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Ab 1949 Lost Today

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Our California Bill ab1949 lost. It would have done away with a corrupted insurance code that favors large insurance carriers over mutual funds for decades. It would allow districts to competitively bid and offer an open architecture platform with mutual fund companies.

 

The coalition was lined up almost to the back door for people supporting this bill. It was WONDERFUL. Assemblyman Cedillo argued passionately for the bill and do the right thing for teachers. He is my new hero. I was able to sit at the table and speak for about 30 seconds on behalf of the LAUSD oversight committee. There were many people from school districts, administrators, CFT, Junior College districts, Valic, TIAA CREF, CalSTRS and the LAUSD legislative rep spoke in favor. It was an impressive sight!

 

The opposition had only about 5-6 people 2 were from our beloved unions and the rest were insurance industry reps. My old union UTLA and CTA. CTA killed it with their arrogance, power and skilled schizophrenia. Their rep was all over the place. She said that she is not against protecting educators from ex ploitation, hates that educators are paying high fees, wants to stop sales people from going into schools and that the annuity companies are taking advantage of educators. She kept stressing that this discussion should start with teachers and not from vendors.

 

OK, I get that. If you want this coming from the teachers, then SPONSER a bill. CTA knows that their members are getting screwed, so either sponsor a bill or endorse Pension 2. But we know CTA REAL INTENTIONS…their RFP has been floating around for over 3 years suggests that they want to be in the game as a money maker (a la the NEA). Vendors, why have you not responded to CTA's RFP?

 

What this tells me is that even though we lost the votes, big time, our side won that argument and the opposition knows it!

 

It's so apparent that CTA focus is on pension reform and they desperately wanted to be part of this game because the rest of the world (OUR SIDE) is way ahead of them. CTA knows this but they lacked the content to argue for the teachers. OUR SIDE ALREADY DID THIS. WE EXPERIENCED THE RIPOFFS. So CTA did what they could and they knew they would win, just oppose it. It's so obvious that they are listening to NEA, Security Benefit who just made a deal with Graff last fall. Who knows what the connection is. But eventually we will find out.

 

I think we were all impressed with the number of people who represented organizations, were united for the educators. The opposition looked transparent. I think they were a little surprised that this obscure issue got some much support. The line on our side went all the way back to the door!

 

I remember vividly 20 years ago there was NOBODY that I could find to help me with my 403b, so we have come a long way. There are lots of good and ethical people who want to do the right thing for the teachers.

The star of the hearing was our first speaker Crystal Mendez, the LA Times featured teacher that was on a front page article on unions and 403b by Kathy Kristoff.

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Thanks for update, Steve. Can't say I'm surprised. IMO: CTA is hemorrhaging credibility.

 

Dan Otter

 

 

CTA won't feel it yet. But if they lose significant credibility from here on, I think it will be by their pathetic opposition in front of a lot of good ethical people who will not forget CTA's behavior! CTA opposed a great bill that looks after the teacher's best interest for the first time in 403b history and they opposed it in front of 15-20 statewide educational leaders on such weak grounds (Bill should come from teachers, not vendors)! The many supporters like me will tell everybody they know what really happened yesterday.

I know first hand that CTA damaged their relationship with CalSTRS, IMO. It's one thing to bully your real opponents (those who attack our pension plan and teachers with incorrect data), but to bully us educators and other collective bargain units will never be forgotten. Our oversight committee will hear the full report on our next meeting and CTA is not going to look pretty. Of course all of this is IMO.

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If rumors are indeed true that CTA plans to use the 403(b) as a profit avenue, a la NEA, they will be crucified in the court of public opinion. I believe if they go down this path they will weaken their efforts to strengthen DB plans. I only see lose-lose. How can they be so short sighted? Does CTA really want to be associated with outcome #1?

 

Three teachers contribute $250 per month for 35 years earning on average an 8% annual return

 

1) Teacher one pays 2.25% in fees (just about what the average California teacher currently pays) and ends up with $336,320.

