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Hey, Nea — Disclose This:

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It looks like the NEA is in the business of disclosure. I wish this article would have disclosed the following about the NEA "Value"builder product offered through Security Benefit:

 

 


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  • 7% Deferred Sales Charge (see page 10 of prospectus)
  • Total Separate Account Annual Expenses range from 1.05% of 2.60% (see page 10 of prospectus)
  • Gross Annual Underlying Fund Operating Expenses range from 0.78% - 3.56% (see page 12 of prospectus)

 

I'd also like the NEA to disclose how much they receive in compensation from Security Benefit. This 2006 Los Angeles Times article reported the following: "The most recent disclosure on file with the Labor Department shows that the NEA received $49.6 million from Security Benefit Life Insurance, the provider of Valuebuilder, and other endorsed companies in 2004."

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Dan Otter

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It looks like the NEA is in the business of disclosure. I wish this article would have disclosed the following about the NEA "Value"builder product offered through Security Benefit:

 

 

  •  

  • 7% Deferred Sales Charge (see page 10 of prospectus)

  • Total Separate Account Annual Expenses of 2.65% (see page 10 of prospectus)

  • Gross Annual Underlying Fund Operating Expenses range from 0.78% - 3.56% (see page 12 of prospectus)

 

I'd also like the NEA to disclose how much they receive in compensation from Security Benefit. This 2006 Los Angeles Times article reported the following: "The most recent disclosure on file with the Labor Department shows that the NEA received $49.6 million from Security Benefit Life Insurance, the provider of Valuebuilder, and other endorsed companies in 2004."

--

Dan Otter

 

 

It's sickening after years and years of this abuse of their own members with these expensive 403b products all under the "handholding" need. NEA thinks that NOBODY is watching. Well, we are! I called Security Benefit to ask them about their "study" that reported that NEA members demanded handholding. Of course I never got a reply.

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I am still trying to find someone who has used the Security Benefit NEA/Direct Invest 403b. This thread from 2012 doesn’t mention the Direct Invest option, so it must have been started afterwards. I haven’t been able to find out when it started.

Included with about 30 funds with higher expense ratios offered by various companies are 8 Vanguard Admiral class index funds. The other funds in the program are mostly managed funds, all with ER’s of about 0.50 to 1.00%. The complete list of funds available in the Direct Invest 403b are found at “Product Performance”. http://www.nearetirementprogram.com/#!enrollment/cc0q

The 8 Admiral class Vanguard funds:
Vanguard Total Stock Market Index ER 0.05%
Vanguard Total International Stock Index ER 0.14%
Vanguard Intermediate Term Bond Index ER 0.10%
Vanguard 500 Index ER 0.05%
Vanguard Growth Index ER 0.09%
Vanguard Mid Cap Index ER 0.09%
Vanguard Small Cap Index ER 0.09%
Vanguard REIT Index ER 0.12%

Although the funds all have a 12b-1 fee of 0.01%, I think that it is included in the ER, but I’m not sure.

The fees listed in the "Security Benefit Custodial Agreement" (Section ) seem reasonable:
An annual fee of $35 for accounts of less than $50,000.
A annual fee of $30 if the employee revokes their agreement to receive all communications by mail instead of electronically.
A $25 withdrawal fee for any withdrawal not requested through the employee’s online account.
Those fees are very different from those of the other Security Benefit NEA 403b that you are criticizing aren’t they? Since 403bwise is where teachers and others go for 403b info, I think you want to be up to date on the SB NEA Direct Invest 403(b)(7).
I understand that Steve, Dan, Tony, Joel and others on this forum are pushing for major reforms and improvements in teacher’s 403b’s, and this option does not fix the basic problems. But it does seem to be a work-around for where the district doesn’t offer a 403b with inexpensive index funds, and cannot be convinced to do so. Which is better, investing in a taxable account because there isn’t a 403b worth using, or contributing to the SB Direct Invest?

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Hi krow36,

 

I think the difference is what you pointed out. Your question is a no brainier: of course, you are fine going with the SB Direct Invest. And you acknowledge that this option does not fix the "basic problems with 403b reforms."

 

This brings up an interesting point that I had not thought about. As I have been thinking for years, why don't more educators complain about the "basic problems with 403bs." One possible answer is that this option keeps the savvy investment educators such as yourself from complaining of the "basic problems" because you and the other savvy educators investors straightened yourself out and went about your business. And that is your right.

 

NEA is very clever with many smart people. Security Benefit knows how to sell to both NEA and educators. Both are huge and powerful institutions. I think you pointed out (Bogleheads?) that NEA offered this low cost plan after their lawsuit, which on the surface its good for educators. I agree. However, the unintended consequences is that the majority of the money generated by SB is still from the costly annuity products. What NEA does not want are wholesale complaints about the more expensive 403bs. The lawsuit may have incentivized NEA to offer the low cost plan so that they can keep making money off of the vast majority of educators who are less savvy.

