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The just released Los Angeles Times story California teachers' supplemental pension plan is flawed, shines a spotlight on the results of the TIAA-CREF Institute study detailing how poor 403(b) plan oversight by employers (the so-called Open Access Model) costs teachers thousands of dollars in retirement savings. Poor oversight, according to the study, results in scores of high fee investment "options" that are typically pushed by annuity salespeople. The article contains the following: "Despite the criticism, the California Teachers Assn. supports the open-access model, saying it allows teachers to pick from a wide selection of investments. The union focuses on educating teachers about how to pick low-cost investments, said spokesman Jonathan Goldman."

 

Note: Way back in 2002 an effort was undertaken to change arcane California insurance code 770.3 which basically said that if you permit one insurance company to sell product you must allow all insurance companies to sell product. The result was huge vendor lists made up mostly of high fee annuity products. You can read more about this reform effort California Dreaming... of Better 403(b) Plans. At that time, the insurance industry used the same "wide selection of investments/choice" argument.

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Who the hell is Jonathan Goldman? When I read what he said my head spun around! Is he implying that we don't want to educate either. And he doesn't know that CTA and my union, UTLA, supported AB2506 which tried to do what Goldman says CTA now opposes! Rumors are flying that CTA has a RFP to set up their own 403b/457b and thats why they want the current system. They haven't learned yet that the business of making money from their members is over. Thats old school because there are watch dogs this days. The consultants to CTA have their ear because CTA is too studgy to do a little homework and listen to their own members. This has been the easy way out for unions for decades and the unions have not learned a thing. Its a new era of transparency.

 

All CTA has to do is call VALIC, LAUSD TPA, and ask them if VALIC is making money. After five years, they have lost money because they were prevented from selling 403bs and I will take the credit for that because I brought it to the school board before the contract was signed. It caused such a stir that the CEO, Bruce Abrams, flew out from Texas to find out what happened and why the board had not initally voted to OK the contract.

They did after VALIC agreed not to sell 403b.

My point is that there are a lot of teachers who know something about 403b and not one union has ever asked the members what we think and how the unions can improve their services for the members. NEVER! CTA has to obviously out of touch with their own members. They have created an excellant website and they don't use it to educate their members. I was told they use 403bcompare.com instead!

 

2 cents,

Steve

 

PS, the study is done by TIAA CREF so it makes sense that any professional hired as a consultant would oppose anything TC does. I have seen this with my union, UTLA and with AFT, there is an inherent bias by the consultants to TIAA cREF. It is such a mystery because of ALL THE FINANCIAL VENDORS IN THE PLANET, TIAA CREF IS A NON PROFIT AND HAS BEEN WITH OUR BROTHERS AND SISTER AT THE COLLEGE AND UNIVERSITY LEVELS SINCE 1918. NON PROFIT!!!!!!

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I don't work with school districts (we consult for private tax-exempt plan sponsors who 99% of their time choose low-cost providers such as TIAA as their exlcusive plan vendors), so I may be ignorant on the issue, but why is it that despite such articles being published time and time again,and the existence of watchdog websites such as 403(b)Wise, and state AG investigations of vendors in the very area of charging unreasonable fees on annuties (mostly to teacher) ,there does not appear to be much change to the status quo of teachers getting the short end of the stick? I realize some states mandate multiple vendors, but even in states that do not there are similar messes; the two favorable-fee states cited in the article seem to be the exception rather than the rule. Do states just not care about the 403(b) given its frequent status as the supplement to the state db plan? All it would take is one RFP for an exclusive provider (in states that would permit one provider).

 

It just seem's patently unfair that, if you work for a university, hopsital, museum, etc. you are more often than not contributing to a low-cost provider, but if you're a public school teacher, sorry, it is you versus the vendors, with the vendor often winning (and to be fair to the vendors, they are in the business to make a profit (save perhaps for TIAA, but that is another discussion...).

 

Feel free to educate me if I am completely missing the point.

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Why is it that despite such articles being published time and time again,and the existence of watchdog websites such as 403(b)Wise, and state AG investigations of vendors in the very area of charging unreasonable fees on annuties (mostly to teacher) ,there does not appear to be much change to the status quo of teachers getting the short end of the stick?

 

Hi benefitsgeek,

You are not off the mark at all. EVERYWHERE outside of k12 school districts, the 403b, 457b and the 401k is cheaper because those institutions demand low cost plans. Unfortunately, the California unions are SILENT and have been silent for decades.

The question you posed above is exactly what Walter Hamilton, the reporter, asked me. I don't have an answer. It’s probably the culture of k12 districts, perhaps there is a gender issue, I don't know. Universities, colleges, hospitals, local, federal and state government employers and their employees have not allowed only one type of 403b plan to dominate their employee choices.

