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DustinVoss

Help me advocate for better (fewer) Options in Chicago Public Schools

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Here in our Chicago district (3rd largest in the Nation) we have an extremely opaque servicer, way too many options, and no guard against the "advisors" that routinely visit our schools with their skull-duggerish sales-tactics.

Anyway, I may soon get a meeting with the folks that control the options available to teachers and the rules for "advisors." I really would like help and support speaking specifically and precisely about a better vision for CPS's supplemental retirement plans. If you have advice, please share.

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Dustin

You have frequented this site long enough to know what you need to say LOL!! PLus you teach personal finance. You know how to proceed.

I would start discussing fees and how they hurt performance over time. Show them charts and graphs.

I would explain why annuities are not a good investment for most people during the accumulation stage plus mention teachers already have pensions which act like an annuity.

I would ask for fewer insurance choices as they are probably overly represented, repetitive, confusing, and are only feeding the beast and not helping the teacher

I would ask for more low-cost choice options like Fidelity Index Funds, Vanguard, Aspire etc. added to the mix. I would certainly bring attention to Nea Direct Invest if already available through Security benefit.

I would ask them to have a smart knowledgeable group of individuals like yourself (not someone associated with any company)  to do in-services explaining the better options now available. Charts and graphs again are helpful. This will be most important because most teachers don't have a clue how to proceed. A team of teacher experts to help teachers navigate the 403b environment would be useful if not essential.

Overall I would encourage them to limit their choices to maybe 6 options. 4 non-insurance low cost,  investing options like Vanguard, Fidelity, Aspire, etc, a 457b state plan is available to teachers in your state, and maybe two insurance products. I would prefer none but that may be too much to expect. The problem here is how do you decide which stay and which go?

I would also ask them to prohibit career fairs that promote annuities  and prohibit on-campus visits by salespeople during school hours. Better companies don't send out reps to these fairs and don't have a salesforce.

Tell them about 403bwise!!

Have them read Steve's book on fighting powerful interests. Ed's writings would be useful too with his excellent fee information.

I would also encourage the powers that be to auto-enroll every new teacher in a low-cost target fund with the teacher having the option to contribute to it or change to something else if desired after one year.

Lowering the amount of providers will also make bookkeeping and record keeping much easier for the district.

I hope others will add to this list

 

 

 

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And of course, there is a problem. Teachers with already established plans with dozens of other insurance companies won't take kindly to having their plans changed or terminated and having to start over with a new list.  This is the mess you get when a school district has an all aboard attitude, letting too many vendors on your list in the first place. 

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Dustin

A big problem is that often district officials know nothing about investing. If they did they would not allow this free for all provider list. You really need to get into the heads of the school board and top district officials. It sounds to me that like so many school districts your school district has no clue that they are hurting their own teachers by allowing these plans to exist.  If you can convince them to cut down their choices to just a small handful, everything will get easier for everyone.

Of course, I have to wonder if there is any backdoor corruption or kickbacks operating that keeps all these insurance companies in the halls hounding teachers and on the provider list. Do these companies make any donations to the school system as a way to keep the door open?

You also have a challenge convincing folks that most of these hall wandering financial advisors are nothing more than commissioned salespeople. Educators have always been impressed with titles and credentials and they tend to trust those that have those credentials because it sounds impressive to them so they take the bait.

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I would need more information to give a proper response. You may want to read my Reforms page to help solidify your goals.

1. You may need to teach them an Investing 101 course before they understand a word you say.

2. You’ll need to explain why the current options are problematic, perhaps by using one of their popular vendors as an example.

3. You’ll need to explain that other districts have chosen high quality vendors, perhaps by using Vanguard or Fidelity as an example (hopefully a nearby district or your district has them).

4. You’ll need to propose policy changes. The holy grail is to have a single elite 403b and 457b vendor that only has target date, fixed allocation, and total market index funds...even better is to have a policy of auto-enrolling employees in the plans with a default contribution rate directed towards a target date fund based on the employee’s age.

If you offer more information, I’ll probably have a lot more to say.

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I just had another thought. Dan Otter's Teach and Retire Rich book would make the point. It did for me many years ago. Passing that book around to the folks at the top might get their attention.

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Just my two cents, but people don’t like to read and they’re not trying to take on extra tasks (especially when everything is working fine in their minds).

Maybe referencing official sounding things like books, NYT, and experts like Bogle/Buffet can influence people through an appeal to authority, but I think the most likely outcome is that they won’t do homework on their own.

Expect to be the person that has to be responsible for educating them, defining the scope of the current problem, identifying the solution, planning the solution, and maybe even doing part of the work to implement the solution. 

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Book or no book, it will only become a priority if teachers in great numbers demand a change in a large district. Our motley crew that hangs out here won't be enough to turn the tide. Dustin has work to do because he needs plenty of support to get the change done.  I was on my own though when I attacked the problem but our school system is relatively small. Still the majority of teachers  in my old school system still wait to be approached by a salesman before they make a move and that move is usually to an annuity. As a society we have been systematically brainwashed on so many levels.

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You didn’t provide a link to the CPS plans, so I googled it and found the 3 providers. I was not impressed with the VALIC or VOYA websites. Mostly expensive (over 1% ER), actively-managed funds, very few index funds and they were expensive. I wasted a time on these 2 websites.

I finally checked out the EMPOWER website and found lots of low-cost index funds! Then I stumbled on to a 2017 403bwise thread and read that the VALIC and VOYA vendors are grandfathered and not available to new employees. This info isn’t readily available on the EMPOWER website, and I don’t know where I found it in 2017!? http://board.403bwise.com/topic/6715-need-help-chicago-public-school-system-403b-and-457-plans/

The CPS/EMPOWER website could be designed to be a lot easier to use: https://cpsretirementplans.empower-retirement.com/participant/#/articles/CPSWR/investmentInformation

The admin fee of 0.45% is a bit high. I found this fee once, but cannot find it again?? Poor site organization by EMPOWER. Does that fee cover EMPOWER employees making on-site presentations to teachers? Is there any chance of extending the plans beyond CPS to include other districts. Would that lower the admin fee?

The website could be better organized along the lines of the WA and NY state 457 plan websites:

WA state deferred compensation plan. https://www.drs.wa.gov/dcp/investments.htm

NY state deferred compensation plan https://www.nysdcp.com/iApp/tcm/nysdcp/about/index.jsp

The active vs passive fund management discussion is very biased and inaccurate.

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Dustin,

I'm sure that was no easy task just getting to the point you are at now, being able to discuss with "the folks" - kudos to you.

Tony and Ed gave excellent answers, and Ed summed it up nicely at the end. You might want to organize your presentation that way: defining the scope of the current problem, identifying the solution, planning the solution, and maybe even doing part of the work to implement the solution. Certainly, the first two. It will be easy to define the problem, but structuring it with charts, graphs and even saving scenarios like Tony said will go a long way as it is visual. Cite your sources of course and give credit and referrals.

I am getting to the point of being able to address and educate our small union (unbiased). It is very true that those folks that ought to know, don't, so the small wins to get their ears is big.  

Keep us posted.

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