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P & I: 403(b) participants hurt by unfair rules
I've been saying this for years, its nice to see others echo it.
The link above may not work, so some of the story is reprinted below, it begins:
While there has been significant convergence between 401(k) and 403(b) plans, 403(b) participants are still treated as second-class citizens when it comes to getting the best pricing on their savings for retirement.
401(k) plans are free to have the most appropriate and cost-effective investment structure — including mutual funds, annuities, commingled trusts and separate accounts. But not 403(b) plans.
Instead, because of anachronistic laws, 403(b) participants are limited to mutual funds and annuities — regardless of the size of the plan. This is unfair and counter to our social policy that seeks to encourage working individuals to contribute toward their retirement security.
Essentially arcane 403(b) rules limit participants ability to buy into cheaper investment options. In some plans I work with we can use Collective Investment Trusts to dramatically lower expenses or provide investment flexibility to participants - this cannot be done in 403(b)'s and leads to higher costs.
Of course, this is not the only issue with 403(b) plans, but its a start that Congress should get to work on now.
Scott Dauenhauer CFP, MSFP, AIF