I have asked myself this question for years now. And you are right, there have been report after report and the unions still don't get it and the teachers who are involved with their unions don't get it either. There have been a few of us who tried, but our numbers were too small, but we did make some progress with my union, thanks to Sandy Keaton, to have 403b workshops, but its never from the leadership. They listen to their financial consultants and defend the status quo.

Steve

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Steve, thank you for you prompt and thoughtful reply. It made me think about the fact that when I started with my firm almost 20 years ago, hospitals, museums and the like were similar to how school districts are now, and how today they are completely different. So I beleive change is possible if the message of 403(b)Wise and others continues to be repeated over, and over, and over again until someone listens!

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It cannot be emphasized enough that California teachers are lucky to have CalSTRS in their corner. They make available an extremely low cost plan called Pension 2 (note: I do wish it was called Pension+ so as not to confuse with the CalSTRS administered defined benefit plan but that's another discussion). CalSTRS also oversees 403bcompare.com which allows employees to learn true cost of all 403(b) products sold in California, and they are working with us to create an education portal that will be customizable to all school districts. It will be a one-stop place for teachers to get 403(b) and 457(b) information and access enrollment forms. Stay tuned as it will be launching soon.

 

Dan Otter

 

p.s. Steve, if CTA indeed sets up their own 403(b)/457(b) plan I think it will be very difficult for them to offer something better than Pension 2. We'll see. But if they go the NEA/Security Benefit route they will make themselves a huge target.

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p.s. Steve, if CTA indeed sets up their own 403(b)/457(b) plan I think it will be very difficult for them to offer something better than Pension 2. We'll see. But if they go the NEA/Security Benefit route they will make themselves a huge target.

 

 

One of the CTA board of directors seems to think CTA can! When I asked him how can a private company compete with a non profit CalSTRS Pension2, he did not have an answer. The CTA board of directors never talk about this stuff, they are listening to their own voices, CTA and the pension plans are under attack and they are thinking of raising money so they can fight those attacks. I agree, but don't raise money from the members that way because it may work in the short run, but the long run, it only hurts the unions when the members find out, and they will eventually. More members will become anti union and it goes on and on. Why can't CTA see this in the long run?

CTA thinks that nobody is watching. It is truly amazing.

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Steve, thank you for you prompt and thoughtful reply. It made me think about the fact that when I started with my firm almost 20 years ago, hospitals, museums and the like were similar to how school districts are now, and how today they are completely different. So I beleive change is possible if the message of 403(b)Wise and others continues to be repeated over, and over, and over again until someone listens!

 

Here are all of the newspaper stories for the last 13 years!

This rip-off had gotten so bad that the Securities and Exchange Commission (SEC, 2000) chimed in with its “warning.” Feds issue annuity warning. Report was released to the Associated Press (AP). The SEC’s warning was only the beginning. Other horror stories from teachers talking to reporters were published in the Los Angeles Times (two articles, 1998 and 2006), New York Times (1999), US News and World Report (2000), USA Today (2002) Changes to 403(b) plans help teachers save; Forbes Magazine, Costly Lesson (2005), San Diego Union, Teachers get harsh lesson on investing (2005), MSN Money, Teachers investment plans flunk; Wall Street Journal (2007), and none other than our very own union, the American Federation of Teachers Newspaper with its article, “Shark Attack”. The latest story, “California teachers' supplemental pension plan is flawed, study finds.” In unison and for 13 years, all of these newspaper reports publish the same problem again, again and again: teachers are getting ripped off with annuities, surrender fees, commissions, high expenses, a plethora of insurance company offering the same product with lower investment performance and nobody is looking after their best interests.

Shockingly, most of the unions categorically ignored the preponderance of these stories. This latest is new from CTA, they have the gaul to say that they want the status quo!!!!!!!!!!!!1

Other unions made similar statements. They defended their practices with stunning, almost religious annunciations with little basis in fact. Usually the defense came from the approved vendor directly. The mantra of their insulting defense is that teachers need “hand holding.” The National Education Association (NEA) refers to a survey they conducted. Through NEA’s approved vendor, Security Benefit Corporation reported that members overwhelmingly want and demand handholding. Mysteriously, nobody can locate this survey. The union chiefs repeatedly stand by their approved vendors. The most frequent type of financial handholding in my profession are from TSA insurance agents. I saw my agent three times in five years and she arrogantly ignored my simple request for a product with no surrender fees. She gave me another expensive product instead. That is not handholding—it’s an institutional and accepted rip off and the unions have encouraged this crap. Don’t take my word for it, read those newspaper reports. You’ll see that similar stories from many educators that have been told repeatedly.

