403(b) Retirement plan

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Why these teachers' retirement plans aren't making the grade

CNBC | Darla Mercado | September 29, 2018

Because public school teachers are contracting individually with a vendor, they don't have the leverage to push for lower fees – and in the worst cases, they can end up with costs approaching and exceeding 2 percent... Teachers in 403(b) annuities can't just bail from the products. That's because these annuities may come with surrender charges. These are additional fees — which can be as high as 5 percent to 7 percent — that savers will have to pay in order to move their money from a contract. These surrender periods can be five to seven years long, and they reset for new money. This is known as a "rolling surrender".


  Click here to access a PDF   of the article

Click here to access a PDF of the article

Plaintiff in NYU 403(b) Plans Lawsuit Asks for Committee Members to Be Removed

Plan Sponsor | Rebecca Moore | August 16, 2018

It will be fascinating to see where this goes. How many board/committee members do you know that use the position as a resume filler, and have no business serving in that capacity? Exactly. -- Forrest specifically found that one of the committee members does not have the depth of knowledge appropriate to oversee a plan the size of the NYU Faculty and Medical Plans and “displayed a surprising lack of in-depth knowledge concerning the financial aspects of managing a multi-billion-dollar pension portfolio.” ... For the other committee member the plaintiff is asking to be removed, Forrest found she “failed to demonstrate a satisfactory understanding of … her role as a fiduciary” and “did not consider herself a fiduciary.” The committee member testified that she does not “review the plan documents” because her staff reviews them, yet the staff member herself “failed to demonstrate a firm grasp on these documents.”


  Click here to access a PDF of the article

Click here to access a PDF of the article

Tax Reform, Fiduciary Rule Impact 403(b) and 457(b) Plans

PlanAdviser | John Manganaro | June 7, 2018

The National Tax-Deferred Savings Association updates its reference guide ‘The Source’ to reflect last year’s tax reform and the DOL fiduciary rule derailment. 


  Click here to access a PDF of the article

Click here to access a PDF of the article

403(b) Story: No Victims Here

403(b) Wise | Dina Isola

Although the best option for teachers is low cost mutual funds, it is becoming a well-known fact that many advisors are offering instead high cost funds and annuities or insurance products that are complex and difficult to comprehend. It is important to get educated on what you are currently being charged for 403(b) services. Isola suggests meeting with a fee-only fiduciary who can help you explore the best options available. Here is a list of fees to inquire about: 

  1. Administrative fee

  2. Management Fee

  3. Wrap fee

  4. Recordkeeping fee

  5. Account termination fee

  6. Surrender charges

  7. Investment and/or Fund fees

  8. (For annuities) Insurance-related fees (e.g., Personal Income Benefit, Mortality Expense?)

  9. Advisor Fee


  Click here to access a PDF of the article

Click here to access a PDF of the article

403(b) Plan Contribution Limits in 2018

The Motley Fool | Dan Caplinger | November 17, 2017

This article discusses the contribution limits for 2018, as well as the basics of 403(b) plans. Those who are offered 403(b) plans tend to work for schools, nonprofits hospitals and healthcare providers, and charities. As with 401(k) plans, there are traditional or Roth 403(b) plans, which is explained in detail. 


  Click here to access a PDF of the article

Click here to access a PDF of the article

How to Fix a Retirement Plan at a School or Nonprofit

NY Times | Ron Lieber & Tara Siegel Bernard | November 4, 2016

Lieber and Siegel Bernard answer a variety of questions about identifying problems with an individual's current 403(b) plan. This includes both general advice for participants as well as how to go about improving an existing plan. It even delves into the best ways to approach a boss or adminsitration to add better 403(b) choices for participants. 

"If you pay a total of more than about 1 percent annually in fees — so that a $50,000 balance costs you more than $500 — then you probably could be doing better."


  Click here to access a PDF of the article

Click here to access a PDF of the article

Nonprofit Employees, Already Underpaid, Face Special Challenges in Retirement

NY Times | Ron Lieber | November 2, 2016

Much of the time, insurance companies offer complex products that are expensive, and that have unclear terms associated with them. Smaller non-for-profit organizations often don't have the time and resources to commit to a solid 403(b) option for their employees, putting many at "severe financial risk." 


  Click here to access a PDF of the article

Click here to access a PDF of the article

Even Math Teachers Are at a Loss to Understand Annuities

NY Times | Tara Seigel Bernard | October 28, 2016

Slightly more than half of all 403(b) assets, approaching $900 billion, have been invested in fixed annuities — which promise either a minimum rate of annual growth or interest based on changes in a market index. Another 25 percent were in variable annuities that invest in mutual funds, according to Investment Company Institute data as of March. The remaining 23 percent were invested in traditional mutual funds.


  Click here to access a PDF of the article

Click here to access a PDF of the article

An Annuity for the Teacher — and the Broker

NY Times | Tara Siegel Bernard | October 26, 2016

Teachers are being preyed upon by salespeople, who show up to their school and present after faculty meetings or even hang out in the break rooms. One insurance company, known as Axa, offers a Equi-Vest variable deferred annuity which has a 460 document explaining the ins and outs of the product. "The most popular version of the Equi-Vest annuity has a total annual cost that can range from 1.81 to 2.63 percent, according to an analysis from Morningstar." There is also often a surrender fee associated with these types of  products for those who want to transfer their savings into another 403(b) product or roll over into an IRA. 

"The charges for such complex annuities are intended to provide plenty of incentive for sales representatives and their managers."


  Click here to access a PDF of the article

Click here to access a PDF of the article

Think Your Retirement Plan Is Bad? Talk to a Teacher.

NY Times | Tara Siegel Bernard | October 21, 2016

Tara Bernard explores the issues surrounding expenses with 403(b) plans and how it can effect retirement savings for teachers, not-for-profit employees, clergy members, and some charities who are offered 403(b) plans through their place of employment. Bernard includes real interactions she has had with those struggling to understand their hidden and complex 403(b) plans. She explains the differences between variable annuities and cheaper mutual fund options, which is what GCM offers for our clients.


  Click here to access a PDF of the article

Click here to access a PDF of the article

Dear Ms. Miller: The Fiduciary Model and Your Company's Retirement
Plan

Morningstar | W. Scott Simon | December 3, 2015

President and CEO of Permac Industries, a precision machining manufacturer with 30 employees, stated in a testimony to the Senate Subcommittee on Employment and Workplace Safety of the Senate Committee on Health, Education, Labor, and Pensions that she had a trusted relationship with her financial advisor, "aware that he is providing a service for a fee and selling a product." Simon wrote her a letter explaining that stockbrockers are pledged to maximize revenue by their employer and its shareholders versus the plan participants and their beneficiaries. 

"The upshot is that even if someone like me, who is always a discretionary fiduciary to the retirement plans we serve, were to hate every single one of the thousands of participants in those plans, I would still be required by the law to obey the sole interest and exclusive purpose rules of ERISA section 404(a)."


  Click here to access a PDF of the article

Click here to access a PDF of the article

Revisiting K-12 School District 403(b) Agreements

Morningstar | W. Scott Simon | January 8, 2015

W. Scott Simon, recipient of the 2012 Tamar Frankel Fiduciary of the Year Award, discusses the ramifications of entering into an agreement with a provider of investment products and services such stockbrokerage firms. Gatekeepers of retirement plans who turn a blind eye to the potentially devastating consesequences of a expensive, complex option for their employees retirement plan are part of the problem. "Nonetheless, 403(b) plans established and maintained by K-12 school districts are
often subject to the fiduciary laws of the state in which a school district is located.