[EricJ]

Just got this e-mail from our Benefits department:

Current and new 403(b) enrollees in EFS: Fidelity Direct.

We were informed by EFS late last Thursday that the Fidelity Direct investment option required further documents be signed to be implemented. Upon review by legal and follow-up with Fidelity by our consultant, we have determined that EFS-Fidelity Direct will not comply with Anoka-Hennepin’s 403(b) Plan and Third Party Administrator requirements at this time.

Therefore, the EFS: Fidelity Direct investment option is not available.

We are notifying you of the unavailability of the EFS: Fidelity Direct investment choice because you are or were enrolled with Fidelity. Due to the last-minute notice, we will extend our deadline for completing the new SRA and choosing a new investment option and/or a new vendor until December 19, 2008 for continuation of 403(b) reductions on January 9, 2009. SRAs completed and returned after next Friday will be processed on the next available pay day.

We are sorry for the shortness of this notice but it was unavoidable based on the untimely communications to Anoka-Hennepin.

Arg. This is a double whammy of goodbye Fidelity and hello middle-man fees.

A summary of my remaining choices are:

• ING Mutual Funds, plus a .5% asset management fee
• P&A Financial Services - Best choice seems to be a target date fund with a 0.86% annual fee, plus their $10 + 0.25% annual charge.
• Educators Financial Services - TD Ameritrade funds, plus 1.06% annual fee to EFS
• Ameriprise - Riversource Mutual Funds with fees around 1.5-2.0%.

OR

I can invest with the Minnesota 457 plan, which would give me access to ultra-low-fee Vanguard funds. The catch is, I'd lose 7.65% of my employer's match to FICA... meaning I'd get $1,845/yr instead of $2,000/yr. If my math is correct, it seems that over the long run I'd be better off losing that part of my employer match in order to avoid 1-2% annually in fees.

What do you guys think? I suppose there's nothing I can do about this whole thing, right? Who is really to blame for this?

Thanks in advance...you guys are excellent.

[apteacher]

I can't help you with your financial calculation, but I can help answer you question, "Who is to blame for this?"

1) The IRS, which wrote the new rules and reg's
2) School districts that have no interest in this.
3) Teachers who have no interest in this.
4) Companies that stand to gain from this nonsense.

I'm sure others can add more to the list.

[JudyS]

Eric --
I would go with option 2 because it seems real clear what the cost to you would be. With the other options, there COULD be costs that you might not be aware of that are additional. IMHO, most often the salespeople -- and I would think the TPAs -- are not AWARE if some a multitude of the teensy costs have been added. They know what their commission is, but they sometimes remain blissfully unaware of some other items.

JudyS

Eric -- Come to think of it, just read Tony's post anout is it worth investing in a 401k without the match. Good article, and the some of principles may apply to your case.... JudyS

[2366967]

Eric, terrible news. I am not sure what you mean by EFS: Fidelity Direct, though? Is this Educational Financial Services? What role does EFS have in this?

[EricJ]

Eric, terrible news. I am not sure what you mean by EFS: Fidelity Direct, though? Is this Educational Financial Services? What role does EFS have in this?

EFS is Educators Financial Services, Inc. (http://tsainvest.com). Due to a great demand for such an option, they were going to offer a way to invest directly with Fidelity funds, on your own, and avoid paying their 1.04% annual fee for financial advice. This seemed to be a good, low-fee option, especially since I already had a 403(b) account with Fidelity. However, it seems this isn't an option anymore.

I think now I'm going to go with the 457 plan offered, which includes some Vanguard and other low-fee options.