403b Participants Getting Short End Of Stick

403b Plan Participants Taking A Backseat To 401k Plan Participants

by: Brendan Magee

I met with two employees of a local school district after each had expressed dissatisfaction about the returns of their retirement plans. They are both participating in their school district's 403b plan, a nonprofit employee's version of a 401k plan.

Last year was a great year for the stock market. U.S. Large Company stocks were up 32.33%. Carol's 403b plan returned .0030%. That is 30% of one percent for the year. Worse then that she paid in investment expenses, 1.25%. She is paying more in expenses than she earned! Steven has been a participant for the last eight years. From 2006 through the summer of 2013 he earned just 2.35%, while in that period of time U.S. Large company stocks earned 7.58%. His investment expenses were over three percent per year. Steven's returns not only didn't keep pace with the rising cost of living, he is slowly but surely working his way into the poor house with oppressive expenses.

Now even though Carol and Steven have had investment representatives that enrolled them in the school district's 403b plan, neither had a clue about how bad their investments were really doing. They never heard from them after they signed up. Now, their experience is not the exception. after talking to many 403b plan participant's it seems to be the routine experience for countless 403b plan participants.

What most 403b plan participants do not realize is that when it comes to a Non-Erisa 403b plan, they are completely on their own. If their investments go bad, unlike a 401k plan, there is no one they can hold accountable. In a 401k plan, the plan sponsor has a fiduciary responsibility to the participants and the beneficiaries of participant. Often times to alleviate some of the liability, 401k plan sponsors will hire investment advisors who are also operating under a fiduciary responsibility. This means that if a 401k plan participants investments do not work out and they can prove that the sponsor and advisor did not live up to their fiduciary responsibilities, they can be held personally liable to the participant and their families.

One of the biggest requirements of a sponsor of a 401k plan is to monitor the plan. For the sponsor of the plan this means having an idea about investment expenses, returns, what types of educational material is being put in the hands of the participants, reviewing the results of the investments being offered to the participants, and making sure the plan's performance is meeting certain benchmarks.


 No such protection exists for employees who are making payroll deposits into a Non-Erisa 403b plan. The benefits manger or whoever has the responsibility for choosing the vendors for the plan does not have the responsibility of monitoring the plan. The vendors are free to approach the employees however they see fit and convince them that theirs are the right investment products for that employee. Unless properly educated before hand the, the employee is completely at the mercy of the vendor. Public school 403b plans and a few others fall into the Non-Erisa category.

So what does this mean to the Non-Erisa 403b participant? They have no right to hold the benefits manger or business manager responsible for anything. They could, unknowingly, be sold underperforming, over priced, completely unsuitable investments that do not keep pace with the rising cost of living and not have the right to hold anyone but themselves responsible. They can't even hold the company rep who sold them the products responsible, if they signed forms that they agreed the investment was suitable to their circumstances. They also could wave their right to take a rogue salesman into court if they signed an arbitration agreement which basically means you have agreed to waive your right to a trial which would be decided by a jury of your peers. (Before financial services companies will open the account they require their reps to have these forms signed)

It's unfortunate, but without that liability hanging over their necks, a lot of school district benefits managers and business managers do not have the motivation to stay on top of their 403b plans. They take the out of sight, out of mind approach and try to leave well enough (or substandard to dismal investment options) alone.

In this school district's case, when Steven, Carol, and a few other employees found investment options that were less expensive and performed more to their liking, the business manager told the employees they already had nine other vendors to choose from. He wasn't about to add a vendor or even listen to their side of the story. He had no idea, or didn't care to know,  that the other vendors that were available were just as expensive and performed just as miserably as the ones the employees already had.

This would not be the case for 401k plan participants. They would have the right to contact the Department of Labor and plead their case. They could initiate an audit of their 401k plan. The plan sponsor is never out from under their fiduciary responsibilities.

Unfortunately, for some reason when it comes to employees of a public school districts, their retirement, their income, and the securities they invest in through the school district's plan, they do not deserve the same kind of protection.


Brendan Magee is the founder and president of Inevitable Wealth Coaching. With questions call 610-446-4322 or e-mail Brendan@coachgee.com.

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Pelosi's Words Haunt Investors Too

Pelosi's Quote Haunts Investors Too

                         by: Brendan Magee

As the media coverage of the Obama Care Rollout intensifies we hear time and time again the famous quotes the President and Former Speaker of the House, Nancy Pelosi used in trying to get the Affordable Care Act passed. Speaker Pelosi's famous quote, "We'll just have to pass it before we can find out what's in the bill," will be played for years to come. It's probably going to haunt her come election time.  Basically, the country was left pretty much in the dark about  one of the biggest pieces of legislation in its history. A lot of people were and still are scared and nervous by not knowing what impact the law would have on theirs and their family's lives. It doesn't get too much more serious than a person's health insurance.

