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Cta To Offer 403(B) Product In 2013

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The California Teachers Association, which has been blasted for its role in defeating legislation to permit competitive bidding in K-14 403(b) plans, recently announced at a CTA State Council Retirement Committee meeting that it would offer its own 403(b) plan early next year. An attendee of this meeting shared the following:

 

 


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  • CTA president Dean Vogel and Controller Carlos Moreno said the CalSTRS Pension 2 403(b) product did not meet the standards of a R.V. Kuhns & Associates, Inc. white paper on the 403(b)/457. When asked why CTA didn’t share concerns with CalSTRS, Vogel reportedly said they didn’t know how to contact CalSTRS.
     
  • When asked why CTA is "reinventing the wheel" when Pension 2 — which many describe as a quality, low-cost plan — already exists, Vogel and Moreno said it didn’t address needs of members. Further details were not provided.
     
  • Vogel and Moreno kept repeating: “Low fees, high standards, no revenue sharing, transparency on fees (especially annuity products), no bundling, no revenue sharing…”
     
  • Aon Hewitt will be administrator; R.V. Kuhns is a consultant; $150,000 for start up of plan will come from Members Benefit Department that is funded by a trust.
     

 

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Guest Joel L Frank

Well Dan, like we all know, the devil is in the detail. If the California Teachers Association does what the Wisconsin Education Association Council (WEAC) did a number of years ago it will be a 403(b) Plan that we all can be proud of. The WEAC also established a Trust---it is the Trust that administers the 403(b) Plan. Take a look: http://www.weabenefits.com/retirement_403b.aspx?id=60

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I know the WEA Trust well (they are running a story in their member publication this summer on my financial literacy efforts) and if CTA can offer a similar program that would be great. The question CTA is going to have to answer, however, is: How does the inclusion of a CTA product without competitive bidding improve the lot of California teachers? I don't think it does. Are the high-fee firms going to stop trawling schools because CTA has a 403(b) product? Are sales agents going to cease pushing equity-indexed annuities because CTA has a product? California teachers pay on average more than 2% in 403(b) fees. Is that going to change because CTA has a product? I don't think so. CTA could have drastically improved the landscape for teachers by putting their muscle behind 403(b) reform. They chose not to on two occasions. Maybe someday they will get behind meaningful 403(b) reform.

 

Dan Otter

 

p.s. I welcome CTAs perspective on this. I know they have my number.

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p.s. I welcome CTAs perspective on this. I know they have my number.

 

 

Dan, don't hold your breath. CTA will never respond, we all know they have become a 403b oligarchy. They despise the one institution, a New York not-for-profit corporation (http://www.tiaa-cref.org/public/support/help/ask_tc/is_tiaa_cref_a_nonprofit.html#.T6srFeCKSEQ.mailto), that has been the loyal low cost pension plan for our brothers and sisters in higher education for almost a century. Nobody can compete because of the corporate culture differences between Hewitt, Kuhn and CTA with Vanguard, TIAA CREF and Calstrs. I believe most unions are private organizations.

BTW AON Hewitt has no experience in public k-12 multi-vendor. Interestingly, while I was researching my mother's former company 3M where my mother bought stocks 50 years ago, Hewitt is the administrator. It was funny as I was asking them about costs they kept saying that 3M pays for the costs and and the fellow said that we don't get many calls from people asking for costs.

 

To Hewitt and Kuhns, do you know what you are walking into? It's going to be political and financial land mines. The California 403b world is vastly different than the 401k world. There are too many of us who will vet all of the costs. We have many friends in your profession that really want to help teachers and so they will help us vet those costs. If those costs are high over 1% total costs, the entire California coalition who supported ab1949 and your client CTA opposed it, will not encourage teachers to use your plan. It's always about the costs. If you say there are no revenue sharing what about your advisers "churning" CTA member's portfolio to get what the administration cannot get and AUM costs. We KNOW all of the costs: spreads, trading. Everybody now says revenue sharing and commissions will not be charged and everybody is not calling themselves a fiduciary, all sales pitches.

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Guest Joel L Frank

 

 

p.s. I welcome CTAs perspective on this. I know they have my number.

 

 

Dan, don't hold your breath. CTA will never respond, we all know they have become a 403b oligarchy. They despise the one institution, a New York not-for-profit corporation (http://www.tiaa-cref.org/public/support/help/ask_tc/is_tiaa_cref_a_nonprofit.html#.T6srFeCKSEQ.mailto), that has been the loyal low cost pension plan for our brothers and sisters in higher education for almost a century. Nobody can compete because of the corporate culture differences between Hewitt, Kuhn and CTA. I believe most unions are private organizations.

 

 

 

Steve,

 

Correction: Tiaa-Cref is a for-profit entity.

 

Joel

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Steve,

 

That was a little tongue-in-cheek. Interestingly I used to have a lot of interaction with CTA. I actually spoke at one of their retirement conferences (three years ago at UCLA). I was set to speak at two more, but then I challenged them on an issue, and suddenly the offer to speak was rescinded. That incident told me a lot about CTA, their culture, and their values. Organizations can and do change. Maybe the CTA we have seen won't be the CTA we will see.

