Section 403(b) Compliance Guide for Public Education Employers
by Ellie Lowder
Book Review and a 403(b) Reform Strategy Editorial by Steve
As a retired teacher who has served for 19 years on my district’s 403(b)/457(b) Retirement Investment Advisory Committee, I opened Ellie Lowder’s Section 403(b) Compliance Guide for Public Education Employers with keen interest. While the primary audience for school district benefits administrators, every educator—anyone who has ever been chased down a PreK-12 school building hallway by a Tax Sheltered Annuity (TSA) insurance agent—should pay close attention and read this lengthy but pithy blog post.
Lowder provides districts with detailed instructions on how to comply with IRS regulations. What she does not provide is the educator’s perspective—the lived reality of costly, inappropriate retirement products that have dominated our profession for 65 years (you read that right!). That omission is not small. It is the entire story.
This review, along with my editorial, fills in that missing half.
The Unspoken Reality: The Educator’s Perspective Is Missing
The first—and most glaring—problem with the book is its silence on what teachers experience daily in the 403(b) marketplace:
high-cost annuities, misleading “guarantee” pitches, and decades of one-sided sales cultures that treat teachers as sales numbers rather than as investors.
Lowder’s professional background explains the silence. She has deep ties to the insurance and annuity industry:
- Co-publisher: Association of School Business Officials International (ASBO)
- Co-author: The Source (with NTSA/ASPPA—the annuity industry’s K–12 trade groups)
- Former senior executive at Transamerica and Delta Life & Annuity
- A long résumé representing annuity salespeople in the PreK–12 market
None of this disqualifies her as a writer. But it does shape what she stresses—and what she leaves out.
The omission matters because the 403(b) has failed educators for decades, and any honest guide must confront that truth. Since 1998, over 40 mainstream newspapers and financial magazines (not to mention dozens of Blog posts, podcasts, and radio programs) have reported the same problem over and over again! The PreK-12 403(b) is a costly economic trap for naive school district employees.
Twenty-five years ago, because of my nagging, the American Federation of Teachers (AFT) trustee Don Kuehn wrote, Shark Attack: Investors in 403(b) plans, beware: You are especially vulnerable to predators. My friend Dan Otter wrote this piece commemorating the 20th anniversary publication of the famous and BRILLIANT article. Click here.
With all of this publicity, you might think that the 403(b) has been reformed. The rest of this review will hopefully demonstrate why reform has eluded us.
A System Built for Industry, Not Educators
Lowder correctly explains how the 2007 IRS regulations forced districts to take responsibility for the first time. Prior to that, the 403(b) was a “Wild West” system of unchecked vendor lists, aggressive sales tactics, and near-zero oversight.
But she omits the consequences:
- The TSA annuity monopoly has dominated since 1961.
Even after mutual funds became available in 1974, few teachers ever learned about them—and fewer could access them.
- State insurance codes still force districts to accept every willing vendor.
In California, this led to lists with over 150 vendors (LAUSD was one of them). This chaos wasn’t accidental; it was built into the system to protect sales.
- Insurance products remain expensive and opaque.
The typical 2%–3% additional cost of annuities cuts a teacher’s nest egg by a third over a career. Yet no one in the K–12 system—districts, unions, state agencies—ever warned us.
- IRS reforms did not fix the problem.
They stopped transfers to low-cost providers like Vanguard and TIAA but preserved the insurance-dominated vendor lists.
In short:
Lowder describes the compliance rules but ignores the ethical reality.
Why Fiduciary Responsibility Terrifies the Industry
Lowder reassures districts that they are not subject to ERISA fiduciary standards. Technically true. But her tone implies that fiduciary duty is a dangerous burden rather than a simple principle:
Put the client’s interests ahead of your own.
This is normal in every trustworthy profession—CPAs, attorneys, fee-only advisors. But in the 403(b) world, it is treated as a threat.
Why?
Because annuities thrive in darkness. With fiduciary duty, salespeople would be required to disclose:
- Commissions
- Ongoing revenue sharing
- Surrender fees
- Higher costs
- Conflicts of interest
The fear is not liability. The fear is transparency.
The Author’s Best Recommendation—And the One Districts Ignore
Buried in Chapter 10 is Lowder’s best idea:
“Establish a committee that includes rank-and-file employees to help build a communications plan.”
Yes!
This is precisely what LAUSD did when it created its Retirement Investment Advisory Committee—and the result was dramatic:
- Elimination of revenue sharing
- Transparent competitive bidding
- Addition of Vanguard and BlackRock Target Date Funds
- Full disclosure of fees
- Consistently low plan costs
- TWO national awards by the National Association of Governmental Defined Contribution Association (NAGDCA) in 2014 and 2024.
Our 457(b) plan is what a functional, ethical, educator-centered retirement plan looks like.
This reform occurred outside the 403(b) through the 457(b), as the 457(b) is not subject to state insurance code 770.3 or monopolized by any insurance company. Our committee made sure of that!
The 403(b): Legally Compliant, Ethically Deficient
Lowder’s guide helps districts check boxes for IRS purposes. But legality is not the same as ethics. A plan can be compliant and still harm the participants it claims to serve.
The essential problems remain:
Annuities are not diversified.
Owning three annuities with three companies is not diversification.
Annuities reduce long-term returns.
Guaranteed products nearly always trail inflation-adjusted market returns.
Salespeople are not fiduciaries.
Their duty is to the product, not the person.
Educators are kept in the dark.
“Meaningful notice” once a year is not education. It is minimal compliance.
The 457(b): A Proven Alternative
Lowder briefly notes “growing interest” in the 457(b). She understates it.
The 457(b) is the future of ethical, transparent, high-performing retirement savings for educators. It:
- Allows competitive bidding
- Offers low-fee mutual funds
- Contains no surrender charges
- Can be overseen by committees with educators at the table
- Has already won national awards
The 403(b) cannot say the same.
What Educators Must Do Now
We can’t wait for:
- The IRS
- The insurance industry
- District benefits offices
- Or even union leadership
Teachers must lead the reform.
Here’s how:
- Join or demand an advisory committee.
Lowder accidentally handed us the blueprint for reform.
- Demand transparency.
Ask for fee disclosures, investment menus, and vendor contracts.
- Promote the fiduciary oath (403bwise.com).
- Learn both plans—the 403(b) and 457(b).
- Push for competitive bidding in your district.
Reform spreads when educators talk openly. Silence protects the status quo.
Final Verdict on the Book
Should district benefits administrators read this book?
Yes—it’s a clear, functional compliance guide.
Should teachers depend on it for the full story?
Absolutely not.
Lowder provides the legal framework. She does not address ethics, transparency, cost, teacher experience, or the long-standing structural biases that have harmed educators for 60+ years.
That’s where we come in.
Because if we don’t push for fiduciary responsibility and honest information, nobody will.
Conclusion: Reform Has Begun—But We Must Finish It
The cracks in the old 403(b) system are widening:
- LAUSD’s award-winning 457(b)
- California’s 403bCompare.com
- Termination of union “endorsement” deals
- Teacher-driven advocacy groups
- Rising awareness of costs and conflicts
But true reform requires educators to stand up and say:
“No more.”
No more high-cost annuities.
No more opaque sales pitches.
No more hiding behind primitive insurance codes.
No more systems that ignore the people they are meant to serve.
Lowder’s guide unintentionally proves the point:
If educators do not speak up, the industry speaks for us.
Let’s make sure that ends—starting now.
