Independent Fiduciary Consultant, Economics and Financial Ethics

One who intends to leave others better off for his having existed.


Please help save $35,122,520 for City of Greensboro employees

City of Greensboro executive management is in possession of the following information which should provide roughly $125 per year in investment and administrative fee savings for about 2,780 City employees in Greensboro's 457 qualified retirement plan (like a 401k).

ICMA-RC's proposal for Winston Salem dated November 30, 2011 states "based on a full plan take over of approximately $20 million in plan assets with 1,149 participants." and "ICMA-RC's minimum annual revenue requirement is 0.34% of assets with a five year contract term."

And "Any revenue received from investment companies above our revenue requirement would be provided to the plan as an administrative allowance", which Greensboro currently isn't offered, as ICMA-RC now takes "Any revenue received from investment companies above" Greensboro's revenue requirement.

Winston Salem's report showing an Administrative Allowance;

Greensboro is currently allowing ICMA-RC to take excess fees from Greensboro's employees, as Winston Salem negotiated the excess fees to be returned to their employees' accounts.

Greensboro's report showing no Administrative Allowance;

ICMA-RC's proposal for Winston Salem also states "If there is a shortfall in revenue, ICMA-RC and the City shall mutually agree upon a method to make up the shortfall necessary to meet the revenue requirement", meaning there is a floor to how much ICMA-RC needs in revenues per participant, which Greensboro's Mary Vigue via Jim Westmoreland denied in a breach of trust to City of Greensboro employees.
The retirement plan consultant's letter to Winston Salem dated December 18, 2014 states "with respect to assets held in the Stable Value fund, the expense ratio of this fund includes 0.34% fee attributable to ICMA-RC services." and "the investment management fee appearing for the Stable Value fund is 0.48%."

And "the original “fee agreement” for ICMA-RC administration/recordkeeping services is 0.34% of plan assets; [Retirement Plan] Consulting will be monitoring the total dollar amount of these fees to ensure they remain reasonable given the inherent escalation of dollar revenue attributable to asset based fee structures (assuming the plan is growing e.g. new contributions and earnings).

Thus, we may determine the 0.34% fee needs to be calibrated lower in the future due to the growth in plan assets. 

Alternatively, we will also evaluate a “flat dollar” fee arrangement for ICMA-RC services."
$20 million x 0.34% = $68,000 ICMA-RC minimum annual revenue requirement for 1,149 participants

$68,000 / 1,149 = $59.18 per participant
As of the 1st quarter of 2014, Greensboro had $87,898,314 in its ICMA-RC 457 plan

Greensboro has 2,781 participants.

2,781 x $59.18 = $164,580    Greensboro is now paying $242,640 for no reason

$164,580 / $87,898,314 = 0.19%
Greensboro should ask ICMA-RC to match Winston Salem's pricing;

For ICMA's VT PLUS [Stable Value] Fund, which had $36,415,538 as of 2014's first quarter,
0.19% + 0.48% = 0.67% instead of 0.82%.

The total cost for Greensboro's $36,415,538 stable value fund should be at most;
$36,415,538 x 0.67% = $243,984

0.67% instead of 0.82% = 0.15%

0.15% of $36,415,538 = $54,623 in savings, which would increase the yield to participants by about the same 0.15%.

By mirroring the Federal Government's Thrift Savings Plan, Greensboro could dramatically lower the cost and increase the returns via low cost index funds, whose expense ratios could be a bit lower if assets in each are larger than $5 million;

Vanguard Intermediate-Term Bond Index Fund Admiral Shares
Expense Ratio = 0.10% + 0.19% = 0.29%

Vanguard Extended Market Idx Signal
Expense Ratio = 0.10% + 0.19% = 0.29%

Vanguard FTSE All-World ex-US Index Fund Admiral
Expense Ratio = 0.15% + 0.19% = 0.34%

Vanguard 500 Index Fund Admiral Shares
Expense Ratio = 0.05% + 0.19% = 0.24%
$87,898,314 total - $36,415,538 Stable Value = $51,482,776

The total cost for Greensboro's $51,482,776 in bond and equity funds should be at most, about the average of 0.29% + 0.29% + 0.34% + 0.24;

0.29% + 0.29% + 0.34% + 0.24% = 0.29%

$51,482,776 x 0.29% = $149,300

$149,300 + $243,984 = $393,284 maximum total annual cost

$393,284 / $87,898,314 = 0.45%
As of 2014's 1st quarter, Greensboro's plan cost and estimated annual cost of $741,132;

$741,132 / $87,898,314 = 0.84%
$741,132 - $393,284 = $347,848 in total annual savings

$347,848 / 2,781 participants = about $125 more per participant in year one.