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PS, the study is done by TIAA CREF so it makes sense that any professional hired as a consultant would oppose anything TC does. I have seen this with my union, UTLA and with AFT, there is an inherent bias by the consultants to TIAA cREF. It is such a mystery because of ALL THE FINANCIAL VENDORS IN THE PLANET, TIAA CREF IS A NON PROFIT AND HAS BEEN WITH OUR BROTHERS AND SISTER AT THE COLLEGE AND UNIVERSITY LEVELS SINCE 1918. NON PROFIT!!!!!!

 

 

 

Call me cynical.. as so many so often do.. but when I read this story I had to stop laughing long enough to write a reply. TIAA is no longer not for profit.. so know your sponsors. Secondly.. if you saw the millions and millions that execs made at TIAA.. well you would wonder how they can afford to pay all those high salaries being so kind hearted and worry about us little people.

 

So TIAA writes a paper and does a study basically saying that "they" are the best option for us all, then get a person "payed" by the company to say how good their "study" was. Sort of like asking the Nissan dealer if a Nissan was as good as Nissans commercials say it is.

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PS, the study is done by TIAA CREF so it makes sense that any professional hired as a consultant would oppose anything TC does. I have seen this with my union, UTLA and with AFT, there is an inherent bias by the consultants to TIAA cREF. It is such a mystery because of ALL THE FINANCIAL VENDORS IN THE PLANET, TIAA CREF IS A NON PROFIT AND HAS BEEN WITH OUR BROTHERS AND SISTER AT THE COLLEGE AND UNIVERSITY LEVELS SINCE 1918. NON PROFIT!!!!!!

 

 

 

Call me cynical.. as so many so often do.. but when I read this story I had to stop laughing long enough to write a reply. TIAA is no longer not for profit.. so know your sponsors. Secondly.. if you saw the millions and millions that execs made at TIAA.. well you would wonder how they can afford to pay all those high salaries being so kind hearted and worry about us little people.

 

So TIAA writes a paper and does a study basically saying that "they" are the best option for us all, then get a person "payed" by the company to say how good their "study" was. Sort of like asking the Nissan dealer if a Nissan was as good as Nissans commercials say it is.

 

Oh, I know my sponsors, what ever sponsor means.

http://www.tiaa-cref.org/public/support/help/ask_tc/is_tiaa_cref_a_nonprofit.html

While you are at it, give us a heads up on the "millions and millions" that TC execs make. I wonder if they compare with the billions of bonuses paid out by ML, Bear Stearns, Goldman Sacks, you know those execs who take care of themselves and the shareholders, while skimming from their own clients.

 

TC is the best option for K12 teachers, just ask the millions of college professors who have used them since 1918.

 

Vanguard has the same structure: "With Vanguard, you are served by the most exceptional people in the investment industry. Every day, the employees of Vanguard—called crew members—do everything they can to meet your needs. After all, we're client-owned. Vanguard crew members are also Vanguard investors—a fact that makes our crew all the more dedicated to pursuing excellence in everything they do."

 

These two companies will never be public and sell shares on the open market, because to do so would create an incentive system that is not in our best interests. Vast majority of the insurance companies selling TSAs to teachers and wall street are public which means they must make money from their clients for the shareholders, not make money FOR their clients.

 

Last I heard, TIAA CREF or Vanguard didn't need any bailout money from the feds. The have the ethical courage to do the right thing always for us, its that simple.

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PS, the study is done by TIAA CREF so it makes sense that any professional hired as a consultant would oppose anything TC does. I have seen this with my union, UTLA and with AFT, there is an inherent bias by the consultants to TIAA cREF. It is such a mystery because of ALL THE FINANCIAL VENDORS IN THE PLANET, TIAA CREF IS A NON PROFIT AND HAS BEEN WITH OUR BROTHERS AND SISTER AT THE COLLEGE AND UNIVERSITY LEVELS SINCE 1918. NON PROFIT!!!!!!

 

 

 

Call me cynical.. as so many so often do.. but when I read this story I had to stop laughing long enough to write a reply. TIAA is no longer not for profit.. so know your sponsors. Secondly.. if you saw the millions and millions that execs made at TIAA.. well you would wonder how they can afford to pay all those high salaries being so kind hearted and worry about us little people.

 

So TIAA writes a paper and does a study basically saying that "they" are the best option for us all, then get a person "payed" by the company to say how good their "study" was. Sort of like asking the Nissan dealer if a Nissan was as good as Nissans commercials say it is.

