[Expensive 457(b). How to get employer to change plan?]

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gtt561
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[Expensive 457(b). How to get employer to change plan?]

Post by gtt561 » Fri Nov 07, 2014 7:12 pm

[See updated post below -- admin LadyGeek. Title was "TPA charging unreasonable fees? Conflict of interest?"]

City hired an investment firm to overlook our 457b funds so they would be considered a third party administrator, correct? They tell us what funds performance has done, what funds they think they should bring into the plan and make nifty charts to show the overall asset allocation and balances, etc.

Mass Mutual is the actual company that holds our retirement account. I guess their considered the plan provider, correct?

So isn't it a conflict of interest if the TPA is being paid through the revenue sharing of the plan?

TPA sent me this : "MassMutual can have Vanguard Index funds, but with a 35 BPS wrap. This could still make them cheaper than the current index funds. However, it could be confusing to some participants.

TPA receives 5 BPS per annum on the Plan’s overall assets rather than per fund. It’s paid quarterly.

That’s ¼ of 5 BPS paid quarterly. Or, 1.25 BPS paid every quarter."

So I did the math. Based off our current balance (45 million) the TPA is making $5625 a quarter / $22500 yearly. I think I did the math correctly...

Are we paying too much? Conflict of interest?

Does anyone know if there is any governing agency for government 457b plans to make sure fiduciary responsibilities are met?
"Anything less than a 10-year horizon is just speculation." John Bogle

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Re: TPA charging unreasonable fees? Conflict of interest?

Post by LadyGeek » Fri Nov 07, 2014 10:21 pm

Hi,

You seem to have quite a number of questions about your portfolio, all related to your 457b plan.

- Help me pick institutional VG funds for gov 457b plan
- Good news..Gov 457b will allow VG funds in, now what?
- Trying to add Vanguard index funds to government 457b plan.
- How does retirement company make money?
- Adding low cost index funds to 457b? What's involved?

It's best to keep all the information in one spot, as your information is scattered and makes it harder for us to help you.

May I suggest you go back to this thread: Please help with my asset allocation I think I did it right and post your questions in there? (I fixed a typo in the title).

The wiki has some background info: 457-b
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Re: TPA charging unreasonable fees? Conflict of interest?

Post by gtt561 » Fri Nov 07, 2014 10:53 pm

LadyGeek wrote:Hi,

You seem to have quite a number of questions about your portfolio, all related to your 457b plan.

- Help me pick institutional VG funds for gov 457b plan
- Good news..Gov 457b will allow VG funds in, now what?
- Trying to add Vanguard index funds to government 457b plan.
- How does retirement company make money?
- Adding low cost index funds to 457b? What's involved?

It's best to keep all the information in one spot, as your information is scattered and makes it harder for us to help you.

May I suggest you go back to this thread: Please help with my asset allocation I think I did it right and post your questions in there? (I fixed a typo in the title).

The wiki has some background info: 457-b
Thanks for the advice. I suppose I'm trying to do to much all at once. This Bogleheads philosophy has me obsessed trying to learn as much as possible. Trying to fix my own portfolio and now trying to show the city the benefits of this approach vs active investing.
Figured I was asking different things so they should have there own thread.
I will consolidate into the one thread so it's easier to follow.
Thanks and sorry for the confusion.
"Anything less than a 10-year horizon is just speculation." John Bogle

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Re: TPA charging unreasonable fees? Conflict of interest?

Post by LadyGeek » Fri Nov 07, 2014 11:25 pm

To be clear, investing can be intimidated. You really are playing with your life's savings and doing the wrong thing can be disastrous. It's quite appropriate to perform due diligence in order to ensure everything is OK.

I think you may be over-achieving with your 457-b plan questions. Step back and relax. You only need to be concerned about a few things:

- The fund's category (taxable, tax-deferred)
- The type of fund, which tells you how to handle things (457-b)
- The fund's composition (asset allocation, i.e. the underlying stocks, bonds, and any other securities it may contain). The fund's datasheet has this info.
- Expense ratio

Leave everything else (the bulk of your questions) for later, when you have the time and desire to deep-dive into the theory of how these funds operate. Assume that the experts have done this already (they have) and that there's nothing for you to do about it (there's not, what you see is what you get).

For your immediate concerns, the 457-b entries in your thread (Please help with my asset allocation I think I did it right) are all you need to focus on. Use the advice in that thread and see how the Bogleheads investing philosophy applies to your own portfolio. Take your time.