2) Teacher two pays 1.25% in fees (about he average mutual fund charge) and accumulates $409,585

3) Teacher three pays 0.18% in fees (BTW this is what I am paying) and amasses $548,750.

For illustrative purposes only and not a predictor of any actual investment.

 

Dan Otter

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Guest Joel L. Frank

A handful of years ago the New York Attorney General decided that union endorsed 403b products will not be allowed in NY. He fined the New York State United Teachers (NYSUT) $100,000 and ordered its co-conspirator the ING Group to return $30 million to the teachers that bought the variable annuity labeled "Opportunity Plus". The Attorney General's reasoning was simple: the union knew and knows that there are identical financial products available to teachers at much lower cost. Case closed.

 

Why not make this Case known to each and every state's Attorney General?

 

Having said that, notwithstanding the Attorney General's decision the commission based 403b product is alive and well in New York, outside of the City of New York. The Decision did not eliminate the commission-based 403b product, it simply does not allow the Union to collect some of the commissions by labeling it an endorsement fee.

 

The teachers employed by the City of New York have never been subject to this abuse because the NYSUT affiliate in New York City made sure that the Teachers' Retirement System of the City of New York also administer a 403(b) plan. This is how you prevent the commission based product from ever being sold to your union members.

 

So now that the NYSUT is prevented from making money in the 403(b) market why haven't they done what was done in New York City more than 40 years ago and have the New York State Teachers' Retirement System also administer a 403(b) plan? Don't they want parity with the teachers of the City of New York?

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Thanks for the update Steve. It's heartening to read the depth of the support. Did I read your post incorrectly...did you write that VALIC was actually in favor of the bill?

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Thanks for the update Steve. It's heartening to read the depth of the support. Did I read your post incorrectly...did you write that VALIC was actually in favor of the bill?

 

 

Indeed, you read correctly, VALIC was behind it, which is odd...they have been a source of variable annuities for a long time...hence the name. Persaonlly, it would appear they were jumping on the train and seeing the destination. VALIC is also losing a lot of district's it TPA'd for, ie LAUSD. All in all, not sure what they are playing at.

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Thanks for the update Steve. It's heartening to read the depth of the support. Did I read your post incorrectly...did you write that VALIC was actually in favor of the bill?

 

 

Indeed, you read correctly, VALIC was behind it, which is odd...they have been a source of variable annuities for a long time...hence the name. Persaonlly, it would appear they were jumping on the train and seeing the destination. VALIC is also losing a lot of district's it TPA'd for, ie LAUSD. All in all, not sure what they are playing at.

 

 

Hi Kat,

Politics make for strange bedfellows. Yes, VALIC and California Federation of Teachers both supported the bill (ten years ago, both opposed a similar measure). I think VALIC sees the handwriting on the wall that 403b is going to change in favor of what we wanted all along for years and years on this board, low cost, mutual funds and NOT annuities. They are now offering a mutual fund platform just as they did when Valic was our TPA for 5.5 years for LAUSD. I talked to both gentlemen about VALIC's turnaround. They want to be competitive. I told them to keep TIAA CREF on their toes in front of the TIAA CREF rep! We all laughed.

This coalition was great. I personally have never felt so good about the collaboration, the positive spirit when we knew the bill was going down because of CTA opposition. But we are great friends now as a direct result of our belief that teachers deserve a plan that is just as good or better than both CTA and NEA's own 401k plan. Check their 401k plans on www.brightscope.com. Just type National Education association of America and California Teachers Association in the search feature. NEA has Vanguard and CTA has a bunch of insurance companies but their plan is rated an 83, which is still very good.

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I'm award of Valic's mutual fund "platform," but it's still fee-heavy. Maybe they're finally understanding that more and more of us are educating ourselves and voicing our displeasure with the 403b game. And maybe, one day, they will offer something reasonable, but I'm not holding my breath and I'm sticking with CALSTRS Pension2 for now. The only way I would switch is if Vanguard became a direct option again, like it was with my district before the new regs.

 

It's all about greed with these players, but if it ultimately benefits teachers and lower fees, I don't care who the players are... just give us some good options. And transparency...how about a little of that....

