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JudyS

Nea And 403(b)s

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Hi, there,

 

For the educators on this site, you may be interested to know that a few of us from Washington (the state) have had concerns about the 403(b) and 403(b)7 products available through NEA Member Benefits. Not only do those products appear to be very expensive, but there is some thought that perhaps NEA should be supporting members by offering educational opportunities to members such that they may become better consumers of these products. Thus, we are hoping that NEA will be challenged to do a better job for members in terms of both products and investor information. At the recent Washington Representative Assembly, we asked the “documents and resolutions” head to pursue this idea. If that doesn’t work, I have been told that that this will become a new business item at the NEA Representative Assembly in Florida this summer. I will certainly welcome aboard anyone else who is challenging NEA to do a better job for all of us!

 

This is the committment I got back from my regional office in regard to the consideration of this set of ideas:

 

That WEA:

*Request NEA and NEAMB publish comprehensive comparisons of their programs with others available to members while remaining business sensitive

*Request NEA feature a member’s forum on their website so members can exchange ideas and comparisons.

In the event 1 and/or 2 proceeding requests are not successful, WEA will file appropriate New Business Items a the NEA RA (in Florida this year).

 

JudyS

 

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Judy,

 

NEA Value Builder does not "appear" to be very expensive; it IS very expensive. Consider the following charges for the variable annuity:

 

- Underlying fund expenses: vary between .80% and 2.09% (!).

- Mortality and expense charges: .90%

- Administrative charge: .15%

 

Whoa. In effect, teachers will get socked with charges generally ranging from 2% to 3% per year. In other words, the expenses are 10-15 times what they would be in a Vanguard target retirement fund. Over time, that is a huge drag on returns.

 

You are to be commended for bringing this up at the Representative Assembly.

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Judy,

 

You might also raise the question of whether or not NEA took a $3 million fee from its retirement savings provider, Security Benefit, as alleged on page 2 of the following Forbes article: http://www.forbes.com/archive/forbes/2005/0425/100_2.html

 

Could you specifically ask the following: was there a quid pro quo here? Did NEA choose Security Benefit because of a fee? If so (and it is a big if), then I question whether NEA truly had the interests of its constituents in mind.

 

Value Builder is an absolute dog.

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AP teacher,

 

Thanks for your supportive comments. You mentioned the annual expenses for the variable annuities, but remember there are also "loads"; the typical load seems to run around 5% on Valuebuilder products. Once you pay this expense, of course, the money is no longer in YOUR account and for the life of your savings, there will be no earnings on that amount ever. That expense is huge, it seems to me.

 

When I talked with the person who heads up the 403(b) part of the business at NEAMB, I asked about that $3 million that had been reported by Forbes (and I have to keep in mind that Forbes has never been a real friend of educators or NEA or union activities), he stated that he had been interviewed for the article and the amount was actually $2 million. That didn't feel a LOT better to me, so I asked what that $2 million was used for, for goodness' sake. He denied that it goes directly back to NEA. He stated that the $$ is used for "overhead", including salaries, advertising and promotional activities for the Valuebuilder products. Since then I have tried to keep an open eye, and sure enough, NEAMB is doing the advertising (some? all?) for the Valuebuilder program in many of the publications that come my way.

 

And every time I see one of those ads it again occurs to me that we are being sold down the river by our very own organization to whom we pay substantial amounts of money to support us in a variety of ways. IMHO, we should be asking them to work on our behalf, not sell us a product that is, in the most optimistic and positive terms, "mediocre".

 

Judy Schneider

 

 

 

Judy,

 

You might also raise the question of whether or not NEA took a $3 million fee from its retirement savings provider, Security Benefit, as alleged on page 2 of the following Forbes article: http://www.forbes.com/archive/forbes/2005/0425/100_2.html

 

Could you specifically ask the following: was there a quid pro quo here? Did NEA choose Security Benefit because of a fee? If so (and it is a big if), then I question whether NEA truly had the interests of its constituents in mind.

 

Value Builder is an absolute dog.

 

 

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Judy,

 

So, someone from NEA admitted to our union receiving a payment from Security Benefit. Like you, I am not less unhappy about the payment being "only" $2 million. In fact, I'm darned angry about it. And like you, I also feel like we were sold down the river on this by our own leadership.

 

Even if the $2 million is used only for advertising (and I'm doubtful about that), that is money that will not benefit members in any way, shape or form. It WILL benefit Security Benefit, though.

 

To call Value Builder "mediocre" is being charitable. I hope that you raise holy hell about this at the Representative Assembly.

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AP Teacher,

 

Let me clarify, please, at least as much as I can. NEA Members Benefits (NEAMB) is a wholly owned subsidiary of NEA; it's mission is specifically "to make members' lives better" and it was formed about 40 years ago. It offers products to educators. They work with a number of companies. I do not pretend to understand the whole relationship, and I don't actually think NEA is taking $$ it shouldn't. I used to think so, but no longer.

