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This page will be monitored and updated throughout this transition.

With the recently announced purchase of Sparrow Health System by the University of Michigan (U of M), many employees of Sparrow more than likely have questions regarding a variety of issues, including their retirement accounts. Although we don’t know much yet about the timeframe of this change, we do know some about what your retirement account may look like once this merger is complete. 

As a financial advisor advising clients at both Sparrow and U of M, I have an intimate knowledge of the retirement plan investment options available at both institutions. It's difficult to know with absolute certainty everything that Sparrow and U of M will do with regard to this merger. I can provide a comparison of the investment options in the retirement plan that is offered at Sparrow vs. the options at U of M.

Most Recent Update: 

In August, Sparrow Hospital announced they would be severely reducing the number of 403(b) retirement plan providers they are currently offering. Among other changes, starting 12/31/2023, Sparrow will no longer allow contributions to the retirement plans administered by the following providers.

- Empower (formerly known as Prudential)
- American Funds
- Corebridge (formerly known as American General or Western National)
- Lincoln Financial
- Security Benefits

Sparrow will continue to allow contributions to the 403(b) plan administered by Transamerica. Going forward, Transamerica will be Sparrow's only 403(b) provider. This is expected to change with the merger of Sparrow into the UofM Health System.

Employees who participate in one of the plans that are closing may keep their funds in that plan with no further contributions after 12/31/2023. Alternatively, participants may transfer their balance to the Transamerica plan by completing the proper transfer form. 

In the coming year, look for more updates as the merger approaches.

Q: What are my current retirement plan options at Sparrow?

The current active plans for most participants at Sparrow are the 401k and 457 from Transamerica. Some participants may also have Empower as a provider or other providers that predate the implementation of Transamerica as the primary provider. 

Q: What are the advantages/disadvantages of Sparrow retirement plans?

The investment options at Transamerica are, in our view, somewhat limited. There are only 16 investment options, of which seven are target date funds leaving only nine asset class specific funds. In my opinion, the cost of these funds are also high. For example, the Transamerica Stock Index R4 has an expense ratio of .30%. This fund is meant to essentially clone the S&P 500, which there are many funds that track. Any investor outside of the 401k plan could purchase an S&P 500 for a mere .10% or less. This means that the S&P 500 fund in the plan is 3x higher than it should be!

The Transamerica/Sparrow plan does have a nice feature which is the (Personal Choice Retirement Account) PCRA. This feature allows participants to move some of their funds from Transamerica to Schwab, where they can invest in a much larger menu of investment options. Although this is a great feature, in my experience, very few participants utilize this feature.

In our view the U of M retirement plans are far more robust with regard to investment options, cost, and provider selection.

Q:  What are the U of M retirement plan options?

U of M uses Fidelity and TIAA Cref to administer their 403b, 457, and 401A plans. Both of these providers have a significant number of great investment options.

Q: What are the advantages/disadvantages of U of M retirement plans?  

A superior advantage of U of M is that they let you choose your provider, using either/or or both. Once you have selected a provider, you are greeted with many more investment options at a much more attractive fee level. 

When looking at investment options at U of M via the TIAA Cref 403 b plan, participants will see over 60 investment options. Compared to the 16 options at Sparrow/Transamerica, the options are more comprehensive and lower cost. For example, there is a large-cap index fund available that is very similar to the Transamerica S&P 500 fund that has an expense ratio of just .02%! That is less than 10x the cost of the Transamerica fund!

Q: What retirement plans will benefit me most?

In my opinion, the Fidelity 403 b plan at U of M is the superior option. The plan has over 180 investment options! There are funds for nearly every asset class and very competitive fees. The plan provides a true S&P 500 index fund with a .02% expense ratio. 

I know that there are likely many more questions about this transition than what can be answered right now. However, employees at Sparrow can at least know that their retirement plan options are going to get a massive improvement when this transition takes place. FSG will be available to chat through these options with all of our valuable Sparrow community members. 

Schedule your complimentary meeting today

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