I think you'd agree that a person's investments are a pretty important subject as well. Investors like to have as much certainty and confidence as possible. I think a big reason a lot of people are walking around on egg shells is because they have money invested in the stock market, but have no idea how the stock market really works. By that I mean, they don't know where the returns are coming from or where they are not coming from. From the moment their money is deposited into a brokerage account they have little to know control over their success or failure. How do they know they have gotten the whole truth before they've invested their money? Unfortunately, too many people can't say for sure they have the truth on their side. It's like they are at the mercy of the all knowing, all powerful, but never seen stock market god. You never know what tomorrow is going to bring.

There are thousands upon thousands of advertisements about where people should be investing their money. There are tons of statistics about the analysts having been right so many times in the past, and it is difficult to know who to believe. Ultimately, an investor is left to make a decision that they hope will be the right one, but also will do the least amount of damage to their portfolio and dreams for retirement. How exciting is that?

To remedy the nerves and anxieties an investor feels, amongst the first questions an investor has to ask and answer honestly is, "Do you know how the market really works? By that I mean, do you understand where the returns are coming from and where they are not coming from? Do you know for certain that you have invested your money in such a way that your are taking full advantage of where and how to capture additional rates of return that the market delivers and you will need to meet your investment goals?  If your answer is anything less than a 100% yes, stop everything and get the answer to that question. Answering it will tell you some very important things, Amongst which are:

-Is my money invested properly for my circumstances and goals?
-Am I with the right advisor?
-Did I fall for a story that sounded good in the moment, but really isn't sound at all?
-How much risk am I really taking?
-Am I in a portfolio that is designed to give me the long-term returns I need?

I know how much anxiety investing your money in the market without the answers to these questions can produce, but just for a second take a minute to think about how much peace of mind you'd have about your investments if you actually had the answers to these questions? You'd have complete control over your investments. No one could get a fast story past you and talk you into investing money in a way that you knew was inconsistent with your goals.

Compare that with state of mind for a good portion of the country. Run away premiums, losing coverage, no clear place to turn to replace the coverage they are losing, and very little faith in the words our leaders are using to try and calm your nerves and regain their credibility. Who knows if the country would be in such turmoil if its citizens had an idea ahead of time what the impact Obamacare could bring? Maybe it wouldn't have passed in the first place. Maybe it still might have passed.  It would still be hard to find out that your health insurance had been cancelled, but it might not come as a complete shock if the President had said that if this law gets passed, you could lose your coverage and be face with considerably higher premiums.  Again, it wouldn't be pleasant, but at least it wouldn't come as a complete surprise.

Your health insurance situation may be out of your hands, but when you ask the right questions, your investments and the peace of mind you experience from them are completely in your hands. Would you want it any other way?

Brendan Magee is the founder and president of Inevitable Wealth Coaching. With questions or comments call 610-446-4322 or email Brendan@coachgee.com.

Pelosi's Quote Haunts Investors Too!

Pelosi's Quote Haunts Investors Too

                         by: Brendan Magee

As the media coverage of the Obama Care Rollout intensifies we hear time and time again the famous quotes the President and Former Speaker of the House, Nancy Pelosi used in trying to get the Affordable Care Act passed. Speaker Pelosi's famous quote, "We'll just have to pass it before we can find out what's in the bill," will be played for years to come. It's probably going to haunt her come election time.  Basically, the country was left pretty much in the dark about  one of the biggest pieces of legislation in its history. A lot of people were and still are scared and nervous by not knowing what impact the law would have on theirs and their family's lives. It doesn't get too much more serious than a person's health insurance.

I think you'd agree that a person's investments are a pretty important subject as well. Investors like to have as much certainty and confidence as possible. I think a big reason a lot of people are walking around on egg shells is because they have money invested in the stock market, but have no idea how the stock market really works. By that I mean, they don't know where the returns are coming from or where they are not coming from. From the moment their money is deposited into a brokerage account they have little to know control over their success or failure. How do they know they have gotten the whole truth before they've invested their money? Unfortunately, too many people can't say for sure they have the truth on their side. It's like they are at the mercy of the all knowing, all powerful, but never seen stock market god. You never know what tomorrow is going to bring.

There are thousands upon thousands of advertisements about where people should be investing their money. There are tons of statistics about the analysts having been right so many times in the past, and it is difficult to know who to believe. Ultimately, an investor is left to make a decision that they hope will be the right one, but also will do the least amount of damage to their portfolio and dreams for retirement. How exciting is that?

To remedy the nerves and anxieties an investor feels, amongst the first questions an investor has to ask and answer honestly is, "Do you know how the market really works? By that I mean, do you understand where the returns are coming from and where they are not coming from? Do you know for certain that you have invested your money in such a way that your are taking full advantage of where and how to capture additional rates of return that the market delivers and you will need to meet your investment goals?  If your answer is anything less than a 100% yes, stop everything and get the answer to that question. Answering it will tell you some very important things, Amongst which are:

-Is my money invested properly for my circumstances and goals?
-Am I with the right advisor?
-Did I fall for a story that sounded good in the moment, but really isn't sound at all?
-How much risk am I really taking?
-Am I in a portfolio that is designed to give me the long-term returns I need?

