Our Rating System Explained

The goal of the 403bwise district plan rating project is to shine a spotlight on K-12 403(b) and 457(b) vendor lists. We want to bring attention to school districts like Montgomery County Public Schools in Maryland who do it right, and school districts that are in need of plan improvement.

Our ultimate objective is for every K-12 employee to have access to both unbiased information (read: no sales agents trawling teacher lounges and email in boxes), and to have at least one quality, low-cost investment choice.

The Process

We began by rating each vendor using a red light-green light system: green (go as in good), yellow (caution as in be careful), and red (stop as in avoid). We further subdivided by “+” and “-”. Green and “+” is the highest rating. Red and “-” is the lowest. Click “info” in colored vendor charts below for more details.

Green + info No asset based fee

No revenue share

Ability to build an index portfolio for under 20 bps Fidelity
Vanguard
Green info No upfront or backend commissions or surrender charges

Low admin fee: asset-based fee under 0.40%

Reasonable account fee: $60 or less (excluding compliance add-ons)

Low investment fees: ability to create an indexed based portfolio for under 20bps

Transparency: open to answering questions, no sketchy affiliations

Cross-selling: does not allow cross-selling of commission based products Aspire
CalSTRS Pension2
FBC
PenServe/PenSelect (no advisor)
TCG FinPath
WEA Member Benefits
Green - info Index-based portfolio costs more than 20bps, but less than 40bps T.Rowe Price
Yellow info Load: no upfront or backend commissions or surrender charges

Low admin fee: asset-based fee over 0.40%

Reasonable account fee: $60 or more

Low investment fees: few or no index funds, primarily actively managed funds, revenue share not rebated

Transparency: questionable practices, affiliated with a red vendor

Cross-selling: allows cross-selling of commission based products American Century
CSD Retirement
CTA
IPC
Lincoln PDP
NEA Direct Invest
PlanMember PC
SFFCU
TIAA-CREF
Red + info Mutual fund wrap programs

Commission based mutual funds American Funds
Amundi Pioneer
Edward Jones
Franklin Templeton
Invesco
Kades-Margolis
Lincoln Investment
Orion
PenServe/PenSelect (advisor)
PlanMember
Putnam Investments
Red info Load: upfront or backend commissions or surrender charges

Admin fee: asset-based fees over 1.00% or large spread product

Reasonable account fee: $60 or more

Low investment fees: lots of actively managed funds, revenue share not rebated

Transparency: questionable sales practices, rep required

Cross-selling: allows cross-selling of commission based products

Representative: required

Fiduciary: representative not required to act as a high-level, full-time fiduciary AIG Retirement Services (VALIC)
American Fidelity
Ameriprise Financial
Equitable/AXA
ESI Education
GWN
Horace Mann
MetLife
Minnesota/EFS Advisors
Pacific Life Insurance Group
PFS Investments (Primerica)
Security Benefit Group
Thrivent Financial
VOYA Financial
Red - info Indexed annuity providers Americo
Athene
Great American
Midland National
National Life Group

Next we look to see if employer has gone through a thoughtful bidding process (often called Request for Proposal) and narrowed its vendors down to just one “green” rated company or a company that has dropped pricing to be in line with “green” rated companies. When forced to compete, high-cost vendors will lower pricing. Next we look at how many green, yellow and red vendors are available. Finally we assign an A through F rating.

Omni & TSACG Compliance Services

Third party administrator Omni & TSACG Compliance Services offers a widely adopted 403(b) program called Preferred Provider Program (P3). They tout it as a “significant cost savings-no hidden fees” plan. Those are their words not ours. The 35-company list is littered with “Red” vendors. There are a few “Green” vendors including Aspire and Vanguard. Unfortunately, we have seen vendor lists like the one for the Rochester City School District in Rochester NY that lack Vanguard. At best we would rate P3 as a C. If Aspire and Vanguard are missing it could be a D or F. School districts can and should do better.

Record Keeper

These companies provide back-office services which include: plan website maintenance, process contributions, approve distributions, deduct fees, etc. These companies offer record keeping services to plan sponsors but don’t generally offer retail products within 403(b) plans. Thus they don’t neatly fit into our Traffic Light system. Knowing they are the record keeper tells you little about how good or bad the plan might be. For example, Voya is a red vendor, yet they record keep for Los Angeles Unified District’s excellent 457(b) plan. They are also the record keeper for the green-rated CalSTRS Pension 2 403(b) product.

Prudential
Mass Mutual
Voya
Empower
Nationwide
Principal
Newport Group
Fidelity
MissionSquare
Lincoln Financial Group
Alight

The Grades

Bidded single vendor

AThe gold standard. School employer has gone through a thoughtful bidding process (often called Request for Proposal) and narrowed its vendors down to just one “green” rated company, or a company that has dropped pricing to be in line with "green" rated companies. See vendor ratings below. Example: Montgomery County Public Schools in Maryland.

Note: It is often difficult to obtain details about the bidding process. Our ratings assume the process was informed and thoughtful, but we realize that is not always the case. Additionally, some winning vendors engage in cross-selling of other financial products. We will work to point this out and factor it into our rating.

Bidded multi-vendor

BSteps have been taken to offer a decent plan. Plan has been put out to bid but more than one vendor has been selected. Winning vendors offer reasonably priced products. Example: Philadelphia City SD in Pennsylvania.

At least one green vendor

CIncludes at least one “green” rated vendor. The problem is that participants are rarely notified about this vendor. Instead, sales agents from other vendors pitch their products in staff lounges and via email. Example: Amherst in Massachusetts.

At least one yellow vendor

DNo “green” rated vendors available. At least one “yellow” rated vendor available. Example: Abbott ISD in Texas.

Note: several of the high-cost vendors offer low-cost options (Lincoln Investments offers Lincoln PDP; Security Benefit offers NEA Direct Invest; PlanMember offers PlanMember PC) but these are rarely promoted to participants. So there is a chance a lower-cost product is available at this employer. Read When Bad 403(b) Vendors Offer Good Investing Choices.

All red vendors

FOnly “red” rated vendors available. Note that if Aspire is offered (a "green" rated company), participants are forced to use an assigned advisor or advisors which adds to investing costs. Example: Williamsburg 01 in South Carolina.

Putting a plan out to bid can result in lower investment costs, and elimination of sales agents trawling school lounges and employee email in boxes.