Penserv Plan Services 403(b) Retirement Plan Platform

Dear Reader,

If you had a 403(b) retirement account with Foresters Financial, you have probably received notifications on the recent changes to your custodian & investment provider. In this post we explain what changed, how it affects your account and finally provide our product review of the Penserv Plan Services platform.

What changed?

In 2019, Macquarie Investment Management announced they purchased the mutual fund management business of Foresters Investment Management Company, Inc. the investment advisor of the First Investors Funds and First Investors Life Series Funds.

What Happens To Your Investment Account?

At first this all may seem very confusing because there are now multiple entities with different roles and responsibilities. Your funds were converted from First Investors funds and merged into the Delaware Family of Funds owned by Macquarie Investment Management.

PenServ Plan Services, was selected to provide recordkeeping services to the former First Investor accounts.
Matrix Trust Company will assume the role of custodian for the funds that were held by Foresters Financial Services, Inc.
Delaware Funds by Macquarie Macquarie Investment Management:
As a 403(b) participant you will invest in mutual funds managed by the Delaware Funds .
Cetera Financial: Your Forester Advisor mostly likely joined the Cetera Financial Group and will continue to be serviced by the same investment professional.

What Paperwork Will You Need To Complete?

New paperwork will not be required to complete this transfer; participant accounts were assigned to Matrix as successor custodian and to PenServ as the new recordkeeper. As a participant you should have received information explaining the process for accessing the PenServ website and the timeline for the transfer of your account balances.

Will Your Contributions Continue as Usual Following the Conversion?

Yes. PenServ have been communicating with the TPA’s associated with each plan to ensure transactions continue as usual.

How Will This Affect You if you had Outstanding Loans on your account?

PenServ said that they have communicated with all participants who have outstanding loans and informed them that they have established new repayment options. If you have an outstanding loan you should check with them regarding the details of the loan repayments.

Will Your Account Still Continue To Be Serviced By The Same Financial Advisor?

Generally, yes. Most likely your prior Forester advisor has now joined Cetera advisor group, you should contact them to make sure. If you cannot locate your former advisor, PenServ has an internal service team that may be able to assist you.

Review of PenServ Plan Services

This review of PenServ Plan Services, a lesser known 403(b) retirement plan provider, will cover:

Platform Overview
Investment Options
Fees & Expenses
Advantages & Disadvantages
Conclusions/Opinion

This information was gathered from PenServ Plan Services’s website and is not a substitution for individual tax or legal advice.

1.Platform Overview

2. Investment Options

Delaware Investments is a US-based asset management firm and a wholly owned subsidiary of Australia's Macquarie Group. All First Investors funds became part of Delaware Family of Funds upon the closing of the transaction. The funds will now be managed by Macquarie portfolio managers moving forward.

Listed below are the funds available in your plan.

3. Fees And Operating Expenses

Operating a mutual fund involves costs, including shareholder transaction costs, investment management fees, and marketing and distribution expenses. Funds pass along these costs to their investors.

The fees you will be paying to invest in mutual funds typically come in two types—transaction fees and ongoing fees.

Transaction fees are charged each time you enter into a transaction, for example, when you purchase a mutual fund with a sales load. In contrast, ongoing fees or expenses are charges you incur regularly, such as mutual fund operating expenses and annual account maintenance fee. These fees and charges can be found in the fund’s prospectus.

Upfront Sales Load: If you have a Penserv account, you will pay a 5.75% upfront load on every contribution into their mutual funds, this is similar to a commission. For example, if you make annual contributions of $10,000 and purchase a Delaware Class A share fund with a 5.75% upfront-sales load the total amount dollar amount of the sales load will be $575. This fee is deducted from your $10,000 contribution (and typically paid to a selling broker), the remaining $9,425 is used to purchase your fund shares. That means you will start with only $9,425 in those investment funds.

On-Going Fees:

Mutual Fund Operating Expenses:  The Delaware funds have average annual operating expenses of 1.10% and they range from as low as 0.55% up to 1.64% so depending on which fund you choose determines if your costs will be higher or lower on average. This is an ongoing fee that gets deducted from your account normally on a monthly basis. If you have $100,000 invested in these funds you pay $1,100 a year on average in mutual fund expenses.

12b1 fees: 0.25% annually. This fee is deducted from your account on a monthly basis. These fees get paid out of the fund assets to cover the costs of marketing and selling fund shares. "Distribution fees" include fees to compensate brokers and others who sell fund shares, and to pay for advertising, and printing and mailing prospectuses to new investors.