 

I'm glad you are making headway, Steve, and that you are happy about the outcome. Thanks for all your hard work on this. It's still a sad day when CTA is opposing a bill that will benefit teachers.

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Video of the committee meeting discussing 403b reform bill ab1949.

Scroll forward to 1 hour and 38 minutes to see Assemblyman Cedillo introduce the bill. The first speaker after Assemblyman Cedillo is our heroine, the famous Crystal Mendez at 1 hour 42 minutes, who knocked it out of the park!

 

Also, LISTEN TO California's Teachers Association (CTA's) shameful testimony in opposition to our bill! Scroll in to 2:15.

 

http://calchannel.granicus.com/MediaPlayer.php?view_id=7&clip_id=298

 

Here is the list of coalition supporters:

Antelope Valley Community College District

Association of California School Administrators

AXA

CalSTRS

Faculty Association of California Community College

Glendale Community College District

Great-West Retirement Services

The Harford Company

Kern Community College District

Los Angeles Community College District

Los Angeles College Faculty Guild

Los Angeles Unified School District

Los Angeles Unified School District Defined Contribution 403b/457b Advisory Committee

Peralta Community College District

Riverside Community College District

San Bernardina community College District

San Joe-Evergreen Community College District

Sierra College

Small School Districts' Association

South Orange County Community College District

Teamsters Union

TIAA

West Kern Community College District

Variable Annuity Life Insurance Company (Valic)

Yosemite Community College District

 

 

OPPOSITION:

American Fidelity Assurance Company

American Society of Pension Professionals

California Teachers Association

Financial Services Institute

MidAmerica Administrative and Retirement Solutions

National Association of Insurance and Financial Advisors of California

National Tax Sheltered Accounts Association

Retirement Options for Professional Educators

Numerous individual financial advisors and their clients

 

 

Make no mistake, The California Teachers Association KILLED THIS BILL and we will not forget!!!!!!!!!!!!!!!

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Update.

Last Saturday, United Teachers Los Angeles UTLA sponsored a financial education workshop on the 403b and 457b plan. The 75 participants were given a short talk about the history of 770.3 and what ab1949 was supposed to do. Guess what, they were angry that ab1949 was defeated. Duh, teachers aren't stupid when given the data.

 

CTA now says on their website:

 

"Oppose. Public employees: annuities and mutual fund custodial accounts.

5/2/2012 - In committee: Set first hearing. Failed passage. Reconsideration granted."

 

What the heck does "reconsideration granted" mean?

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Forgot to mention how much I enjoyed the video of the proceeding. Not sure what was my favorite part (action begins about 1:38 in):

 

1) An organization with Teachers in it (CTA) fighting against the best interest of teachers,

 

2) Or, after a teacher spoke for the need for competitive bidding, the financial services industry telling teachers what is best for them (especially the folks at American Fidelity Assurance who push a product with 2.42 in expenses plus 8-year surrender charge while giving their own employees a plan lauded for its low fees. You can read more here:)

 

As I have said many times you can't make this stuff up!

 

Dan Otter

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Guest Joel L Frank

I'll bet that if the California School Boards Association enthusiastically supported this legislation it would have past. Its unfortunate that the organization that represents the public agencies that pay k-12 salaries did not get much more actively involved in lieu of taking an "approval" stance.

 

The k-12 school districts have to ask themselves the following question: Assume the 403(b) was the primary retirement plan to which the school districts/taxpayers contribute. Would they choose the commission based vendor or the no-load vendor? The California School Boards Association needs adopt the same fiduciary standard for the salary reduction only 403(b) Plan.

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Our enemy of 403b reform just released their latest newsletter. I read it with great interest. This is the first time I have read where the agents are beginning to get defensive about their practices! And I think we can agree on what they said: "By now you should know the story: Consultants in the employ of some major players in the industry have told state legislators and school districts that teachers are paying too much for their 403(b) accounts."

They didn't deny this. We agree.

Read the entire article here:

http://www.asppanews.org/2012/05/08/403b-advisor-releases-spring-issue/

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