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February 9, 2005
Sacramento – The California State
Teachers’ Retirement System has recently unveiled a
new retirement planning Web site that will change the way
employees of local school districts, community colleges and
county offices of education select their retirement savings
investment options.
The new 403bCompare Web site (www.403bCompare.com)
enables eligible employees to pull up free, objective information
about different 403(b) retirement investment products available
for purchase. The 403(b) is a tax-deferred retirement plan
available to employees of educational institutions and certain
non-profit organizations as determined by section 501(c)(3)
of the Internal Revenue Code. Contributions and investment
earnings in a 403(b) grow tax deferred until withdrawal, at
which time they are taxed as ordinary income.
The site, which has been under construction for nearly a
year, went “live” on November 30, 2004. Employees
are now able to search vendors and products registered on
the site and view detailed information about 403(b) products.
The site also includes an educational section with general
information about retirement planning, basic facts, instructions
and navigation tips.
Created by CalSTRS as required by state legislation, 403bCompare.com
also offers links to resources that provide more in-depth
information.
“We are proud to have had a hand in creating the first
Web site of this kind in the country,” said Jack Ehnes,
Chief Executive Officer of CalSTRS. “This promises to
be an invaluable retirement planning tool for our members.
It’s good to have a wide variety of choices, but there
are so many products available that employees have found it
difficult to make sound decisions that result in adequate
diversification.”
The 403bCompare site is designed so that users can select
and compare specific products that are of interest to them.
Up to three products can be displayed on the screen at one
time (for example, the site can be used to compare the features
of three mutual funds or three variable annuity contracts).
Ehnes added that the ability to compare vendors’ fees
will likely be one of the most widely used features of the
site – as fees often have a great, but unrealized, impact
on retirement benefits. “In some cases in the past,
vendor fees actually offset the benefits of tax-deferred investing,”
Ehnes explained. “The Legislature recognized this problem
and authorized the creation of this site as a step towards
a solution. Since contribution limits recently increased,
this couldn’t be a better time to release this one-of-a-kind
planning tool for our members and other school employees.”
According to Ronni Vasconcellos, the 403bCompare program
administrator, CalSTRS assembled an advisory team more than
a year ago to begin designing the site. Vendors, teachers
and employers all participated throughout the process, and
Vasconcellos said, the resulting product is a site that is
not only functional and easy to navigate, but also very thorough.
“For the average investor, trying to read a prospectus
is like reading a newspaper in a foreign language,”
she explained. “Thanks to a truly collaborative effort
by all parties, we’ve created a site that leaves no
stone unturned and explains complicated options in clear,
concise terms. We expect this site to become a favorite ‘bookmark’
for financially savvy employees who want to get the best bang
for their retirement buck … and in time, it will become
a model for other states that want to clarify and organize
product information for people planning for retirement.”
Information on individual products was independently submitted
by, and will be continuously updated by the vendors. All expenses
for the site were covered by vendors registration fees; there
is no cost to the site users. CalSTRS will be responsible
for the ongoing maintenance of the site, as required by California
Education Code 25100 et seq.
According to the law, after the implementation date, only
vendors who are registered with the site can establish new
403(b) accounts or contracts with employees of California's
local school districts, community college districts or county
offices of education. All 403(b) products offered for new
accounts must also be registered with the site, and all fees
must be disclosed.
“As of this week, we have more than 109 vendors, registering
494 products and 6,631 subproducts,” Vasconcellos explained.
“This is going to be the premiere place to go for thorough,
impartial 403(b) information.”
NOTE: Below is
background information on 403(b)Compare.com:
403bCompare.com was established by California state Legislation
in 2002. Chapter 1095, Statutes of 2002 (Assembly Bill 2506
– Steinberg) was passed September 29, 2002, becoming
California Education Code Section 25100-25115.
This law requires the California State Teachers’ Retirement
System to create and implement an online information bank
of 403(b) vendors and investment products -- including mutual
funds, fixed annuities, variable annuities, and equity indexed
annuities. The goal of the 403(b) information bank (403bCompare.com)
is to provide employees of California local school districts,
community college districts, and county offices of education
with access to accurate, impartial and comparably presented
information, including all fees, related to the 403(b) products
available to them through their employer.
The site went “live” and fully functional on
November 30, 2004.
After AB 2506 became law, CalSTRS established a cross-functional
project team to begin developing and implementing the information
bank. The name “403bCompare.com” was selected
in the early stages of the project (fall 2003). The project
team established a Project Advisory Committee to provide input
on the requirements and functionality of the information bank;
the advisory committee included representatives from California
school employees and employers, 403(b) product vendors and
members of CalSTRS staff.
My Employer: Employees of California’s
1,200 local school districts, county offices of education
and community college districts can use the “My Employer”
feature to see which registered vendors have been approved
by their specific employer and are thus available to them
for investing.
