Thursday, August 20, 2009

TDS Not Requiring New Vendor Agreements?

Tax Deferred Services has begun sending out letters and contracts to school districts stating that they are going to start charging for their "compliance" services. However, the preferred method of charging is for TDS to charge the vendor the $3 fee (see my previous post on this topic). As a consultant to the California Teachers Retirement System's 403(b) program (Pension2) I was concerned that they would need to sign a new "vendor agreement."

After a call by CalSTRS to TDS the response was that they would use the existing agreement and not require a new one. This is strange and further proof that TDS is more interested in creating a revenue stream than actually protecting the school districts and providing competent compliance services.

If you were going to charge vendors for your compliance services, wouldn't it be nice to have that in writing? Lets say that TDS receives about $40 million a month in contributions from their school districts (a number that I've been led to believe is about right). While for certain this number will and probably already is plummeting do to employers canceling their contracts with TDS, lets pretend it only falls by half to $20 million. We'll also assume that the average contribution amount is $1,000 (its actually far lower), thus about 20,000 potential participant contributions to charge on. At $3 per participant contribution you are looking at $60,000 per month (less in the summer months) in revenue.

Wouldn't you want that revenue secured by a contract?

Call me crazy, but I would want an agreement in place with the vendors that are supposed to be paying me. This is just one more reason that I don't believe this company can be taken serious when it comes to handling district money and 403(b) compliance.

Scott Dauenhauer AIF
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