Custodial Fee : $33 annually

Loan Fee: $60 annually

Surrender fees: None on the Mutual Fund A class shares.

Some of these fees may seem small, but over time they can have a major impact on your investment portfolio.

4. Advantages and Disadvantages

Advantages:

Portfolio Rebalancing Program & Financial Planning Tools
On-line Learning Center & Training Videos.
Traditional and Roth for 403(b) and 457 are available
Loans: PenServ Plan Services makes loans available to 403(b) participants.
Required Minimum Distribution Services
Customer Service Support – Representatives are available Monday – Friday 7:30am – 7:30pm
24/7 access to enrollment and educational systems, information on investment providers, and a variety of user-friendly tools to manage retirement account • Paper statements are mailed quarterly; however, statements can be accessed at any time and for custom time periods via this portal.
Is not an annuity product so no death benefit fees are charged on any on the investment options on the platform.

Disadvantages:

Investors are limited to investing in the proprietary mutual funds of Macquarie Investment Management.
Currently you only have access to 18 Delaware mutual funds in total.
Delaware Class A Funds have upfront sales loads of 5.75% on every contribution.
You'll pay additional 12b-1 fee of .25% of your account to your advisor to cover marketing, distribution, and service costs. These fees get paid to the broker.
Average Annual mutal fund expenses are 1.10%, which is above average for retirement accounts.
Delaware Funds do not offer e-signature capabilities for transactional Business.

5. Conclusion

We have reviewed dozens of 403(b) provider’s products & services. When we see a retirement plan that is invested in a high-cost proprietary funds that is consistently underperforming many similar funds, we have to question whether their broker provided quality, independent advice. We believe that you should avoid investing in mutual funds that charge sales loads to purchase them.

You should be aware that you are losing that amount charged to pay a commission to the salesperson. That means you lose all of the dividends, interest and capital gains you might have otherwise made on that money. You should try to reduce or eliminate some of the fees that you pay. Fees can reduce the value of your investment portfolio. This is particularly true over time, because not only is your investment balance reduced by the fee, but you also lose any return you would have earned on that fee. Over time, even ongoing fees that are small can have a big impact on your investment portfolio.

When we researched the performance of these Delaware funds compared to their peers, we saw no reason to pay higher fees than comparable no-load funds. Again, it is up to you to decide if the value of the mutual fund is worth these expenses.

Does it Make Sense to Switch to another 403(b) provider?

If you work for a K-12 school district you most likely have access to multiple retirement plan providers. Just like shopping around for the best price on other products or services, you should compare the fees other providers charge to see if you can find one that has lower fees & expenses.

If you are looking to work with another provider, you want to ensure they are giving you the best advice possible for your situation and not just trying to sell you mutual funds or other products that earn them a commission.

When searching for a financial advisor, asking the right questions is critical. As long as you understand how they are paid, you can make an informed decision. Look for an independent, fee-only registered investment advisor who is not earning a commission on the products sold. You must also ask if the person is a fiduciary, which means they must always act in the best interests of the client. Just because a person is a financial advisor, which covers various categories carrying different certifications, does not necessarily mean they must act in a fiduciary capacity.

Second Opinion?

If you currently use Penserv Plans Services and are interested in a more detailed analysis specific to your situation, feel free to contact us.

None of the third parties referenced in this communication are affiliated with K-12 Financial Advisors, Private Advisor Group or LPL Financial. 

This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.

Mutual fund investing involves risks, including possible loss of principal.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

The market value of corporate bonds will fluctuate, and if the bond is sold prior to maturity, the investor’s yield may differ from the advertised yield.

High yield/junk bonds (grade BB or below) are not investment grade securities, and are subject to higher interest rate, credit, and liquidity risks than those graded BBB and above. They generally should be part of a diversified portfolio for sophisticated investors.

The prices of small and mid-cap stocks are generally more volatile than large cap stocks.

International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.

International debt securities involve special additional risks. These risks include, but are not limited to, currency risk, geopolitical and regulatory risk, and risk associated with varying settlement standards. These risks are often heightened for investments in emerging markets.

Options are not suitable for all investors and certain option strategies may expose investors to significant potential losses such as losing entire amount paid for the option.

Investors should consider the investment objectives, risks, charges and expenses of the investment company carefully before investing. The prospectus and, if available, the summary prospectus contain this and other important information about the investment company. You can obtain a prospectus and summary prospectus from your financial representative. Read carefully before investing.