Browse Vendors: Employees can access a list
of all vendors registered with 403bCompare.com and may view
information about the vendors and the products they offer.
If the employee selected his or her employer using the “My
Employer” feature, the “Browse Vendors”
feature will indicate which vendors are and are not approved
by the employer.
My Compare: Employees may browse the site
and add products to the “My Compare” cart. This
feature retains the products added and allows employees to
perform side-by-side comparison of like products. This quickly
enables employees to see differences in features and fees
of products that interest them.
The site provides employees the ability to email a link to
their personal email account showing their selections from
the “My Compare” cart, thus enabling them to retain
their research without having to log in, allowing them to
view their search results at a later time.
Search: Employees can perform a word search
on the products and vendors contained in the site. The system
returns vendors and products that match all words entered
into the search box. Employees have the ability to narrow
their search results based on product type and may designate
how many results they wish to see on the screen.
There are three target audiences for this project, all with
specific interests in the site. Listed below are each of these
groups.
Employees: Employees of California local
school districts, community college districts, and county
officers of education are the main audience for this site.
Employees will be able to enter the site to gain useful information
to help them in the retirement planning process. Specifically,
the site offers them:
- Employer Vendor Lists. Employees will have the ability
to select their employer to view those vendors authorized
by their employer. The benefit is that employees will know
immediately if the product they desire is available with
their employer and to limit search result to only those
products offered by their employer.
- Search and Compare. Employees have the ability to view
and compare the fees or other features of up to three like
403(b) products from the same or different vendors, side-by-side
on the screen.
- Salary Reduction Agreement. Once an employee identifies
a product and vendor they wish to invest with, the employee
may download the salary reduction agreement for their employer,
if the employer has submitted its SRA to 403bCompare.com.
- Links to general information and educational materials
regarding 403(b) investing.
Employers: California local school districts,
community college districts and county offices of education
are able to electronically establish and maintain the following:
- Employer Vendor Lists. Most employers maintain a list
of “approved vendors” for their employees. The
employers will have the ability to select their 403(b) vendors
and maintain their “approved” list on the 403bCompare.com
Web site. This will eliminate the need for employees to
acquire the list of approved vendors from their employer’s
personnel office.
- Salary Reduction Agreement. The employer will have the
ability to upload their SRA for use by the employees. Once
again, this will eliminate the need for the employee to
secure the agreement from the personnel office.
Employers are prohibited from forwarding funds for new contracts
between employees and vendors, if the vendor is not registered
on the site. However, they can forward existing funds if they
were entered in to prior to the implementation date of November
30, 2004.
Vendors: For the purpose of 403bCompare.com,
“vendor” is defined as a public retirement system,
broker-dealer, registered investment company, nonbank custodian
or life insurance company qualified to do business in California
that provides investment products as described in Section
403(b) of the Internal Revenue Code of 1986. “Vendor”
does not include individual registered representatives, brokers,
financial planners or agents. Vendors who chose not to register
with 403bCompare.com are not allowed to enter into new contracts
with employees until they register; the registration period
will be offered again in the spring of 2005.
The law requires CalSTRS, as the administrator of the site,
to:
- Offer a registration period to 403(b) vendors once annually
- Remove a vendor from the information bank if the vendor
submits inaccurate information
- Establish an appeals process for vendors who are denied
registration or removed from the list
- Include information about 403bCompare.com in all newsletters
to their members
- Assess vendors equally, based on the number of participants,
for the “actual and reasonable” costs incurred
in establishing and maintaining the site
Vendors must submit the following information in order to
register on the site:
- Statement of experience in providing investment products
under public employer pension plans
- Characterization of offerings as annuities or custodial
accounts, as defined
- Disclosure of expenses paid by retirement plan participants,
types of products, product features, and services offered
to participants
- Retirement counseling experience
- A statement of financial strength and stability
- Location of offices and counselors
- Ability to comply with all applicable state and federal
laws
- Willingness to negotiate reasonable indemnification agreements
with schools
- Ability to offer an array of accumulation funding options
- Investment performance data
- Certification by the vendor that information submitted
is accurate
- The range of administrative and customer services provided
In addition to submitting this registration information,
participating vendors are required by the law to:
- Renew their information at least every five years
- Amend their information between renewal periods if the
product or service offered changes or new products are introduced
- Bear all costs associated with the establishment, administration
and maintenance of the site (via registration fees)
Vendors are additionally prohibited from claiming that registration
with CalSTRS constitutes an endorsement by CalSTRS. The Teachers’
Retirement Board, CalSTRS and its officers and employees are
held harmless from liability for information in the bank and
the actions of the registered vendors.
The full text of the law in PDF can be viewed here
or can be viewed online.
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