403b rollover headache

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BSA44
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Joined: Wed Jul 31, 2013 6:43 pm

403b rollover headache

Post by BSA44 » Sat Jan 20, 2018 11:48 am

My wife and I have spent ~20 hours (75% of it was spent on hold with Newport Group) trying to resolve this issue, and we are stuck at this point. I thought the Boglehead community might have some advice on a path forward.

Situation: My wife started a new job and has a 403b there with Vanguard managed by National Benefit Services (NBS). Her current 403b accepts rollovers into it. We want to roll over two different accounts of hers into her current 403b: 1) an older, inactive 403b with Vanguard and 2) her accumulated pension contributions from another state that we no longer live it.

Problem: Vanguard/Newport Group says that we need to get the roll-into form signed by NBS. We sent the forms to NBS, and they said that they never sign other forms (for legal reasons), but provided their own letter to Vanguard noting that they accept roll-ins. The employees we spoke to at the Newport Group (we've called in many times trying to figure this out) can't figure out if this is acceptable or not. We finally got an amazing employee at Newport Group who gave us his email address and promised to figure this out. Unfortunately, he to has hit a brick wall. He said he emailed over 11 people to try to escalate the issue and none have responded to his messages.

Other things we've already done: We've reached out to NBS multiple times to try to get an answer from someone about whether they can sign the form instead of just giving us their letter to Vanguard. We can only get lower level employees on the phone who don't even know the people who deal with the forms. We have been unsuccessful in trying to get someone on the phone (escalating the issue) to someone who actually knows what's going on. We tried to get a flagship rep at Vanguard involved, but he was useless as well; at first he was helpful, but it seems he too got too frustrated by the long Newport Group hold times, and just told us that we would have to deal with them directly. We also filed a complain with the CFPB in hopes of getting this resolved, but we just got an email that it's been over the normal period for the bank to respond to the issue (in this case Vanguard), so they are just going to post it on their wall of shame.

Why don't we just roll everything into an IRA: We are both 29, so if my wife were to roll the pension and old 403b into an IRA (~$130,000), she could never do a backdoor Roth IRA again. Considering how young we are, that is a lot of lost tax-free growth space. There is time pressure on this issue because: a) her ~$70,000 of pension money is still sitting in her pension gaining no interest whatsoever, and b) my wife is quitting her teaching job this June to become a full-time author, so we will lose the ability to roll money into her 403b (we were planning on leaving all of her funds in there when she quit).

Does anyone have any recommendations on how to proceed? It feels like we've just been hitting our heads against a brick wall here.

feehater
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Re: 403b rollover headache

Post by feehater » Sat Jan 20, 2018 12:45 pm

Can you roll it into an IRA and then roll the IRA into the 403b? Will NBS accept that?

BSA44
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Re: 403b rollover headache

Post by BSA44 » Sat Jan 20, 2018 12:49 pm

feehater wrote:
Sat Jan 20, 2018 12:45 pm
Can you roll it into an IRA and then roll the IRA into the 403b? Will NBS accept that?
The issue isn't that NBS isn't accepting the roll-over (they do). It's that: 1) NBS won't sign Vanguards form for roll-ins (Vanguard has the same form for IRA and 403b roll-ins), 2) Vanguard won't accept NBS's letter that they accept roll-ins (that NBS provided instead of their signing Vanguard's form due to "legal reasons").

feehater
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Re: 403b rollover headache

Post by feehater » Sat Jan 20, 2018 1:13 pm

Right, but what if you did the IRA with a 3rd party that also had good customer service and was willing to deal with all the forms?

Another option is that if your wife is going to make any 1099 income as an author, she could set up a self employed 401k to accept the rollover.

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Tyler Aspect
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Re: 403b rollover headache

Post by Tyler Aspect » Sat Jan 20, 2018 1:26 pm

Hmm, I wonder if you need to do incoming rollover at all. If the old 403b is also managed by Vanguard then the investment options should have been low cost. It does not hurt to have two 403b if you want to keep the backdoor Roth IRA possibility open.

The traditional pension does not prevent a backdoor Roth IRA. You should also check its plan document because usually pension fund balance grows according to a formula described by the plan document. It would be quite unusual for the balance to grow at 0%.
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Alan S.
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Re: 403b rollover headache

Post by Alan S. » Sat Jan 20, 2018 1:44 pm

Do you know the total fees with the current 403b plan? Just because Vanguard products are offered in the plan it does not mean the costs are low. This plan could be adding their own fees, and note that one of the recent fee litigation cases was filed against a plan using Vanguard funds. If the fees totaled anywhere near 1%, that would be enough to erase the back door Roth advantage, and open up a rollover IRA as a viable option.

And if you went in that direction, you would probably roll her current 403b into the rollover IRA in June and be done with NBS.

BSA44
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Re: 403b rollover headache

Post by BSA44 » Sat Jan 20, 2018 2:15 pm

Thanks for all of the advice so far!
feehater wrote:
Sat Jan 20, 2018 1:13 pm
Right, but what if you did the IRA with a 3rd party that also had good customer service and was willing to deal with all the forms?

Another option is that if your wife is going to make any 1099 income as an author, she could set up a self employed 401k to accept the rollover.
A solo-401k may work, but it could be a while before she starts earning real income. The other company for the IRA could work, but we would only be rolling the money out of there, so I doubt they would be very helpful with the forms needed by the new institution we would be rolling the money into (especially if the benefits provider of the new 403b, NBS, is non-cooperative).
Tyler Aspect wrote:
Sat Jan 20, 2018 1:26 pm
Hmm, I wonder if you need to do incoming rollover at all. If the old 403b is also managed by Vanguard then the investment options should have been low cost. It does not hurt to have two 403b if you want to keep the backdoor Roth IRA possibility open.

The traditional pension does not prevent a backdoor Roth IRA. You should also check its plan document because usually pension fund balance grows according to a formula described by the plan document. It would be quite unusual for the balance to grow at 0%.
The funds are all low fee (it is a true Vanguard 403b plan). However, the Vanguard/Newport charges $60/year for each 403b plan. We have both of the 403bs (new and old) at Vanguard. And because of their inability to help us get these two plans rolled into one plan, they are going to double-charge us for the second.

gostars
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Re: 403b rollover headache

Post by gostars » Sat Jan 20, 2018 10:04 pm

I'm with the others; open a rollover IRA at Schwab or Fidelity, roll the old 403b into it, then roll that to the new plan. You might have to pay a fee for closing the account or transferring the assets, but it'll probably be less than $60. You would still be eligible for a backdoor Roth as long as you complete the iRA->new 403b rollover before the end of the year.

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