Great 403b for teachers?

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krow36
Posts: 1191
Joined: Fri Jan 30, 2015 6:05 pm
Location: WA

Re: Great 403b for teachers?

Postby krow36 » Fri Apr 21, 2017 1:18 am

You probably know that there is a 403b reform movement that has been active for decades. Both Dan Otter, who started and runs 403bwise.com, and Scott Dauenhauer, CPA, who blogs at http://teachersadvocate.blogspot.com are truly 403b Reform Warriors! Scott wrote “The Wild West, Providing Fiduciary Advice to Public School Employees”. Steve Schullo is a frequent poster on both the BH and 403bwise forums, and is contributing to this thread. He has spent years working to improve the LAUSD 403b and helped organize and is a committee member of an award winning 457 plan. He describes the whole saga in his book “Fighting Powerful Interests”.

Podcast #13 describes a MD county school district that went through the steps to change from using a list of providers, to a single provider, Fidelity. The county wide school district was able to assume a true fiduciary responsibility for their 403b plan. It was a very impressive and challenging undertaking, as Fidelity has to deal with all the many legacy vendors. Many of the podcasts cover a wide variety of efforts to improve the K-12 403b. http://teachandretirerich.com/podcasts/

W Scott Simon is an ERISA lawyer and writes a monthly article for Morningstar. He wrote 3 articles interviewing Steve which are very interesting (May, Jun, Jul 2015). He also wrote a long series in 2007, one article in 2008 and two in 2015 before the three with Steve. In the June 2015 article, they discuss the “open vendor” state law that prevents school districts from putting out bids for a plan and selecting a single vendor. I believe CA and WA have these laws as well as other states, but I don’t know about FL. http://www.morningstar.com/advisor/arch ... cott+Simon M* requires registration to access the articles but it’s free.

I wouldn’t be surprised if you were well-versed in all the above but I thought it was worth posting in case there are others interested in digging a bit deeper into the K-12 403b world.

EdLaFave
Posts: 205
Joined: Fri Dec 26, 2014 2:31 am

Re: Great 403b for teachers?

Postby EdLaFave » Fri Apr 21, 2017 7:03 pm

Thank you for sharing and don't hesitate to share more.

I had no idea my wife's 403b/457b was going to be a nightmare until I was in the middle of it. I had no idea that 403b/457b plans are generally a nightmare across the nation. I had no idea there was a movement. I'm just a guy who became outraged when I learned that paying our most important profession like crap wasn't enough, "they" also had to steal from their retirement accounts!

Orange County Public Schools (FL) is renegotiating their contracts Jan 2018 and they won't be doing it again for another 5 years. I'm trying to work the school board, union, and OCPS retirement services all at once. I'm going to try to organize employees as well. I'm reading Steve's book. I fear I'll make some big mistakes because I don't have enough time to learn all the lessons that seem to be available from those who came before me...just not enough time before Jan 2018. I suspect I'll fail but you never know.

krow36
Posts: 1191
Joined: Fri Jan 30, 2015 6:05 pm
Location: WA

Re: Great 403b for teachers?

Postby krow36 » Sat Apr 22, 2017 2:11 pm

EdLaFave wrote:Orange County Public Schools (FL) is renegotiating their contracts Jan 2018 and they won't be doing it again for another 5 years.

"Renegotiating their contracts" sounds unusual for a K-12 school district. A 401K plan or a rarely seen ERISA 403b plan are plans established by the employer for the benefit of the employees. The employer has a fiduciary responsibility and the plan administrators hired by the employer also have a fiduciary responsibility.

In contrast, the usual K-12 403b plan is an arrangement between the employee and the vendor. The employee can choose any vendor on the employer's list. I believe the district can restrict the number of providers unless the state has an "open vendor" law. The employer doesn’t vet any of the provider’s several offerings.

I wonder if Orange County Public Schools is not a typical K-12 school district, and has attempted to take on some fiduciary responsibility for their employees’ 403b/457 plans? Whatever plan they have, you should be able to get a copy of it. If they did hire a fiduciary to set up their 403b/457 plans, they ended up with 10 providers that are the usual insurance companies that sell mostly high-fee annuity based plans. Most also sell high-fee mutual fund-based 403b/457 plans. I think Plan Member is the only non-insurance company. TIAA doesn't deserve to be lumped in with the other insurance companies.

