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

5/13/13

The City of Greensboro's 457 Retirement Plan, Its Stable Value Fund, and How to give City Employees a Raise

As of December 31, 2012, there was $79,494,486.39 invested by the City of Greensboro's employees in their 457 retirement plan;


457 plans are similar to 401(k) and 403(b) retirement savings plans.

A 457 plan is a non-qualified tax advantaged deferred-compensation retirement plan for the City of Greensboro's employees. 

Greensboro's government provides the plan and employees defer compensation into it on a pre-tax basis.

At first glance, Greensboro's 457 looks like it's paying an annual fee of $143,291.72;



But 49% of the plan is invested in the VantageTrust Plus Fund, otherwise known as a Stable Value Fund;


The VantageTrust Plus Fund's Objective;


The expense ratio for the VantageTrust Plus Fund is in addition to the $89,168.05 above.

I met with City of Greensboro staff Friday to go through this information. It is not their fault that they did not know this.  It is my industry's fault for not telling the people in charge of doing right by their employees fault for not telling them about what they should have known but didn't.

As can be seen below, and semi-confirmed by city staff, the VantageTrust Plus Fund charges .81% on top of $89,168.05 charged above.

38,800,959.85 x .0081 =  $314,287.77

All the other funds in the plan also have underlying expenses, like the VantageTrust Plus Fund, some of which get kicked back to the retirement plan provider.


The returns about "assumes a 0.55% management fee, which "an Employer may negotiate"

The City of Greensboro's Plan sounds like they're paying 0.81%, plus $89,168.05.

$89,168.05 + $314,287.77 = $403,455.82 for 49% of the plan, meaning ICMA actually looks like it's making about 1.04% on just their Stable Value Fund, not counting any of the other funds in the plan.

The following is from the agreement between ICMA and the city;



This is what legal kickbacks sounds like that are not included on fund fee disclosure disclaimers;

In a nutshell, the above wording means ICMA makes money on the back end through City of Greensboro employee funds that were very poorly disclosed to the city's employees by ICMA.

What big print can give, fine print can take away.

If the fees are negotiable, and city staff negotiates the VantageTrust Plus Stable Value Fund down to 0.25% instead of 0.81%;

0.56% x  38,800,959.85 = a $217,285.38 raise per year for City of Greensboro employees invested in the city's ICMA 457 Retirement Plan's VantageTrust Plus Fund.

Again, the likelihood for Greensboro city staff to have known about this issue is relatively small, because my industry has been misleading retirement plan sponsors for decades on how fees are accumulated by brokers and providers.

At an average return of 3% per year, $217,285.38 turns into about $10,647,565.55 after 30 years, meaning lowering the actual fees charged for about half of the City of Greensboro's 457 plan and compounding could put about $10,647,565.55 more into the pockets of taxpayer funded employees, which is essentially giving them a raise.

The US Federal Government's Thrift Savings Program Fund Comparison Matrix; Average Fund Expense Ratio = 0.03%

http://hartzman.blogspot.com/2014/06/the-us-federal-governments-thrift.html

Some ICMA-RC 457 Plan Fee Disclosure from some different local Municipalities

http://hartzman.blogspot.com/2014/07/some-icma-rc-457-plan-fee-disclosure.html

The City of Greensboro's 457 Retirement Plan, Its Stable Value Fund, and How to give City Employees a Raise

http://hartzman.blogspot.com/2013/05/the-city-of-greensboros-457-retirement.html

National Association of Counties Nationwide Insurance provided 457 Plan Fee Disclosure for a North Carolina Municipality

http://hartzman.blogspot.com/2014/07/national-association-of-counties.html

On fees for ICMA-RC's VantageTrust PLUS Fund charged to the City of Greensboro

http://hartzman.blogspot.com/2014/07/on-fees-for-icma-rcs-vantagetrust-plus.html

A Few Observations on Share Classes and Wells Fargo Stable Return Fund

http://hartzman.blogspot.com/2014/06/a-couple-of-observations-on-share.html

On the State of North Carolina's 401k plan Stable Value Fund; Could be a $4,844,452.19 annual increase for North Carolina's employees

http://hartzman.blogspot.com/2014/06/on-state-of-north-carolinas-401k-plan.html

City of Greensboro 457 Plan Proposal;

http://hartzman.blogspot.com/2013/06/city-of-greensboro-457-plan-proposal.html

Stable Value Fund Expenses; ICMA-RC VT PLUS Fund - 1.38%


http://hartzman.blogspot.com/2014/07/stable-value-fund-expenses-icma-rc-vt.html

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