New Retirement Planning Tool Available on the Web
403bCompare.com Geared to Teachers, Other School Employees
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:
- general information and history of the development of 403(b)Compare.com
- important features of the Web site
- a description of the target audiences
- a summary of requirements of the authorizing legislation
- the full text of the authorizing legislation
403bCompare.com – General Information
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.
History of the Creation of 403bCompare.com
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.
Important Features of 403bCompare.com
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.
Target Audiences for 403bCompare.com
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.
Requirements of the Law (Summary)
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.
Full Text of the Authorizing Legislation