Our 403(b) Reform whose Time has Come! New York Time(s) that is
by Steve Schullo*
We public school educators who are active in the 403(b) reform movement have been flying high since October 21st, 2016. The New York Times published a devastating five-part series on the corrupted and self-conflicted 403(b) retirement plans associated with public k-12 school districts and church plans.
The 403(b) has been in the news before, it is such a horrible tax-deferred plan. More than 30 articles have been previously published nearly all saying the same thing for 20 years–403(b) annuities are the worst retirement products ever created by the financial industry.
But this series is so deep and revealing of a retirement plan so devoid of transparency and so costly, no common sense teacher, a friend or family member of a teacher will let this continue unabated. If this media exposure isn’t our call to action to stop this costly behavior that only benefits the insurance industry and their agents, I don’t know what is.
Copy the headlines of these reports and mail them to your local teacher’s union, school board and benefits administration. Don’t forget your major state and national teachers unions. You can email or twitter: California has the California Teachers Association and the two National Unions are the American Federation of Teachers and the National Education Association. Most public K-12 teachers belong to either the American Federation of Teachers or the National Education Association.
Twitter is the best and quickest way to communicate:
Here are the twitter handles: @WeAreCTA @NEAToday @AFTunion
Picture of how to construct a tweet. First, you have to creat an account and you are set to tweet:
Attach a link to each NY Times article and tweet it off. If they get hundreds of tweets about these NY Times articles, you will have gotten their attention. Keep tweeting in the days ahead. Another connection is to join us at 403bwise.com. That’s where we hang out and discuss everything 403(b).
Let’s start with my favorite quote from a prolific financial author and financial adviser, Bill Berstein. He wrote that, “…teachers find themselves in one of the dankest, foulest-smelling cellars of the financial world–the 403(b) plan.”
School Teachers and Others who pursue service in exchange for modest paychecks get lightly regulated retirement plans that often charge excessive fees.
Steve’s comment: The National Education Association has a Vanguard low-cost excellent 401k plan with their 700 employees. Sit down when you read what their members have: an expensive 403(b) plan for the 3.0 million members through Security Benefit Corporation (Read my previous blog post on NEA). I kid you not! And not enough members from the 3.0 million complained about this. Well, now is the time. This is absolutely wrong and why unions are getting a bad rap. This blatant double standard reeks with elitism. NEA knows what to do. And they could be a great union by replicating their 401(k) plan for the members.
Steve comment: insurance agents are always bellowing that if it weren’t for us, teachers would have no money saved. Of course, the insurance industry told the district’s legal counsel and boards of education to never inform their employees of their 403(b) otherwise districts could face litigation. That’s just plain BS. There is nothing wrong with informing employees that a 403b plan is available. But for 50 years, districts left the door wide open for any tom, dick or harry to walk into classrooms and pitch their expensive annuity products. Teachers are not stupid. If they know they had low-cost funds available they would have chosen those plans.
It “seemed like a good way to make more money,” said Ms. Lindert, who started … Company of the Southwest for The New York Times, she was just as befuddled. … Mutual funds were not available in 403(b) plans until 1974.
Steve’s comment: I met Melanie Lindert through a mutual friend. Last winter, the three of us had dinner and my friend and I convinced Melanie that her so-called financial adviser was not thinking about her best financial interests. He was thinking about commissions by doing a little selling and buying Melanie old annuities, and exchanging them for newer annuities. We told her to stop those transactions because it made no sense what so ever to go from one annuity to another. I was shocked at this behavior. No genuine financial adviser with fiduciary responsibility would ever do that to clients. In fact, in the private sector 401(k) world that adviser might lose their license, but it’s perfectly legal in the 403(b) world. That’s why my friends and I want reform.
This exchanging from one annuity to another is a direct result of little or no oversight on agents’ behavior or the products. Nowhere is the 403(b) discussed publically between unions and their members, or among the teachers themselves.
Part 4: Places of worship are not immune to the 403(b) annuity scam:
Part 5: How to fix a retirement plan at a school or nonprofit:
*Stephen A. Schullo, Ph.D. (UCLA ’96) taught in the Los Angeles Unified School District (LAUSD) for 24 years and UCLA Extension teaching educational technology to student teachers. Steve wrote investment articles for the United Teacher-Los Angeles (UTLA) newspaper for 13 years. Thrice featured retirement plan advocate in the Los Angeles Times and U.S. News and World Report. He co-founded an investor self-help group (403bAware with a colleague, Sandy Keaton) for teacher colleagues and wrote 6,500 posts in three investment forums since 1997. Frequently quoted by the media, testified at California State legislative hearings and honored with the “Unsung Hero” award by UTLA for his retirement planning advocacy. For the last ten years, he serves on LAUSD’s Investment Advisory Committee as a “Member-at-Large” and former co-chair. The committee monitors the district’s 457b/403b/PARS of 55,000 former and current LAUSD employees, worth $2.2 billion in total assets. Lastly, Steve and his late husband, Dan, were featured participants for the award-winning documentary, PBS Frontline: The Retirement Gamble, aired April 23, 2013.
Steve is the author of an additional new book, released last year, “Fighting Powerful Interests: Educators Challenge Tax-sheltered Annuities and WIN!” A story of how a handful of LAUSD educators struggled for years to improve the 403(b) to no avail. But we never quit! We were instrumental in LAUSD’s implementation of the new 457(b) plan, and ended up with a “Plan Design” award.