Benefits Officials: Stop Acting Like 98-pound Weaklings and Start Throwing Your Weight Around to Gain 403(b) Pricing Breaks Coming 403(b) Regulations Offer Opportunity to Get Tough With Vendors On Pricing     Dear Benefits Official,   New regulations are here and set to go into effect January 1, 2009. They are going to seem queer. But you better get used to it. The question now shifts to: What should you (the benefit official) be doing?   The first order of business is to figure out exactly how much money your employees have invested in the 403(b). The technical term is Assets Under Management (AUM). Why is this information important? Once you know the total assets being invested by your employees you will have the fiscal muscle to flex in negotiations with financial providers. In the current vendor choice overload environment — particularly at the K-12 level — it is easy to lose sight of just how much assets under management and leverage you have. Instead of viewing your plan as 20 to 30 little plans because you have 20 to 30 vendors, it is wise to view your plan in totality. A large public school district on the east coast did just that and discovered it had close to $1 billion invested in 403(b) money spread among more than a dozen vendors. The benefits official in charge of this plan drew the following conclusion: it is time to start acting like a billion dollar plan. The result? A request for proposal was put out asking vendors for pricing breaks, an end to surrender charges, and an end to loaded products. Vendors were only too willing to comply with these requests in order to maintain this lucrative business.   Expect pushback and resistance from the vendors. They know that calculating AUM only serves the interests of you and your employees. And that is exactly the point. For far too long vendors have been able to charge excessive fees and impose onerous surrender charges for two main reasons: 403(b) regulations were loose at best, and benefits officials were largely ignorant to the plan's workings. That is all coming to an end with new regulations which require much more employer oversight and engagement.   Even if your plan falls short of a billion dollars — as most will — it is in your interest, and more importantly in your employees' best interest, to negotiate the best possible plan in terms of products and pricing. After all, isn't that what business entities do with health benefits, construction costs, etc.? Coming regulations present employers a chance to make transformative changes to their 403(b). Plus it is only a matter of time before court action on excessive fees moves from the 401(k) to the 403(b). Those familiar with the rampant fee abuses in K-12 403(b) plans know this arena would make fertile lawsuit pickings. New IRS 403(b) regulations offer benefits officials not only a unique opportunity to help their employees save more money for retirement, but they are also offering something many benefits officials lack: a backbone.   Wise moves benefit officials should make now: 1.  Calculate total 403(b) Assets Under Management (AUM) 2.  Put together an RFP asking for pricing breaks, an end to surrender charges, and an end to loaded products. 3.  Read The Employer Get Wise Guide for the New 403(b) Regs for more information.   Home | Disclaimer | © 2007 403(b)wise, LLC. All rights reserved.