I know how much anxiety investing your money in the market without the answers to these questions can produce, but just for a second take a minute to think about how much peace of mind you'd have about your investments if you actually had the answers to these questions? You'd have complete control over your investments. No one could get a fast story past you and talk you into investing money in a way that you knew was inconsistent with your goals.

Compare that with state of mind for a good portion of the country. Run away premiums, losing coverage, no clear place to turn to replace the coverage they are losing, and very little faith in the words our leaders are using to try and calm your nerves and regain their credibility. Who knows if the country would be in such turmoil if its citizens had an idea ahead of time what the impact Obamacare could bring? Maybe it wouldn't have passed in the first place. Maybe it still might have passed.  It would still be hard to find out that your health insurance had been cancelled, but it might not come as a complete shock if the President had said that if this law gets passed, you could lose your coverage and be face with considerably higher premiums.  Again, it wouldn't be pleasant, but at least it wouldn't come as a complete surprise.

Your health insurance situation may be out of your hands, but when you ask the right questions, your investments and the peace of mind you experience from them are completely in your hands. Would you want it any other way?

Brendan Magee is the founder and president of Inevitable Wealth Coaching. With questions or comments call 610-446-4322 or email Brendan@coachgee.com.

Pelosi's Quote Haunts Investors Too

Pelosi's Quote Haunts Investors Too

                         by: Brendan Magee

As the media coverage of the Obamacare Rollout intensifies we hear time and time again the famous quotes the President and Former Speaker of the House, Nancy Pelosi used in trying to get the Affordable Care Act passed. Speaker Pelosi's famous quote, "We'll just have to pass it before we can find out what's in the bill," will be played for years to come. It's probably going to haunt her come election time.  Basically, the country was left pretty much in the dark about  one of the biggest pieces of legislation in its history. A lot of people were and still are scared and nervous by not knowing what impact the law would have on theirs and their family's lives. It doesn't get too much more serious than a person's health insurance.

I think you'd agree that a person's investments are a pretty important subject as well. Investors like to have as much certainty and confidence as possible. I think a big reason a lot of people are walking around on egg shells is because they have money invested in the stock market, but have no idea how the stock market really works. By that I mean, they don't know where the returns are coming from or where they are not coming from. From the moment their money is deposited into a brokerage account they have little to know control over their success or failure. How do they know they have gotten the whole truth before they've invested their money? Unfortunately, too many people can't say for sure they have the truth on their side. It's like they are at the mercy of the all knowing, all powerful, but never seen stock market god. You never know what tomorrow is going to bring.

There are thousands upon thousands of advertisements about where people should be investing their money. There are tons of statistics about the analysts having been right so many times in the past, and it is difficult to know who to believe. Ultimately, an investor is left to make a decision that they hope will be the right one, but also will do the least amount of damage to their portfolio and dreams for retirement. How exciting is that?

To remedy the nerves and anxieties an investor feels, amongst the first questions an investor has to ask and answer honestly is, "Do you know how the market really works? By that I mean, do you understand where the returns are coming from and where they are not coming from? Do you know for certain that you have invested your money in such a way that your are taking full advantage of where and how to capture additional rates of return that the market delivers and you will need to meet your investment goals?  If your answer is anything less than a 100% yes, stop everything and get the answer to that question. Answering it will tell you some very important things, Amongst which are:

-Is my money invested properly for my circumstances and goals?
-Am I with the right advisor?
-Did I fall for a story that sounded good in the moment, but really isn't sound at all?
-How much risk am I really taking?
-Am I in a portfolio that is designed to give me the long-term returns I need?

I know how much anxiety investing your money in the market without the answers to these questions can produce, but just for a second take a minute to think about how much peace of mind you'd have about your investments if you actually had the answers to these questions? You'd have complete control over your investments. No one could get a fast story past you and talk you into investing money in a way that you knew was inconsistent with your goals.

Compare that with state of mind for a good portion of the country. Run away premiums, losing coverage, no clear place to turn to replace the coverage they are losing, and very little faith in the words our leaders are using to try and calm your nerves and regain their credibility. Who knows if the country would be in such turmoil if its citizens had an idea ahead of time what the impact Obamacare could bring? Maybe it wouldn't have passed in the first place. Maybe it still might have passed.  It would still be hard to find out that your health insurance had been cancelled, but it might not come as a complete shock if the President had said that if this law gets passed, you could lose your coverage and be face with considerably higher premiums.  Again, it wouldn't be pleasant, but at least it wouldn't come as a complete surprise.

Your health insurance situation may be out of your hands, but when you ask the right questions, your investments and the peace of mind you experience from them are completely in your hands. Would you want it any other way?

Brendan Magee is the founder and president of Inevitable Wealth Coaching. With questions or comments call 610-446-4322 or email Brendan@coachgee.com.

Very Good Day Sunshine!

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