American Century Services / 800-345-3533

AXA Advisors / 800-628-6673

Great American / 800-789-6771

Reliastar (VOYA) / 877-884-5050

LSW / 800-579-2878

Plan Member Services / 800-874-6910

Security Benefit Group / 800-888-2461

TIAA - CREF/ Enrollment/ 800-842-2888

TIAA - CREF / Existing Clients/ 800-842-2776

VALIC / 800-448-2542

I notice that in 2013 they asked for bids on a 401a/403b Special Pay Plan, FICA Alternative Program and Recordkeeping Administration. “Special Pay Plan to be used to deposit accumulated sick and/or vacation leave, terminal retirement pay, or other incentive payments on behalf of all eligible employees.” https://www.ocps.net/op/procure/Solicit ... ration.pdf
I wonder what this plan looks like?
I'm trying to work the school board, union, and OCPS retirement services all at once. I'm going to try to organize employees as well. I'm reading Steve's book. I fear I'll make some big mistakes because I don't have enough time to learn all the lessons that seem to be available from those who came before me...just not enough time before Jan 2018. I suspect I'll fail but you never know.

I think you should be optimistic that your efforts will have a positive effect on the new plan. If you successfully push for a single provider that provides on-site education, there will be fees, either higher ERs and/or annual flat fees to cover that expense. Unlike a 401k where a company frequently picks up the cost of administering the fund, the school district rarely can afford to subsidize their 403b plan. Perhaps Fidelity would be willing to repeat in FL's Orange County SD what they did in the MD county? Have you listened to the podcast? Of course just getting Fidelity added to the provider list would be a great improvement. The employee education could be a separate project?

EdLaFave
Posts: 205
Joined: Fri Dec 26, 2014 2:31 am

Re: Great 403b for teachers?

Postby EdLaFave » Tue Apr 25, 2017 5:47 pm

As far as I know OCPS (FL) is in the second category where they select a few vendors and force their employees to go through one of those vendors. Although I don't know the exact mechanics of the relationship. If OCPS or the TSA Consulting Group they're using are acting as a fiduciary then they're doing a terrible job.

I believe by "renegotiate" she meant that they could add/remove vendors every 5 years and perhaps make certain demands of the vendors.

I'm not pushing for a provider to be on site educating people (quite the opposite actually). In my ideal world, I'd want a single provider (not 10) that offers at most Total Stock, Total International Stock, Total Bond, target date, and fixed allocation funds with ERs <= 0.11%. It would be easy for the 5 person staff of OCPS Retirement Services to understand and provide appropriate guidance and advice to employees.

After reading that Steve had a multi-decade struggle it is tough to be optimistic although that doesn't affect my actions or mood. Just controlling what I can control but it sure would feel great to be successful.

Can you expand on the district's relationship to the cost of administering a 403(b)/457(b) plan? Perhaps I'm naive in thinking they could bring in somebody like Vanguard/Fidelity and the costs would be minimal...after all, we're currently invested in NEA DirectInvest with rock bottom fees.

I haven't had time to listen to the podcast or read most of the links...not enough hours in the day it seems.

krow36
Posts: 1191
Joined: Fri Jan 30, 2015 6:05 pm
Location: WA

Re: Great 403b for teachers?

Postby krow36 » Wed Apr 26, 2017 12:31 am

EdLaFave wrote:As far as I know OCPS (FL) is in the second category where they select a few vendors and force their employees to go through one of those vendors. Although I don't know the exact mechanics of the relationship. If OCPS or the TSA Consulting Group they're using are acting as a fiduciary then they're doing a terrible job.
OK, this is the same arrangement that the vast major of K-12 public schools are under.

