My wife is a teacher and the school district has a 403b plan avail. There doesn't seem to be any magic to setting up a 403, as it appears to look like a normal account or IRA.
However, the list of participating vendors appears to be split between insurance companies & mutual fund companies.
We have never invested with an annuity company, just mutual funds.
Any general thoughts on this list of vendors for the 403b account
After she has chosen the Fidelity option, suggest that she engage in a little "community service" and make inquiries of the administrators, school board, etc., as to how and why the particular choices are put on the list. A good idea would be to find out the loads, MER's, any other costs of those funds and circulate copies among a lot of other teachers, hopefully everybody in the school district. Educators are supposed to teach their students critical thinking, so it should not be considered unusual if they apply it themselves to their own financial affairs.
Does anyone know if Fidelity is already fully complying with the 2012 requirement to provide exact documentation on stock purchase basis? Well, I know they can't for very old stock purchases, which I know by experience that they didn't keep basis records. And I know they do OK for recent trades, at least for buying and selling an equal amount.
But what about the case where you sell a partial amount? Say you bought 500, then another 500 shares at another price. Then sell 300 and next year sell 300, then again sell at another price the remaining
400. Do they remember the leftover crosscut trades, and not throw their hands up in the air with the annoying excuse that they are doing nothing due to not knowing your fifo/lifo/average preference?
It is of supreme importance to me that they just pick a consistant method (any one!) and apply/document it. It seems a fate worse than death for me to calculate it myself, which I have done too many times with fidelity. Now I am gun shy and don't dare sell partial amounts - can I do it at least for fidelity purchases only a few years old?
Reporting of stock cost basis is a requirement for tax year 2011 (except for some dividend reinvestment programs, etc.), so they must already have this in place.
Fidelity has been tracking cost basis for many years - it's on the supplemental information they provide with your 1099; it's just not reported (yet) to the IRS. They do the best job I've seen anywhere on handling bonds (including amortization of market premium, as well as OID); compared to that, tracking basis on stocks is relatively easy (all you have there is return of principal, splits, etc. :-) Short answer: yes, they keep track of which shares you sold. (By the way, average cost is not available for stocks, except for DRPs.)
_You_ are still the one responsible for ensuring that the cost basis you report on your 1040 is correct. The new regulations are merely added reporting requirements on the brokerages; they do not shift responsibility. There are situations in which the brokerage is guaranteed to get it wrong, e.g. a wash sale where the replacement purchase is substantially identical to the security sold, but with a different CUSIP number. The brokerage is not to consider this a wash sale in satisfying its reporting requirement; you are to consider this a wash sale for tax purposes.
I believe the regulations require brokerages to use FIFO as the default. I haven't been able to dig up Fidelity's pages for retail customers, but here's their notice to advisers, that says all this and more:
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One point mentioned there (and I'd read before at Fidelity) is that you can change the default treatment.
I feel people do a disservice to themselves if they do not keep track of their shares and identify which ones they are selling, because they are forsaking the opportunity to minimize (or at least defer) taxes. The good news here is that the regulations allow brokerages to offer a slew of alternate default rules (e.g. highest cost first, or selecting shares to minimize the magnitude of the gain/loss - keeping it as close as possible to no net gain/loss). They're not mandatory, so different brokerages may offer different choices. So if you're not going to keep track, you may want to check with Fidelity for what method you can establish as a default.
They can only possibly do that if the transactions were all in the same account. Which leads to the importance of being able to make corrections...
That doesn't seem too surprising.
I need to look carefully at how they've been handling the basis adjustments for some securities I've got which have had return of capital distributions. That's the sort of thing individuals have been particularly bad at becuase it's not always all that obvious that a dividend indeed contained such.
I don't see any reason why they couldn't do it across *Fidelity* accounts. Agree that there's no way thy can do it if the wash sale spans brokers. And further agree I really hope they have a way for you to make manual adjustments so that you can just use the numbers that show up on the 1099-B without further adjustment.
Please report back to the group on that! It would be interesting to know if that's done right.
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