Current Pension Topics
HHC Fund Can't Complement

By JOEL L. FRANK

Health and Hospitals Corporation executive Frank J. Cirillo asserts in his letter-tothe editor (Dec. 15 issue) that the HHC-TDA/403(b) Program, by offering actively managed mutual funds, is designed to "complement," not "compete" with, the Deferred Compensation 457(b) and 401(k) Plans of the City of New York (DCP) with its focus on index funds. In my view, the HHC TDA program neither "complements" nor "competes" with the DCP.

Managed funds have higher expense ratios because their goal is to outperform their comparable market index. Payment of the higher costs, however, would be justified if such actively managed funds outperformed their respective indices. But the opposite is true. Most managed funds under perform their benchmark index over time. Those that do outperform their comparable index are difficult to find in advance and rarely repeat. This is yet another reason to eliminate the HHC TDA from your financial life.

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Q.: Is an unforeseen emergency withdrawal from my 457 account eligible for rollover?

S.F.

A.: No it is not. Withdrawals on account of hardship are not eligible for rollover treatment. Such withdrawals are to be used to alleviate the hardship/emergency and are taxable at ordinary rates. As with all 457 withdrawals, the 10-percent penalty tax does not apply. You may roll over ordinary (taxable) distributions from your 457 account only after separating from city service.

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Q.: After calling Vanguard to inquire about doing a Revenue Ruling 90-24 transfer of my Prudential TDA/403(b) balance with the Health and Hospitals Corporation (HHC) to the Vanguard Group, the Vanguard rep suggested that I contact my HHC payroll department to see if I can use the Vanguard Group for future pre-tax contributions. Would this be possible?

S.S.

A.: Yes. The law allows the employer to use different product providers. Vanguard, as you know, sells only no-load (no commission) funds and would, with its Target Date Retirement Funds, be a welcome addition to the current highpriced investment menu offered by Prudential. I suggest you write to Mr. Frank J. Cirillo, Chief Operating Officer, at the HHC and ask him to add the Vanguard Group of mutual funds to the current investment line-up. Have your fellow employees sign their name on the petition. Maybe if enough HHC employees make the written request, Mr. Cirillo will comply. After all, we are only talking about your money. But don't wait for Mr. Cirillo to grant you your New Year's wish any time soon. Until HHC sees the errors of its ways, you should invest all of your pre-tax dollars in the Deferred Compensation 457(b) and 401(k) Plans of the City of New York.

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Q.: I am 41 and started to invest in a Roth IRA in 2006 with a maximum contribution of $4,000. Am I also allowed to contribute to a traditional IRA in the same year? I am a city schoolteacher.

P.M.

A.: Yes, you are, but the aggregate contribution cannot be more than $4,000, so you cannot contribute to the traditional IRA for 2006. Did you know that you can roll over your traditional retail/high-cost IRAs to the New York City Employee IRA (NYCE IRA) administered by the Deferred Compensation Plans (DCP) of the City of New York? Contact them at: http://www.nyc.gov/html/olr/html/deferred/dcphome.shtml (Mayor's Office of Labor Relations' Employee Benefits Program Pre-Tax Benefits & Citywide Programs). In 2007, the NYCE IRA will adopt a Roth feature. At that time you will be able to roll over your retail/high cost Roth IRAs to the Roth NYCE IRA. Stay tuned!

Mr. Frank is a fee-only Retirement Financial Planner. He can be reached by telephone at (732) 536-9472, or via e-mail at rollover@optonline.net .