 

At this point in history, I just believe NEAMB has outlived it's usefulness and purpose and they need to evolve. We members don't need them to provide us with mortgages, insurance, and investment products. There are plenty of products out there, many that might be better than the ones with whom they have contracts (Minnesota Life, Prudential, Security Benefit and others). Time marches on... if I may be so bold, let me suggest two things. (1) Stop giving our names to these companies and spending so much of what we have paid for (through our purchases of these products) to sell us more. and (2) As a business that serves educators, EDUCATE us. Give educators more information and resources such that we become more knowledgeable about products and become better consumers.

 

That's a big project.... most staff members I talk to just don't even try. They're busy so they throw up their hands with frustration, look no further, and become vulnerable to salesmen. To assist them in becoming better consumers is a far tougher task than selling them something, I think. What do YOU think?

 

Judy Schneider

 

 

 

 

 

Judy,

 

So, someone from NEA admitted to our union receiving a payment from Security Benefit. Like you, I am not less unhappy about the payment being "only" $2 million. In fact, I'm darned angry about it. And like you, I also feel like we were sold down the river on this by our own leadership.

 

Even if the $2 million is used only for advertising (and I'm doubtful about that), that is money that will not benefit members in any way, shape or form. It WILL benefit Security Benefit, though.

 

To call Value Builder "mediocre" is being charitable. I hope that you raise holy hell about this at the Representative Assembly.

 

 

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Hey, Judy.

 

I think that you hit on a good point about educating the educators. Our dues money would be far better spent doing this than foisting poor products like Value Builder upon us.

 

I don't see how taking $2 million from Security Benefit is "making members' lives better," either. It seems to me that Security Benefit is the main beneficiary of this. It cost SB less than $1 a member to get access to NEA members. Boy, are we cheap.

 

I also agree with your point about teachers being poor consumers and therefore becoming vulnerable to salesmen. Like you, I would like to see NEA take a stronger role in educating members about investing and less of a role in selling investment products to members. In the end, however, teachers are responsible for their own investing decisions. Plenty of folks on this forum (myself included) have made poor decisions in the past, and have learned from those decisions the hard way. We have then become less vulnerable to sales pitches.

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Judy,

 

You are right on the money. I wrote an article several years back called "Does the NEA Practice What it Preaches" and they don't. Their 403(b) program is horrible. They should be advocating for better programs, not pushing bad ones. The Union's job is to advocate for better benefits, how can they do this when their own subsidiary is hawking a product (a bad), that is a direct conflict of interest. The NEA could do a lot to bring about positive changes in the 403(b) industry, instead they just join in the bonanza. They have stopped publishing how much they have in assets, but it has to be over a billion by now. The NEA should terminate its 403(b) plan and begin advocating for better 403(b)'s across the school districts and employees they represent.

 

Imagine the credibility gap the NEA has now when they try to tell a district that they shouldn't use a certain provider, they should use an NEA provider.........that just won't fly.

 

Great job Judy - keep it up. Let us know how we can help. My wife and mother in law are NEA Members.

 

ScottyD

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Hi Judy,

Welcome. It’s about time somebody, other than the 10-15 educators who regularly post on this wonderful site, condemn what the NEA has been doing with respect to 403b. I am a member of AFT and a few years ago, AFT had an opportunity to do something right, but blew it. No teachers' union in the country has had the guts to try something different, different than what the districts do, which is to turn the entire matter over to the sales force and never monitor their sales tactics again.

Anyway, I think you know that you are "speaking to the choir" here. And that’s just fine.

I agree that the unions should be educating their members about these plans. There are plenty of members who do know something about these plans but the leadership will never ever listen to their own members. In my own local, UTLA, in Los Angeles, we have been called vicious names by the leadership because we advocate for the low cost vendors such as TIAA CREF, Vanguard and Fidelity over the "union approved" vendors (LAUSD has TIAA CREF, USAA and Fidelity). But those leaders are gone now and the new leadership is a 180 degree turn around. Our treasurer wants UTLA to offer workshops to the members and has asked for help from our 403b watch dog group, 403baware. Our group has been around for almost ten years now and we got nowhere until this year. It is a very long and slow process. We have been in numerous print media articles (LA Times, NY Times, US News and World Report as well as the great Forbes Article). It is interesting that folks outside education know more about 403b mess than the folks inside education. Union officers come and go, but ordinary members live on and we have stuck with this movement all along. And it may now be paying off.

It’s refreshing that you let us know that there are other 403b watch dog groups. I knew this would happen because it is a good idea. Good ideas will prevail over politically correct, status quo, 20 century 403b ideas. I agree with you that the old idea of unions approving vendors is totally wrong and outdated. There is so much more information going on these days that many of the members know more than the leadership.

What can we do to help?

Best wishes,

Steve

 

 

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