OCPS only adds and removes 403b/457b vendors once every five years and they’re currently initiating that process now. Happily, after my latest 3 minute speech to the OCPS school board, Chairman Bill Sublette once again voiced support for low cost investing and said OCPS would be contacting Vanguard and Fidelity during the renegotiation process.
He expressed doubt that the exploitative vendors would be removed, which is an expected disappointment. Still, adding Vanguard and Fidelity would be a significant win for OCPS employees and there’s now more evidence to believe that might happen.
My speech highlighted the exploitative practices of PlanMember Services to illustrate why reform is necessary. Here’s the transcript:
When I was last here I spoke about how AXA was exploiting OCPS employees by charging unjustifiably large fees on retirement accounts. Today I’d like to explain how PlanMember Services, another OCPS-approved vendor, is doing the very same thing.
First, I’ll cut straight to the chase. They offer 3 different plans:
Plan #1, which they push very hard, costs employees just over 2% per year! That may not seem like a lot, but if you assume 6% annual returns and 3% inflation, then after 30 years this fee will consume just over 75% of real investment returns.
Plan #2, which they’ll casually mention if they’re pressed, costs employees 1.64% per year and using the same assumptions consumes 62% of real investment returns.
Plan #3, which they do everything possible to conceal, costs employees 0.35% per year and using the same assumptions consumes 15% of real investment returns.
Having said that, allow me to explain the process I had to go through to gather this information.
I repeatedly called and emailed PlanMember Services asking for a complete understanding of their retirement plans. It took them 22 days before they offered even the most rudimentary information, which was woefully inadequate. When I continued to press for answers to my questions, I was told, “at this point I would recommend that you go to this website which will have all of the information you are looking for.”
The website had none of the information I was looking for. This tactic is common among OCPS vendors because they don’t want to answer any questions that might reveal how bad their plans really are. It is also worth noting, that the sales rep only talked about Plan #1, the same plan that consumed more than 75% of real investment returns.
Eventually I had to call the Vice President of Business Development. Only then was I given a reasonable set of answers to my questions, but even his knowledge was rather shaky and incomplete. He emphasized the most expensive plan, he spoke briefly about the still expensive mid-tier plan, and he made the most casual of references to the cheapest plan.
Had I not been extremely persistent and known the exact questions to ask, there is absolutely no way I’d understand these plans. Although I don’t have time to get into the details, please know these plans are intentionally complex because if employees truly understood them, they would not invest. OCPS employees have virtually no chance of navigating this minefield successfully, it just is not a fair fight.
So I ask you, during the ongoing negotiations, which happen only once every five years, please take this opportunity to replace all of the current vendors with low cost, ethical vendors. Two of the very best, used throughout the state, are Vanguard and Fidelity. Thank you.