My fellow 403(b) reform advocates and I have many 403(b) dreams! :- )

Throughout history, social, cultural, political, economical (and inventions), psychological and spiritual changes are started by dreams:

1. I dream that our California’s insurance code which regulates the 403(b) plans will be updated from the 1960s. Retirement planning has changed drastically in all of this time. For half century this outdated insurance code keeps the entire state frozen as if nothing has changed in the financial world! A 21st Century Insurance code is needed now to reflect our state’s educators’ best interests rather than the insurance industry’s best interest. It’s going to come perhaps in five years, ten years, or 20, it’s going to happen. Just looked at what happened with the recent changes in the 401(k) world. They are protecting more and more private-sector employees. The unbalance between 401k and 403bs cannot go on forever, leaving 4 million Amerian teachers nationwide unprotected from conflicted sales practices and costly products, commonly known as fixed or indexed annuities (Read my personal story with supporting California legislation in my 2nd book about this hideous code in Fighting Powerful Interests free download).
2. I dream that a task force could be formed by all of the other California public employers(cities, counties, sheriffs, fire and police departments, hospitals, UC and CalState systems, CalSTRS, and the state of California) sending their reps to Sacramento to assist and lobby in repealing this ludicrous insurance code.
3. I dream that the unions will see the errors of their ways (now that’s a HUGE dream!). First, unfortunately, I have a nightmare. Good ole fashion picketing may begin with the nation’s largest teachers’ unions (AFT and NEA) to expose them to the press that their silence sends a message that they are a part of the problem. NEA’s 403(b) is especially expensive. While their 401(k) plan for their 700 employees has Vanguard! (click here for my post on the NEA 401k plan)
4. I dream that a 2^nd documentary that is specific to public k-12 DC plans will be produced and broadcasted nationally on either PBS Frontline, 60 minutes or some other documentary. The first documentary was the Award-Winning documentary, The Retirement Gamble, aired four years ago on Frontline, regarding 401K plans.
5. I dream that all of the LAUSD unions including UTLA will eventually embrace and understand the benefits of auto-enroll.
6. I dream that school board members will realize that if more educators save in their DC plans, more veteran teachers could retire a few years earlier than now and thus cutting salary costs. Yeah, it’s controversial but there is an important caveat: I am only talking about older teachers who have dedicated many great years to their students but now are tired (or burnt out), want to retire but cannot because they don’t have enough pension service credit time.
7. I dream that enrolling in the 403(b) and the 457(b) plans will be straightforward because right now it is tedious and time-consuming, requiring a phone call for assistance.

Dreams come to fruition simply because it’s the right thing to do.  Still, it takes work and effort to fulfill most dreams. In the final analyses, nothing is inherently wrong dreaming about protecting the four million public-school educators in the same way as Employee Retirement Income Security Act, 1974 (ERISA) protects our private-sector employee friends and relatives in their 401(k) plans (See Retirement Gamble Award-Winning Documentary broadcasted by PBS Frontline). I only wish there was a documentary on 403(b) plans too.

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While my dreams have not come true yet, here are the positive developments while I was fully awake:

1. LAUSD introduced the 457(b) plan in 2006. Brilliant Tactic! The main reason why my employer entertained this new plan was to get around the devastation of the states insurance code mentioned in number 1 above.
2. I never predicted that my district’s LAUSD administrators would ask me to serve on the advisory committee, which oversees and advises the Chief Financial Officer about the 457(b) plans. It wasn’t just me but they asked each of the eight union reps to serve on the committee to be part of the decision making the process. Wow! After years of getting hammered by some of my union officers who were convinced I was a TIAA agent!, and treated like a parasite from former 403(b) benefits staff, I was shocked and pleased. I said HELL YES, I will serve, and I am still serving in 2019.
3. Not only did I not predict being on the advisory committee, but I am also very proud to be on this committee which turned out to be one the best in the country. I read on several financial/investment forums where employees are complaining of incompetent committees who don’t know about the impact of costs, getting rid revenue sharing and having an investing philosophy that looks after their employees for a change. Our committee was way ahead of our first conflict financial consultant as we tried to reduce revenue sharing back in the dark ages of 2006. It wasn’t until 2010 that congress took up the revenue sharing issues. OUR LAUSD Retirement Investment Advisory Committee (RIAC) is competent, committed and knowledgable! And we should be PROUD!
4. Our committee did such a great job designing our very low cost 457(b) plan with ZERO insurance products, for the first time that I am aware, a K-12 school district earned an Award for our investment plan (Plan Design from the National Association of Governmental Defined Contribution Administration). As a result, one of the benefits administrators was the first K-12 benefits professional to attend a NAGDCA conference.
5. Auto enroll is a huge development and its beginning in LAUSD. Our committee recommended the investment and the official fiduciary to the plan, the Chief Financial Officer, agreed.
6. A great influencer Tim Ranzetta (Next Gen Personal Finance) has appeared and supports Dan Otter and his website 403bwise.org. Dan works for Tim full time educating our teachers with financial literacy so they can take care of their financial interests and their students’. Read Tim’s website: https://www.ngpf.org/

 

 

Summary

Our dreams to reform the 403(b) have not materialized at all! Educators across this state and around the country are still unprotected from the aggressive insurance 403(b) predictors. Because our tiny powerless advocacy group kept it up for 25 years, we are very pleased with what actually happened especially with my former school district Los Angeles Unified.

If you have a question and want to join forces with a growing contingency of educators who want a 403(b) or 457(b) retirement plan that looks out for your best interests, you are NOT ALONE! Go to our online meeting places: 403bwise.org and our 403bwise Facebook page.

 

Steve’s Bio:

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) union newspaper for 13 years. He has been featured and quoted in many mainstream media articles about 403(b) plans, including the Los Angeles Times, NY Times, and U.S. News and World Report. He co-founded an investor self-help group 403bAware for teacher colleagues and wrote 7,500 posts in three investment forums since 1997. He testified at California State legislative hearings and honored with the “Unsung Hero” award by his teacher’s union for his retirement planning advocacy.

For the last thirteen years, he serves as a volunteer on LAUSD’s Investment Advisory Committee as a “Member-at-Large” and former co-chair. The committee contains collective bargaining reps from the unions and monitors the district’s tax-deferred retirement plans, 457b/403b, of 55,000 former and current LAUSD employees, worth $2.8 billion in total assets.

I started this blog in 2012 to help all PreK-12 public school educators nationwide, especially his Los Angeles Unified School District colleagues. He belongs to a small national group of 403(b) advocates (mostly teachers) who want to bring closer attention to the 403(b). During the last 25 years, 38 newspaper articles have been published and each one says the same thing, TSAs (Tax Sheltered Annuities) and Indexed Annuities are terrible 403(b) plans and the salesperson gets the benefit from lucrative commissions and high costs. Nobody in educational leadership reads these articles NOR talk about the proper place for annuity products publically. We come together at 403bwise.com. Come on over if you want to join us so we can help our colleagues avoid these self-conflicted retirement plans, TSAs.