard Admiral Shares in my new 403(b) when it has $0 instead of $10,000?

Posted: Sat Mar 17, 2018 7:01 pm
by runner9

Re: Why am I allowed to pick Vanguard Admiral Shares in my new 403(b) when it has $0 instead of $10,000?

Posted: Sat Mar 17, 2018 7:08 pm
by Naturally Brilliant
Oh my God! I wonder who can afford those shares

Re: Why am I allowed to pick Vanguard Admiral Shares in my new 403(b) when it has $0 instead of $10,000?

Posted: Sat Mar 17, 2018 7:15 pm
by runner9
Naturally Brilliant wrote:
Sat Mar 17, 2018 7:08 pm
Oh my God! I wonder who can afford those shares
The collective plan can. An individual in the plan can buy that share class with no minimum.

Re: Why am I allowed to pick Vanguard Admiral Shares in my new 403(b) when it has $0 instead of $10,000?

Posted: Sat Mar 17, 2018 7:45 pm
by letsgobobby
I’m so annoyed my wife’s 403b does not offer Vanguard Admiral shares. They definitely have the assets. I’ve asked Vanguard what it would take and they claim I just have to prompt her employer to ask for them. I’ve asked her employer and they replied, somewhat defensively, that they offered a world class plan. Maybe it’s time for another go around.

Re: Why am I allowed to pick Vanguard Admiral Shares in my new 403(b) when it has $0 instead of $10,000?

Posted: Sat Mar 17, 2018 9:41 pm
by Naturally Brilliant
So I looked, and my 403(b) also offers VINIX, which apparently has a $5 million minimum investment! D:
https://personal.vanguard.com/us/funds/ ... irect=true

The rates of return on the VIMAX I chose look pretty much the same, though, so I'm not sure why VINIX costs $5 million and VIMAX costs like $10,000 to start investing in.

Re: Why am I allowed to pick Vanguard Admiral Shares in my new 403(b) when it has $0 instead of $10,000?

Posted: Sat Mar 17, 2018 10:05 pm
by indexfundfan
letsgobobby wrote:
Sat Mar 17, 2018 7:45 pm
I’m so annoyed my wife’s 403b does not offer Vanguard Admiral shares. They definitely have the assets. I’ve asked Vanguard what it would take and they claim I just have to prompt her employer to ask for them. I’ve asked her employer and they replied, somewhat defensively, that they offered a world class plan. Maybe it’s time for another go around.
I know that for Vanguard managed 401(k)s, the employer can choose to offer investor shares or admiral / institutional shares. If the employer chooses investor shares, the cost to run the plan is lower (because Vanguard offers a recordkeeping credit). It all depends whether the employer is willing to pay more to offer admiral / institutional shares.

Re: Why am I allowed to pick Vanguard Admiral Shares in my new 403(b) when it has $0 instead of $10,000?

Posted: Sat Mar 17, 2018 10:15 pm
by nordsteve
Naturally Brilliant wrote:
Sat Mar 17, 2018 9:41 pm
So I looked, and my 403(b) also offers VINIX, which apparently has a $5 million minimum investment! D:
https://personal.vanguard.com/us/funds/ ... irect=true

The rates of return on the VIMAX I chose look pretty much the same, though, so I'm not sure why VINIX costs $5 million and VIMAX costs like $10,000 to start investing in.
VIMAX has expenses 50% higher than VINIX (0.06% vs 0.04%)

Re: Why am I allowed to pick Vanguard Admiral Shares in my new 403(b) when it has $0 instead of $10,000?

Posted: Sun Mar 18, 2018 12:56 am
by TropikThunder
Naturally Brilliant wrote:
Sat Mar 17, 2018 9:41 pm
So I looked, and my 403(b) also offers VINIX, which apparently has a $5 million minimum investment! D:
https://personal.vanguard.com/us/funds/ ... irect=true

The rates of return on the VIMAX I chose look pretty much the same, though, so I'm not sure why VINIX costs $5 million and VIMAX costs like $10,000 to start investing in.
Why does it sound like you think the expense ratio depends on the past performance of the fund?

The relative Expense Ratio of the different share classes (investor, Admiral, institutional, etc.) are a function of economy of scale. The more assets an investor commits to a fund, the cheaper percent-wise it is for the custodian to manage that investment.

Re: Why am I allowed to pick Vanguard Admiral Shares in my new 403(b) when it has $0 instead of $10,000?

