The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: MrMathMustache on February 02, 2016, 05:07:25 AM
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I recently attended a 'teacher talk' given by my superintendent and asked about how our district could expand the investment choices available within our 403(b) set-up to include firms such as Vanguard or Fidelity that offer low cost index tracking funds. We currently have just a handful of insurance companies such as AXA (my current choice), ING (now called something else), etc. All of them charge a top line fee of around 1.25%, and all of their choices are actively managed funds or funds-of-funds with additional expense rates of 1.5-2%+.
The talk itself got bogged down by union members carping about salary schedules, so I think my question got lost in the shuffle. I followed up with an email this week, but am unsure as to how I can proceed. My understanding is that this would be a no-cost initiative by our district to expand plan offerings. Is this true though? It seems like inviting Vanguard and Fidelity in would be easy to do. Is it not? Any suggestions as to what I could do as an employee to get things moving?
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Any suggestions as to what I could do as an employee to get things moving?
What does your contract say? Some contracts specify that funds may be added to the 403b plan if X (where X can be as small as 5 or 10) employees request them.
See http://www.403bwise.com/home.html and https://www.bogleheads.org/wiki/How_to_campaign_for_a_better_401%28k%29_plan for related discussion.
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Good question. I'm not a union member so I had to look it up. Only a very general clause:
"The Board shall make available to all employees through payroll deduction, tax deferred annuity programs with companies which qualify and are approved under the guidelines and criteria established by the board."
I don't know whether the term "annuity" means it has to be an insurance contract or not. I'll research those links when I have another free moment later today. Thanks!
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I don't know whether the term "annuity" means it has to be an insurance contract or not. I'll research those links when I have another free moment later today.
In the 403bwise site there is
The 403(b) has often been referred to as a Tax Deferred Annuity (TDA) or a Tax Sheltered Annuity (TSA). This is a misnomer and gives the false impression that a participant must invest in annuity products. This is not true. Way back in 1974 Congress granted participants the ability to contribute directly in mutual funds when they added paragraph 7 to the code creating the 403(b)(7) custodial account.