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Our Recent Experience With Axa

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Not just the companies. In California, we have an insurance code that protects insurance agents access to every classroom in California. No other vendor is allowed to come into classrooms during recess and sell textbooks, computers, desks, but the 403b salesperson is allowed and nobody can kick them off campus. Would you think the principal or school police? The principal perhaps, but our school chief of police has already informed our committee that they have no authority.

 

What is the state's rationale for allowing this? Do they not know many of these agents are basically financial predators?

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Not just the companies. In California, we have an insurance code that protects insurance agents access to every classroom in California. No other vendor is allowed to come into classrooms during recess and sell textbooks, computers, desks, but the 403b salesperson is allowed and nobody can kick them off campus. Would you think the principal or school police? The principal perhaps, but our school chief of police has already informed our committee that they have no authority.

 

What is the state's rationale for allowing this? Do they not know many of these agents are basically financial predators?

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This conversation makes me so proud of this board. GRW, your tenacity is to be admired. I think you have nothing to lose by pursuing action. It's doubtful anything concrete will come out of it but as Tony mentioned: too many teachers are too timid about this stuff. I know you are not a teacher but instead are helping your wife. But your efforts are helping all teachers. I would pursue the two tracks you mention (press AXA, seek to add a better choice). I have posted some resources below:

 

How a 7th grade teacher got a better 403(b) choice

K-12 Story: I have an AXA 403(b). Help! (share with employer)

NY Times series on 403(b) woes

California dreaming of better 403(b) plans (again) touches on issues Steve raised

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Not just the companies. In California, we have an insurance code that protects insurance agents access to every classroom in California. No other vendor is allowed to come into classrooms during recess and sell textbooks, computers, desks, but the 403b salesperson is allowed and nobody can kick them off campus. Would you think the principal or school police? The principal perhaps, but our school chief of police has already informed our committee that they have no authority.

 

What is the state's rationale for allowing this? Do they not know many of these agents are basically financial predators?

 

 

There is a long story about this hideous law. We tried twice to update it and failed both times because of the insurance lobbyists and our state teachers association. Refer to my post about my open letter to the state insurance commissioner, and that tells the story.

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Dan, I'm so glad that I found this website! Thanks for your years of work to bring awareness! I really hate the thought of more government oversight, but it's really almost criminal that teachers are allowed to be preyed upon by such greedy corporations. Until laws are put into place to keep the wolves in check, all we can do is fight the fight locally one school district at a time.

 

We greatly appreciate all of the feedback!

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Until laws are put into place to keep the wolves in check, all we can do is fight the fight locally one school district at a time.

 

Somewhere in my inbox somebody emailed me an interesting idea that I need to look into when I have time...why can't the states run the 403b/457b plans?

 

For example, the state of Florida already has something called the FRS Investment Option, which is an alternative to the pension. The FRS Investment Option has spectacularly low cost total market index funds and target date funds. There might be some exploìtation around the edges (I have to study it more closely), but when you go their page, the first thing you see are target date funds with 0.08% ERs. Then if you poke around you see total market funds suitable for a 3 fund portfolio for 0.02% (Domestic), 0.03% (Foreign), and 0.05% (Bonds).

 

Why couldn't the state replicate the same thing, once for a 403b and once for a 457b and then force every district in the state to use it?

 

This might be the real path to reform, I'd like to hear everybody's thoughts on this path because I haven't had any time to learn new information.

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Ed, the Illinois Teacher Retirement System is so severely underfunded that the legislature is once again looking at changes. The reason the plan is so deeply in the red is because for years the state treated the pension fund like a piggy bank for decades, much like what has happened with social security. Anyway, TRS added a second tier in 2011 which made drastic changes to the pension plan for new teachers in pension benefits and years of service. Now I hear they are in the process of drafting a third tier which will be a hybrid of defined benefit and defined contribution. It will be interesting to see how they draw this up and perhaps this will draw attention to the current 403b process.

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Until laws are put into place to keep the wolves in check, all we can do is fight the fight locally one school district at a time.

 

Somewhere in my inbox somebody emailed me an interesting idea that I need to look into when I have time...why can't the states run the 403b/457b plans?

 

For example, the state of Florida already has something called the FRS Investment Option, which is an alternative to the pension. The FRS Investment Option has spectacularly low cost total market index funds and target date funds. There might be some exploìtation around the edges (I have to study it more closely), but when you go their page, the first thing you see are target date funds with 0.08% ERs. Then if you poke around you see total market funds suitable for a 3 fund portfolio for 0.02% (Domestic), 0.03% (Foreign), and 0.05% (Bonds).

 

Why couldn't the state replicate the same thing, once for a 403b and once for a 457b and then force every district in the state to use it?

 

This might be the real path to reform, I'd like to hear everybody's thoughts on this path because I haven't had any time to learn new information.

 

 

A number states already have very low-cost 457 plans available to K-12 employees, unfortunately less than half. A few of those states also have a 403b plan. Some states only offer these plans to state employees and/or state higher education employees, not to public school district employees. http://board.403bwise.com/index.php?showtopic=6130

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TRS added a second tier in 2011 which made drastic changes to the pension plan for new teachers in pension benefits and years of service. Now I hear they are in the process of drafting a third tier which will be a hybrid of defined benefit and defined contribution.

Interesting because this is nearly the same path VRS (Virginia) has taken. Luckily I retired in time to get the old plan. Newer teachers are in different tiers now and getting less and less benefits and paying more and having to work longer. I think its just a matter of time when you will see many defined teacher pension plans disappear completely. That is why a good solid state administered 457b or 403B plan that is uniform across all districts in the state is essential. I was able to get our school system to adopt the Virginia 457B state plan. No-one in my district even knew that in Virginia public schools qualify for inclusion. And I must say its an amazing low cost, well thought out option. The only complaint I get about it is that some administrators felt that since it offers no advisor services several teachers would not know what to sign up for and would make bad decisions. Funny considering what we know about how some advisors operate. I also heard that advisors use that as an excuse as to why you should invest with them instead of going direct with a 457b plan.

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I will have to check into the 457b. I'm positive that if it is even an option for the district now no one knows about it. I'm fairly certain that it is not.

 

There have been attempts to change long term teacher pension plans in Illinois but luckily they have failed every time. The Illinois constitution has a specific clause which states that "Pension and Retirements rights: Membership in any pension or retirement system of the State, any unit of local government or school district or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired." The constitution would have to be changed by a majority vote in order to change the pension of any teacher who taught before Jan 1, 2011. I'm sure there will be more attempts, but in 2015 the Illinois Supreme Court struck down a reform with very clear and strong language because it was unconstitutional.

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GRW

 

You guys do have a state compensation plan with TRowePrice If I read correctly and it does offer some low cost Vanguard funds. I would bet with little effort your wife's school district could add it. This would be a great end around from her bad 403b choices. I would research it.

 

 

As a comparison/reference here is our Virginia plan. http://www.varetirement.org/dcp.html Click on investments for investment info.

 

As you can see there are different paths an investor can take and the fees are minuscule and transparent. If I were you I would try to get your illinois plan started at your wife's school system after reviewing its feasibility. I could not find a similar website for illinois.

 

Hope this helps

 

Tony

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Tony, I found that same brochure but I can't see to whom it applies. I'll have to call tomorrow. Thanks for the heads up.

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Tony, I should have said that I couldn't find anything for K-12 schools either. I think there's one for State employees and another one for State university employees, but not for K-12 folks. Hope we're wrong!

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