Posted: Sun Mar 18, 2018 1:48 am
by CyclingDuo
Naturally Brilliant wrote:
Sat Mar 17, 2018 6:37 pm
So I took a new job and signed up for their tax-deferred annuity plan/403(b). They obviously had their funds to choose from, and one of them was Vanguard Mid Cap Index Admiral (VIMAX) with an expense ratio of 0.06%. I thought, "Wow! This seems like a good pick" and put myself down for 100% of it.

Obviously, my 403(b) account is currently at $0. But when monies from my pre-tax income starts rolling in, then I should be snapping up the VIMAX admiral shares. However, I have a separate Vanguard account (where I keep my IRA monies), and there I can't get Admiral Shares unless I spend $10,000 on them :'( So my question is, how am I getting Admiral Shares in my 403(b) without the minimum $10K requirement?
Vanguard Admiral and Institutional pricing are fairly common in the 403b and 457b world for individual investors. The plans have been negotiated based on the size of the organization. TIAA, VALIC, Voya, MassMutual, Horace Mann, etc.... are common plan providers.

Total Stock Market, S&P 500, Mid-Cap, Small Cap, Total International, Total Bond - are typical choices within many of these plans.

Re: Why am I allowed to pick Vanguard Admiral Shares in my new 403(b) when it has $0 instead of $10,000?

Posted: Sun Mar 18, 2018 10:12 am
by Clever_Username
letsgobobby wrote:
Sat Mar 17, 2018 7:45 pm
I’m so annoyed my wife’s 403b does not offer Vanguard Admiral shares. They definitely have the assets. I’ve asked Vanguard what it would take and they claim I just have to prompt her employer to ask for them. I’ve asked her employer and they replied, somewhat defensively, that they offered a world class plan. Maybe it’s time for another go around.
My 403(b) used to offer Vanguard investor-class shares. That was annoying. A year or two ago, it switched to institutional shares. I wish I knew what happened to cause that change (it wasn't me) so I could help others get the same change made.

Naturally Brilliant wrote:
Sat Mar 17, 2018 9:41 pm
So I looked, and my 403(b) also offers VINIX, which apparently has a $5 million minimum investment! D:
https://personal.vanguard.com/us/funds/ ... irect=true

The rates of return on the VIMAX I chose look pretty much the same, though, so I'm not sure why VINIX costs $5 million and VIMAX costs like $10,000 to start investing in.
They look similar because they're share classes of the same fund with very slightly different expense ratios (offhand, I think it's 0.04% versus 0.035%). Half a basis point makes a difference, but not a huge difference.

Re: Why am I allowed to pick Vanguard Admiral Shares in my new 403(b) when it has $0 instead of $10,000?

Posted: Sun Mar 18, 2018 1:42 pm
by Earl Lemongrab
Clever_Username wrote:
Sun Mar 18, 2018 10:12 am
My 403(b) used to offer Vanguard investor-class shares. That was annoying. A year or two ago, it switched to institutional shares. I wish I knew what happened to cause that change (it wasn't me) so I could help others get the same change made.
A frequent point in lawsuits against plans is the failure to use lower-cost funds that that it's entitled to.

Re: Why am I allowed to pick Vanguard Admiral Shares in my new 403(b) when it has $0 instead of $10,000?

Posted: Sun Mar 18, 2018 1:45 pm
by Clever_Username
Earl Lemongrab wrote:
Sun Mar 18, 2018 1:42 pm
Clever_Username wrote:
Sun Mar 18, 2018 10:12 am
My 403(b) used to offer Vanguard investor-class shares. That was annoying. A year or two ago, it switched to institutional shares. I wish I knew what happened to cause that change (it wasn't me) so I could help others get the same change made.
A frequent point in lawsuits against plans is the failure to use lower-cost funds that that it's entitled to.
Interesting. My employer is very likely large enough to warrant Institutional funds, so that makes sense. I wonder if we're large enough to warrant institutional plus. Probably not. Thanks!

Re: Why am I allowed to pick Vanguard Admiral Shares in my new 403(b) when it has $0 instead of $10,000?

Posted: Sun Mar 18, 2018 2:36 pm
by willthrill81
One of the Blackrock S&P 500 index funds in my state-sponsored 457 plan has an expense ratio of .003%. That's right, it's less than one-third of one basis point, essentially free. A $100,000 investment in it would cost me $3 annually.