I believe by "renegotiate" she meant that they could add/remove vendors every 5 years and perhaps make certain demands of the vendors.
This probably varies district to district. Districts are now required by the IRS to have a written plan. It should be on the internet but I think it usually is not. The 403b regulations it’s a relationship between the employee and the provider—the employer isn’t responsible for advice or guidance. I read that OCPS is number 10 in the nation for size, and it seems unusual to me that there are just 10 providers 9 of which are insurance companies. Remember about 70% of teachers don’t use a 403b. Of the 30% that do, most are in annuities. Maybe 5% are in mutual fund based 403b plans.

I'm not pushing for a provider to be on site educating people (quite the opposite actually). In my ideal world, I'd want a single provider (not 10) that offers at most Total Stock, Total International Stock, Total Bond, target date, and fixed allocation funds with ERs <= 0.11%. It would be easy for the 5 person staff of OCPS Retirement Services to understand and provide appropriate guidance and advice to employees.
I agree that would be ideal. Of course the insurance industry would fight such a proposal tooth and nail. Do you know how the OCPS Retirement Services staff are funded? Considering that the district uses a TPA, what do they do all day? And some teachers would oppose it because they’ve trust that nice rep!?

After reading that Steve had a multi-decade struggle it is tough to be optimistic although that doesn't affect my actions or mood. Just controlling what I can control but it sure would feel great to be successful.

Can you expand on the district's relationship to the cost of administering a 403(b)/457(b) plan? Perhaps I'm naive in thinking they could bring in somebody like Vanguard/Fidelity and the costs would be minimal...after all, we're currently invested in NEA DirectInvest with rock bottom fees.
The K-12 403b plans of Vanguard and Fidelity are generic plans—the same plan in every state. They are administered over the internet and phone. They don’t provide any on-site guidance or advice. So the costs are minimal for them to be on the provider list. I’ve read that there’s a small fee of maybe $30 per enrollee that the TPA requires be payed. The insurance companies willingly pay the fee. Fidelity seems willing to pay this fee more often than Vanguard. The district size may be a factor, I don’t know. Probably Fidelity relies on their managed, profitable funds to pay the costs administration.

I haven't had time to listen to the podcast or read most of the links...not enough hours in the day it seems.

EdLaFave
Posts: 205
Joined: Fri Dec 26, 2014 2:31 am

Re: Great 403b for teachers?

Postby EdLaFave » Wed Apr 26, 2017 6:31 pm

krow36 wrote:I read that OCPS is number 10 in the nation for size, and it seems unusual to me that there are just 10 providers 9 of which are insurance companies.


Apparently in 2013 they removed vendors.

krow36 wrote:Of course the insurance industry would fight such a proposal tooth and nail. Do you know how the OCPS Retirement Services staff are funded? Considering that the district uses a TPA, what do they do all day? And some teachers would oppose it because they’ve trust that nice rep!?


I have no idea how they're funded. I assumed they were funded the same way any teacher or administrator is. The fact that you asked that questions makes me think I need to be educated.

...finally got a chance to listen to a few of those podcasts, it is nice that people are out there doing something.

krow36
Posts: 1191
Joined: Fri Jan 30, 2015 6:05 pm
Location: WA

Re: Great 403b for teachers?

Postby krow36 » Thu Apr 27, 2017 2:07 am

EdLaFave wrote:Apparently in 2013 they removed vendors.

Assuming they removed annuity vendors, I guess they deserve credit for that. Then again they might have removed a low-cost vendor?
I have no idea how they're funded. I assumed they were funded the same way any teacher or administrator is. The fact that you asked that questions makes me think I need to be educated.

There’s a LOT of 403b money being made in a district the size of OCSD. There have been cases where the TPA boss was actually an insurance agent, selling his plans. A district’s HR office can have a relative in the 403b annuity business. It’s something to keep in mind. Have you read the recent NY Times articles on the K-12 403b? https://www.nytimes.com/2016/10/23/your ... share&_r=0
...finally got a chance to listen to a few of those podcasts, it is nice that people are out there doing something.

Podcast #26 at 00:21:40 talks about NEA and Security Benefit and a bit about Direct Invest. Speaking of 403b money, SB pays NEA something like 2.5M a year to have exclusive rights to add “NEA” to several of the SB 403b high fee products! That gives you an idea of how profitable annuity based 403b plans are.


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