Open Letter to California’s Newly Elected Insurance Commissioner

January 14, 2019

The Honorable Ricardo Lara
California State Insurance Commissioner

Dear Commissioner Lara:

RE: Insurance Code 770.3 is a consumer nightmare

You won the election because in your words, “…my allegiance will always be first and foremost to the consumers….” Congratulations on your victory for yourself and for California consumers (Click here for his full statement for running).

I wanted to bring to your attention to this obscure code, 770.3. This law is anti-consumer. 770.3 protects the insurance industry against the best interests of our state’s public K-12 educators. The annuity retirement products are overwhelmingly sold to our states’ teachers via each district’s defined contribution plan, 403(b). While almost all the other public sector employers can screen and pick vendors because of best practices and at reduced costs for their employees, the 1,181 California K-12 school districts cannot for fear of violating 770.3. The “any willing provider” model of 770.3 has had an iron-fist, and in my opinion, a negative presence, since annuities were first sold to teachers in 1961.

The anti-consumer claim is evidenced by the enclosed documents:

1. New York Times 403(b) Articles
   1. NY Times 403(b) Part 1: https://www.nytimes.com/2016/10/23/your-money/403-b-retirement-plans-fees-teachers.html?action=click&contentCollection=Your%20Money&module=RelatedCoverage&region=EndOfArticle&pgtype=article
   2. NY Times 403(b) Part 2: https://www.nytimes.com/2016/10/27/your-money/403-b-retirement-plans-teachers-brokers-fees.html?module=Promotron&region=Body&action=click&pgtype=article 
   3. NY Times 403(b) Part 3: https://www.nytimes.com/2016/10/29/your-money/403b-teachers-annuities.html
   4. NY Times 403(b) Part 4: https://www.nytimes.com/2016/11/03/your-money/spreading-the-gospel-of-better-retirement-plans.html
   5. NY Times 403(b) Part 5: https://www.nytimes.com/2016/11/05/your-money/403-b-retirement-plan-tips.html
2. Shark Attack by American Federation of Teachers (Click here)
3. A letter from the Los Angeles Unified School District (LAUSD) benefit’s administrator, George Tischler to your predecessor David Jones
4. My book, Fighting Powerful Interests: Educators Challenge Tax-sheltered Annuities and WIN! (Click here for FREE PDF download).

In addition to the above documents, over 35 newspaper and online articles reported the same problem repeatedly for 25 years–annuities are costly, inappropriate and yield pathetic returns for our teachers’ 403(b) plans. The annuity sales force is the only beneficiary. Our teachers are woefully unprotected from misleading, aggressive and self-conflicted financial sales pitches. The retirement planning universe has changed to fiduciary standards. While these sales “practices” are legal under 770.3, they are unethical, anti-consumer and not-at-all fiduciary. It’s time for reform.

Amending 770.3 to reform the 403(b) is your opportunity to show your “allegiance” to one group of consumers, California’s 933,410 public-school educators and their beneficiaries (data from our pension plan, California State Teachers’ Retirement System 06/30/17).

On the behalf of myself and my advocate colleagues Sandy Keaton, Scott Dauenhauer, Barbara Healy, and Dan Otter, we request a meeting with you or your staff to continue this conversation.

Once again, congratulations on your election! We look forward to meeting you.

Sincerely,

Steve Schullo, Ph. D. Retired LAUSD elementary teacher

 

Rancho Mirage, CA 92270

LAUSD’s 403(b)/457(b) advisory committee member. Blogger and author of two books.

Email: Steve.schullo@latebloomerwealth.com 

Our advocacy 403(b) reform team agreed with my letter:

1. Dan Otter, webmaster of 403bwise.com
2. Barbara Healy, financial consultant to LAUSD Advisory 403(b) and 457(b) committee
3. Scott Dauenhauer, financial consultant to CalSTRS
4. Sandy Keaton, Au.D., retired LAUSD educator/financial literacy workshop coordinator

cc

1. Michael Martinez       Senior Deputy Commissioner & Legislative Director
2. Kendra Zoller               Deputy Legislative Director
3. Jack Ehnes                     Chief Executive Officer, California State Teachers Retirement System
4. David Holmquist        Office of General Counsel, Los Angeles Unified School District

 

Steve’s BIO

A. Why I write this blog

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. 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 for teacher colleagues and wrote 7,500 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 twelve 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 $2.5 billion in total assets.

He 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, over 30 newspaper articles have been published and each one says the same thing, TSAs (Tax Sheltered 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.