In 30 years, another $125 per year per employee compounded at 7% should leave another $12,634 each by mirroring the federal government's Thrift Savings Plan, designed with low cost index funds by federal employees for themselves, instead of a D.C. "non-profit" whose CEO makes more than $2 million per year.

$12,634 x 2,780 = $35,122,520

Renegotiating Greensboro's 457 plan fees could save plan participants about $347,848 per year, but City Manager Jim Westmoreland and Assistant City Manager Mary Vigue, indirectly affiliated with the plan's administrators, worked to prevent lower costs with the help of financial industry lobbyists.

Westmoreland and Vigue have acted in the best interests of a retirement plan company connected to their management association instead of the employees they are supposed to represent.

Please help retain more money in our community instead of letting Greensboro's retirement plan provider skim more than necessary by contacting City Council to advocate for the reallocation and renegotiation of the plan's funds and fees.

It's the right thing to do.

George Hartzman.
401k, 457, 403b's and the Federal Government's Thrift Savings Plan

Suggested City of Greensboro ICMA-RC fund changes by James Weight, Director, Relationship Management, Mid-Atlantic Region

"TriMet's 401(k)-type plan on the screen behind him and said that, outside the federal government's Thrift Savings Plan, this was "the best I've ever seen."

How Jim Westmoreland, Mary Vigue and ICMA-RC's lobbyists shafted Greensboro's employees

Concerning the contents of an information request concerning Greensboro's 457 plan

Greensboro ICMA-RC 457 plan fund alternatives which City management refuses to look into

Emails between City of Greensboro, Charlotte and some Winston Salem employees and their 457 Retirement Plan Provider

"Administrative fees and the tyranny of compounding costs."

"The toll taken by 401(k) and associated mutual fund fees is staggering, and can eat up more than half your gains. With 401(k)s, there are usually more than a dozen undisclosed fees: legal fees, trustee fees, transaction fees, stewardship fees, bookkeeping fees, finder fees and more.

But that's just the beginning. The mutual funds inside 401(k)s often take a 2 percent fee off the top. If a fund is up 7 percent for the year, they take 2 percent and you get 5 percent. It sounds like you're getting more, right? At first, yes, but in the end the mutual fund wins.

As Jack Bogle, the founder of Vanguard explains it, "What happens in the fund business is the magic of compound returns is overwhelmed by the tyranny of compound costs."

If you contribute $5,000 per year, from 25 years old to 65, and the fund goes up 7 percent every year, your money would turn into around $1,143,000. Yet, you'd only get to keep $669,400, or less than 60 percent. That's because 7 percent compounding returns hundreds of thousands more than a 5 percent compounding return, and none of it goes to you. The 2 percent fee cuts the return exponentially. In the example above, by the time you turn 75 the mutual fund may have taken two-thirds of your gains.

Bogle puts it like this, "Do you really want to invest in a system where you put up 100 percent of the capital, you take 100 percent of the risk, and you get 30 percent of the return?"
"Explaining 401(k) Fees

...Investment fees, sometimes referred to as investment management fees, tend to be the most expensive fees. These are the fees you are paying the company who handles your 401(k) to manage your funds, and they typically are assessed as a percentage of assets invested, meaning the more your 401(k) grows, the more you will pay in investment fees. These fees are automatically deducted from your investment returns.

Typically noted as plan administration fees on your quarterly statements, administration fees are the costs associated with the day-to-day operation of your plan. Record keeping, accounting, legal and trustee services are all paid for under the umbrella of administration fees..."

When considering fees associated with their 401(k) retirement plans, it's important that investors recognize these fees will escalate as their investment returns increase."


Dollar strength and crisis correlations

28 CFR 600.1 - Grounds for appointing a Special Counsel

"The Attorney General, or in cases in which the Attorney General is recused, the Acting Attorney General, will appoint a Special Counsel when he or she determines that criminal investigation of a person or matter is warranted and—

(a) That investigation or prosecution of that person or matter by a United States Attorney's Office or litigating Division of the Department of Justice would present a conflict of interest for the Department or other extraordinary circumstances; and

(b) That under the circumstances, it would be in the public interest to appoint an outside Special Counsel to assume responsibility for the matter."
The Independent Counsel shall have prosecutorial jurisdiction to initiate and conduct prosecutions in any court of competent jurisdiction for any violation of 28 U.S.C. 1826, or any obstruction of the due administration of justice, or any material false testimony or statement in violation of the Federal criminal laws, in connection with the investigation authorized by this regulation, and shall have all the powers and authority provided by the Ethics in Government Act of 1978, as amended, and specifically by 28 U.S.C. 594.
28 CFR 603.1 - Jurisdiction of the Independent Counsel

The Independent Counsel: In re Madison Guaranty Savings & Loan Association shall have jurisdiction and authority to seek indictments and to prosecute, or to bring civil actions against, any persons or entities involved in any of the matters referred to in paragraph (a), (b), or (c) of this section who are reasonably believed to have committed a violation of any federal criminal or civil law arising out of such matters, including persons or entities who have engaged in an unlawful conspiracy or who have aided or abetted any federal offense.