 

That's my speculation. What do you think?

 

Steve

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The lawsuit may have incentivized NEA to offer the low cost plan so that they can keep making money off of the vast majority of educators who are less savvy.

 

That's my speculation. What do you think?

 

Steve

 

I think your explanation is the only one that makes sense. Security Benefit pays NEA millions for the privilege of attaching “NEA” to their annuity type products. The lawsuit in 2007 generated a lot of bad publicity for NEA and for SB (and for insurance type 403b’s in general). No doubt press coverage of the suit, especially the NYT article, was a problem for both NEA and SB. The lawsuit was dismissed in 2010. In April, 2012, dc9husker posted here complaining about having TR Price but not having Vanguard in SB Direct Invest. I’ve sent dc9husker a PM asking for an update. That’s the earliest reference I can find for Direct Invest. Sometime after that, the 8 Vanguard Admiral funds were added.

 

Here's the dc9husker thread: http://board.403bwise.com/index.php?showtopic=5444&hl=%2Bsecurity+%2Bbenefit

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If teachers are currently using Security Benefit's annuity type NEA 403b with its load funds in a district that refuses to add a low cost provider, a good case can be made for their moving to SB's NEA/Direct Invest 403b. That would mean they would give up the "services" of the SB rep and be willing to manage their 403b over the Internet. Some will choose "hand holding" over low cost investing, but I think there's an opportunity here.

SB seems to turn up frequently on school districts' list of providers. That's not surprising in that SB is paying NEA millions of $$ for the NEA “endorsement” of the 2 programs. There must be a very large number of teachers using the SB annuity 403b who would be MUCH better off with the Direct Invest 403b.
I'm a retired teacher but when I was teaching, I did not have the time or energy (or knowledge) to lobby for a better 403b. Teachers able and willing to become activists working for a better 403b are the exception. However, teachers with the crappy SB annuity based 403b are NOT the exception. To me this looks like an opportunity to make progress in getting low cost investing out to more educators in poorly served school districts. If more teachers were using low cost Vanguard index funds in Direct Invest, there might be increased pressure on all districts and states to provide low cost index choices in their 403b’s (and 457b’s).

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If teachers are currently using Security Benefit's annuity type NEA 403b with its load funds in a district that refuses to add a low cost provider, a good case can be made for their moving to SB's NEA/Direct Invest 403b. That would mean they would give up the "services" of the SB rep and be willing to manage their 403b over the Internet. Some will choose "hand holding" over low cost investing, but I think there's an opportunity here.

SB seems to turn up frequently on school districts' list of providers. That's not surprising in that SB is paying NEA millions of $$ for the NEA “endorsement” of the 2 programs. There must be a very large number of teachers using the SB annuity 403b who would be MUCH better off with the Direct Invest 403b.
I'm a retired teacher but when I was teaching, I did not have the time or energy (or knowledge) to lobby for a better 403b. Teachers able and willing to become activists working for a better 403b are the exception. However, teachers with the crappy SB annuity based 403b are NOT the exception. To me this looks like an opportunity to make progress in getting low cost investing out to more educators in poorly served school districts. If more teachers were using low cost Vanguard index funds in Direct Invest, there might be increased pressure on all districts and states to provide low cost index choices in their 403b’s (and 457b’s).

 

 

Hi Krow36,

 

We have been arguing this for 15 years on this forum. I am open to any ideas. But first, this is what we have learned since 2001 when this website was launched. Nobody else is going to do this for us. The powers to be are happy that we have teachers with no time, energy, and the knowledge to reform the 403b. Its been this way for half century. How do you get the word out to those less savvy teachers about NEA low cost plan?

 

There have been low cost funds in many districts. My district LAUSD had no loads for many years but few knew about them. The same with NEA low cost. So the opportunity has been there for years with many districts.

The problem is not availability, the problem is no publicity (nor aggressive sales )of the low cost investments on one hand and the aggressive sales going on everywhere with high cost annuities on the other.

 

How do you ask the most powerful union in the country to publicize their low cost Vanguard index funds in Direct Invest? Hint: NEA will never to do this. SB will not make any money and neither will NEA. It will always be left to us with no time, energy or knowledge. I think knowledge is power and when teachers get the knowledge, BINGO! they find the time and energy. I have always been optimistic about knowledge because learning this stuff is a lot easier than new teachers' first year on the job (YIKES!).

 

How do you get the unions, district benefits' departments and teachers to start a conversation like we have here?

 

2 cents,

Steve

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