 

 

Not sure where the study concludes that TIAA-CREF is the best option for teachers. Can you provide the passage? I do see that the study says teachers in districts with little 403(b) oversight tend to pay more in fees. And many studies say high fees negatively impact return. Steve Schullo has been very upfront about his background (former teacher once stuck with high fee investment choices). I have done the same. "Beauxdru" can you provide some background on yourself? Do you work in the industry? If so for whom? What is your investment approach? Are you one of the many who work for companies peddling high fee investments to teachers yet invest their own money in companies like Vanguard and TIAA-CREF?

 

Dan Otter

 

p.s. Call me cynical, but I suspect we'll never hear the truth about your identity, your employer and your true motivation.

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I am simply shocked that "Beauxdru" has not responded. I am equally shocked that so many hide behind fake/nebulous names and free email addresses.

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I am simply shocked that "Beauxdru" has not responded. I am equally shocked that so many hide behind fake/nebulous names and free email addresses.

 

 

Hi Dan,

I'm not. There have been so many over the last ten years who remain anonymous. It’s sooooooooooooo interesting. There is no threat to their lucrative livelihood from the few teachers who are left here to try and tell the truth to our colleagues. For now it looks like its only Tony and I who post here regularly. In the meantime, millions of dollars are still taken from LAUSD educators into index annuities.

Steve

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Dan.. ahh.. my apologies.. this is your site.. I was referring to Steve's post.. talking about the non profit status of TC.. from your link..

 

"Since 1998, both TIAA and CREF have been subject to federal income taxation following a decision by Congress to end the organization's tax-exempt status under Section 501©(3) the Internal Revenue Code."

 

non profit? I have a real life.. and I teach.. I am free to meet whenever, just PM.. I even sent Steve a PM in regards to the meeting in LAUSD.. never got a response.

 

I hear pluses and minuses about all companies.. Vanguard.. do a little research and you will read about fees that people were stuck with that they were unaware of and the difficulty some of my peers have had from moving money from Tiaa to another company. Things happen and thats life.

 

Finally.. I will say that the salaries of TIAA don't add up to the millions in bonuses that some of the other companies make and TIAA has even had a troubled past with it's company.. some employees anyway. That in itself does not make it a bad company.

 

Steve... I am so glad that you can make the investment decisions for all of us in regards to where we want to put our money. Speaking of profits.. just took a quick look.. in 2006 TC made @ 2.6 billion in profits and came in second among insurers.. yet they made more profit than the 1st and 2nd companies combined. Need to get some more recent data.. that was just a quick look around.

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Dan.. ahh.. my apologies.. this is your site.. I was referring to Steve's post.. talking about the non profit status of TC.. from your link..

 

"Since 1998, both TIAA and CREF have been subject to federal income taxation following a decision by Congress to end the organization's tax-exempt status under Section 501©(3) the Internal Revenue Code."

 

non profit? I have a real life.. and I teach.. I am free to meet whenever, just PM.. I even sent Steve a PM in regards to the meeting in LAUSD.. never got a response.

 

I hear pluses and minuses about all companies.. Vanguard.. do a little research and you will read about fees that people were stuck with that they were unaware of and the difficulty some of my peers have had from moving money from Tiaa to another company. Things happen and thats life.

 

Finally.. I will say that the salaries of TIAA don't add up to the millions in bonuses that some of the other companies make and TIAA has even had a troubled past with it's company.. some employees anyway. That in itself does not make it a bad company.

 

Steve... I am so glad that you can make the investment decisions for all of us in regards to where we want to put our money. Speaking of profits.. just took a quick look.. in 2006 TC made @ 2.6 billion in profits and came in second among insurers.. yet they made more profit than the 1st and 2nd companies combined. Need to get some more recent data.. that was just a quick look around.

 

 

Beauxdru,

My apologizes for not responding to your PM. I erroneously thought that I answered your question here TWICE for all to see, but I was wrong: Click here. and click here Two times apparently is enought for you.

BTW, I also apologize to you for making investment decisions for you too. My goodness I did not think I had that big an impact. You are listening. I am impressed.

Your subjective comments about high fees, high salaries of TIAA CREF and Vanguard and whether they are a nonprofit or not are either a joke, distractions from the real issue that you are a sale person or you are not very knowledgeable about the impact of fees on investments. But your "freedom" is more important than saving money on fees. Good for you.

The only data that I need is that I am paying about 25 basis points for my investments, thank you very much.

BTW, you evasiveness about Dan questions fits a pattern of so called “teachers” who post here claiming they are teachers "I have a real life and I teach" and never admitting they were financial professions goes back ten years. You fit the pattern with several individuals all claiming the same thing, hating TIAA cREF and Vanguard and wanting their “freedom” and they teach. Teach what and what is your "real life?"

 

• "It is difficult to get a man to understand something when his salary depends upon his not understanding it."

- Upton Sinclair

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