Dallas Fed New Orders

"The shipments index plunged from 20.8 to 6, due to a much higher share of respondents noting a decline in shipments in January than in December

Wage pressures eased, while input and selling prices declined in January.

The raw materials price index came in at -1.7, its first negative reading in more than five years.

The finished goods price index fell 11 points to -6.7, after posting positive readings during the past 17 months.

...The wages and benefits index receded from 25.2 to 19.1, suggesting some moderation in upward pressure on compensation costs."


U.S. Crude Oil Stocks

"Inventories have now reached 397.9 million barrels, the highest level for this time of year in “at least the last 80 years,” or as far as the EIA’s records go back.

This chart by the EIA shows that current inventory levels (blue line) have been on a terrific upward trajectory that defies the 5-year range and seasonal movements."

Do fewer Gazelles = fewer Cheetahs?

If Gazelles need water and grass
and Cheetahs need water and Gazelles
and an abundance of sustenance leads to more Gazelles
should more Gazelles and water lead to more Cheetahs?

If too many Gazelles relative to water and grass lead to fewer Gazelles
do fewer Gazelles = fewer Cheetahs?

If water was money and grass was credit
and Cheetahs and Gazelles were people
who would be who?

If need is sustenance and a temperate climate
should you not do what you don’t want done to you
unless you need to?

Population, when unchecked,
increases in a geometrical ratio.

Subsistence only increases in an arithmetical ratio.

Thomas Robert Malthus
Suggested populations could increase faster than food supplies

Are there correlations
between currency, debt, natural resources, peace and war?

Are there times when compromise isn't appropriate?

Have the powerful created symbols for the powerless to destroy
to turn tyranny into nationalism?

Is attachment suffering?


"Active Funds vs Index Funds 2014: Managed Mutual Funds Underperform Passive Funds, Continuing Losing Streak"

"The Dow Jones Industrial Average and the S&P 500 hit record highs in 2014, but Wall Street’s best and brightest mutual fund managers fell short and failed to keep pace, costing investors billions in missing gains—and fees. Passive funds that mirror popular indexes outpaced more expensive actively managed funds for the year.

Here’s what that means in real terms:

If you had put $10,000 into the average mutual fund guided by a seasoned manager on Jan. 1, 2014, you’d have seen an average return of $1,148 for the year.

As of the market’s close on Dec. 31, you’d have a total of $11,148, according to data from investment research firm Morningstar.

That total doesn’t include the average 1 percent that would get subtracted in fees to, among other things, help pay the fund manager’s salary. In your case, that 1 percent would lop off about $111.48 from your annual return.

$11,148 - $111.48 = $11,036.52

By comparison, if you had opted to put $10,000 in a passively-managed fund at the start of 2014, you would’ve realized an average return of $1,446, totaling $11,446—with fees as low as 0.2 percent owed, or $22.90.

$11,446 - $22.90 = $11,423.10

$11,423.10 - $11,036.52 = $386.58

From Buck Consultant's ICMA-RC 457 Plan Administration RFP for Contra Costa County

"ICMA-RC uses the SunGard OMNI system for recordkeeping which is a standard product used by many different firms to perform back office third-party administration services to 457(b) plans.

ICMA-RC Fee with Open Architecture Investment Structure = 0.116%

ICMA-RC Fee if County Uses Vendor’s Proprietary PLUS Fund = 0.0625%

The RFP requested proposers to confirm that any revenue sharing amounts generated in excess of fee quotes would be tracked and reimbursed to the County. ICMA’s proposal confirmed this practice."