If you don't understand the advice given in the thread, please say so. The hardest questions to answer are those not asked.
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Re: TPA charging unreasonable fees? Conflict of interest?

Post by LadyGeek » Fri Nov 07, 2014 11:31 pm

gtt561 wrote:Trying to fix my own portfolio and now trying to show the city the benefits of this approach vs active investing.
What is "the city"? Are you trying to use your own portfolio as an example to the governing body of where you live (a city)? That's a whole 'nother animal and a huge challenge.

You probably don't want to use a personal portfolio as an example for a large government body. You'll get skinned alive. We have forum threads which deal with these types of issues (Personal Finance (Not Investing) forum area), but are mostly geared for the corporate mindset.
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Re: TPA charging unreasonable fees? Conflict of interest?

Post by gtt561 » Sat Nov 08, 2014 9:57 am

LadyGeek wrote:
gtt561 wrote:Trying to fix my own portfolio and now trying to show the city the benefits of this approach vs active investing.
What is "the city"? Are you trying to use your own portfolio as an example to the governing body of where you live (a city)? That's a whole 'nother animal and a huge challenge.

You probably don't want to use a personal portfolio as an example for a large government body. You'll get skinned alive. We have forum threads which deal with these types of issues (Personal Finance (Not Investing) forum area), but are mostly geared for the corporate mindset.
I recently was asked by my Union to attend the deferred compensation meetings that are held quarterly. First, I was shocked by the lack of knowledge by the other people who attended the meeting on behalf of their respected unions. They just sat there as the person from the investment advisor company that the city hired went on about performances of the funds and new funds he wanted to bring into the plan. (all actively managed of course)
So my main objective was to get lower cost index funds in our fund line up. Currently, Dreyfus index funds at .50‰ are offered.
So, I was told they could bring VG aboard but they would have to put a 35 BPS wrap on it.
That got me interested in finding out exactly how much the investment advisor company is making and Mass Mutual.
It doesn't look like 457b plans are covered under ERISA, so I was also trying to find out if any agency protects the rights of 457b participants?
And that's it in a nutshell. Just trying to stop the bleeding of fees from my / our retirement account.
"Anything less than a 10-year horizon is just speculation." John Bogle

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Re: TPA charging unreasonable fees? Conflict of interest?

Post by gnosis » Sat Nov 08, 2014 10:08 am

Can you suggest at your Union meeting that you bring in another financial advisor as a free 2nd opinion? You can then find a fee only advisor who promotes passively managed index funds and is in line with your Boglehead philosophy 8-)
BTW this is exactly what I'm doing myself with my company's 401k plan.

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Re: TPA charging unreasonable fees? Conflict of interest?

Post by LadyGeek » Sat Nov 08, 2014 10:12 am

gtt561 - OK, now I see why you posted this thread. Let's take a different approach to get you some help.

This thread is now in the Personal Finance (Not Investing) (retirement account plans). I also retitled the thread. The OP's union has asked for help:
gtt561 wrote:I recently was asked by my Union to attend the deferred compensation meetings that are held quarterly. First, I was shocked by the lack of knowledge by the other people who attended the meeting on behalf of their respected unions. They just sat there as the person from the investment advisor company that the city hired went on about performances of the funds and new funds he wanted to bring into the plan. (all actively managed of course)
So my main objective was to get lower cost index funds in our fund line up. Currently, Dreyfus index funds at .50‰ are offered.
So, I was told they could bring VG aboard but they would have to put a 35 BPS wrap on it.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

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gtt561
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Re: TPA charging unreasonable fees? Conflict of interest?

Post by gtt561 » Sat Nov 08, 2014 12:01 pm

gnosis wrote:Can you suggest at your Union meeting that you bring in another financial advisor as a free 2nd opinion? You can then find a fee only advisor who promotes passively managed index funds and is in line with your Boglehead philosophy 8-)
BTW this is exactly what I'm doing myself with my company's 401k plan.
Yes, I can have our union most likely agree to have another advisor analyze our plan. Problem is, there are 3 other unions (FD, teamsters, PW) also under the city's 457b plan. So if my union brought someone new in and we found we could save $, we could present our findings to all the union presidents and then approach the city's finance department.
"Anything less than a 10-year horizon is just speculation." John Bogle

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