March 28, 2013

Presented by:
Jonathan P. Slinger, CFA

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Omni is:

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From ICMA-RC Response to the City of Anaheim California's 457 Request for Proposal

Five Year Contract Term – City of Anaheim

Fee Transparency

Total participants served  3,148

Total assets administered  $161M

ICMA-RC revenue requirement  $118,821

$118,821 / 3,148 = $37.74 per participant
The asset based revenue disclosed above is anticipated annual asset-based and/or per-participant
revenue on assets administered as of 9/30/2010.
Proposed funds included;

VantageTrust PLUS Fund Stable Value Expense Ratio = 0.26%

Vanguard Total Bond Market Index Fund Expense Ratio = 0.12%

Vanguard Extended Market Index Fund Expense Ratio = 0.13%

Vanguard Developed Markets Index Fund Expense Ratio = 0.22%
All Vantagepoint Funds invested through 401 or 457 plans are held through VantageTrust.Vantagepoint Funds are distributed by ICMA-RC, a wholly owned broker-dealer subsidiary of ICMA-RC and member FINRA/SIPC.
Gross Expense Ratio - The annualized amount, expressed as a percentage of their total investment,
which investors will pay annually for the mutual fund's operating expenses and management fees before any waivers.

One Thing Migrant Smugglers Can't Do Without: Big U.S. Banks

"Diaz paid for part of the trip using one of America’s biggest banks, Wells Fargo & Co.

Major banks, including Bank of America Corp. (BAC), JPMorgan Chase & Co. and Wells Fargo, have been used as financial conduits for the smuggling industry, according to evidence in a federal criminal case against a gang of 15 human smugglers and warrants from prosecutors in Arizona, Maryland and Texas.

...They slept on bare, filthy floors for a week, squeezed in among 40 other people in two rooms -- until Federico, Dionisio’s older brother, who was already living in Doraville, deposited $5,200 into the gang’s Wells Fargo (WFC) accounts. Two men then put Dionisio, Danilo and 11 other undocumented immigrants into a van and drove them to Atlanta.

“We weren’t going anywhere until the money showed up in the bank,” Dionisio says.

...the institutions have fallen short on their responsibility to detect and report suspicious cash deposits and withdrawals -- including money that flows through their accounts into the hands of gangs, federal investigators and bank compliance officers say.

...“There’s a level of ordinary suspicion that banks and regulators are failing to employ.”

...The 1970 Bank Secrecy Act and the 2001 Patriot Act require banks to monitor transactions for activity that may be tied to money laundering and other crimes, including human smuggling.

...In January 2006, prosecutors issued subpoenas ordering JPMorgan and Wells Fargo to look for accounts suspected of being used by coyotes.

...Phoenix police targeted the same transaction patterns and seized hundreds of accounts at Bank of America, JPMorgan (JPM) and Wells Fargo from 2006 to 2008. Since March 2013, Arizona prosecutors have gotten court-ordered seizure warrants to shut down 325 additional accounts suspected of belonging to smugglers at Bank of America and Wells Fargo.

...In 2014, Bank of America required all cash depositors in the U.S. to show identification. JPMorgan began accepting cash deposits into accounts only from the person named on the account and official co-signers. Wells Fargo took none of those steps, Grisham says.

“Wells Fargo didn’t respond,” she says.

...Wells Fargo continuously monitors accounts and reports suspicious activity to authorities, says spokeswoman Richele Messick. The bank complies with all laws and regulations, she says.

...Smugglers prefer Bank of America, JPMorgan and Wells Fargo because they need banks with branches across the country to receive payments, says Homeland Security’s Welch.

...The smugglers told Dionisio and his nephew that they wouldn’t be released until someone put $5,200, the second smuggling-fee installment, into Wells Fargo accounts. About 1,850 miles away, in Doraville, Federico’s mobile phone rang. A male voice ordered him to go to a Wells Fargo branch.

“I went to the bank and deposited the cash,” Federico says.

...On Jan. 9, 2013, the day after the two men arrived in Doraville, Homeland Security Investigations agents searched the house in Mesa where Dionisio and his nephew had been held. Inside, they found a spiral notebook listing the names of 42 smuggled people, including Dionisio and Danilo; their destinations; contact phone numbers; and shorthand references to payments to accounts at Wells Fargo, Bank of America and JPMorgan, according to the ledger, which federal agents described in detail in affidavits filed in U.S. District Court in Phoenix.

...Part of the fees smuggling gangs collect go to Mexican drug cartels, says Matt Allen, who heads Homeland Security Investigations’ unit in Arizona.

...Wachovia Corp., which Wells Fargo had bought, admitted in court in 2010 that it hadn’t done enough to spot drug-trafficking money among the $378.4 billion it handled for Mexican currency exchange houses from 2004 to 2007.

The Justice Department charged the bank with violating the Bank Secrecy Act, and Wachovia paid $160 million in fines and penalties and promised to revamp its detection systems.

A year later, the government dropped the charges."