 

Dan Otter

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Steve,

 

That was a little tongue-in-cheek. Interestingly I used to have a lot of interaction with CTA. I actually spoke at one of their retirement conferences (three years ago at UCLA). I was set to speak at two more, but then I challenged them on an issue, and suddenly the offer to speak was rescinded. That incident told me a lot about CTA, their culture, and their values. Organizations can and do change. Maybe the CTA we have seen won't be the CTA we will see.

 

Dan Otter

 

 

Let me think and that issue was something about fees, right?

Sure CTA has changed when they dropped the approval process a decade ago. But they are having second thoughts about missing out on all that money--it's the secrecy that has been and will always be the red flag. They are hiding the costs. There own retirement committee did not know what was going on until the president spoke to them about ten days ago!

If they have a great plan, they should be proud that they beat CalSTRS, TIAA CREF and Vanguard with lower fees. If they know it now, you would think they would be beginning to advertise it. NOTHING has been said anywhere outside of the president's sales pitch to the retirement committee. Prove me wrong. CTA will never respond to anybody outside of the union when they kept their own members in the retirement committee in the dark.

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Steve,

 

Actually, it wasn't over fees. It had to do with integrity. At this time, I can't be any more specific than that.

 

Dan

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There has been nearly 200 hits on this discussion alone in less than 1.5 days and only 2 people posted responses. There is a lot of interest in this story, yet no one else dares to say something and virtually none of it reaches the mainstream news and nothing is on the CTA, Kuhns or Hewitt's website. We all know how this system works and yet, by keeping it under raps, these three players think they have some kind of advantage. There are no advantages to secrecy. NONE!

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Can something tell me if this is the white paper that the CTA president was talking about? http://www.iscebs.org/Documents/PDF/Luckenbach_BMMarch.pdf

This paper is basically a review of what we have been discussing on these boards for years about high expenses, lack of transparency, BLAH, BLAH, absolutely nothing new. Interesting in one of the last points the CTA consultant said that they seek an open architecture platform. Oh really, that's what ab1949 was supposed to do until CTA killed it.

 

 

 

Or this one:

California Teachers Association Affinity 403(b) and 457 (b) Plans. Best Practices White Paper. October 2011.

The second one is not online that I could find.

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I'm happy with Pension2. If CTA was going to do 403b, they better offer funds that have lower expense ratio and more choices. Also, I don't like the game that CTA is playing.

 

After reading the funds available from WEAC, I like pension2 better.

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Also, I don't like the game that CTA is playing.

 

 

 

 

And that game is extremely risky. Our pension is under attack and CTA is spreading their enormous power too thin. They really think that can launch a complex product with headwinds going against them from the coalition that support ab1949? And what about protecting our pension from the attacks.

CTA should have endorsed Pension2, a huge mistake for them to launch their own product trying to compete with Pension2 and reinvent the wheel. And we will be paying the price with their big ego mistake with a weaken pension.

These are sad and dangerous times for our pensions.

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Also, I don't like the game that CTA is playing.

 

 

 

 

And that game is extremely risky. Our pension is under attack and CTA is spreading their enormous power too thin. They really think that can launch a complex product with headwinds going against them from the coalition that support ab1949? And what about protecting our pension from the attacks.

CTA should have endorsed Pension2, a huge mistake for them to launch their own product trying to compete with Pension2 and reinvent the wheel. And we will be paying the price with their big ego mistake with a weaken pension.

These are sad and dangerous times for our pensions.

 

 

 

Steve,

 

This is what I have been saying for some time: CTA's behavior around AB 1949 gives unions a bad name and hurts their efforts on pension preservation. Dumb. Dumb. Dumb.

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Interesting and sad discussion. This has me laughing out loud:

 

When asked why CTA didn’t share concerns with CalSTRS, Vogel reportedly said they didn’t know how to contact CalSTRS.

 

I guess the state of education is so bad that Vogel never heard of Google...

 

The other thought that comes to mind is that many charter schools are not in collective bargaining units, i.e., CTA. I wonder if this miracle product will be offered to those in CTA. I suppose it will depend on the structure of the charter school. Many charter schools tag onto the 403b offerings of their county office of education or sponsoring district. Those entities would most likely be heavily unionized.

 

As to the question of "why?", for me, it's a simple case of follow the money...and the greed...and the power. CTA is no different than any other highly politicized organization: its members are the last thing it cares about.

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Guest Joel L Frank

Interesting and sad discussion. This has me laughing out loud:

 

When asked why CTA didn’t share concerns with CalSTRS, Vogel reportedly said they didn’t know how to contact CalSTRS.

 

I guess the state of education is so bad that Vogel never heard of Google...

 

The other thought that comes to mind is that many charter schools are not in collective bargaining units, i.e., CTA. I wonder if this miracle product will be offered to those in CTA. I suppose it will depend on the structure of the charter school. Many charter schools tag onto the 403b offerings of their county office of education or sponsoring district. Those entities would most likely be heavily unionized.

 

As to the question of "why?", for me, it's a simple case of follow the money...and the greed...and the power. CTA is no different than any other highly politicized organization: its members are the last thing it cares about.

 

 

As to the question of "why?", for me, it's a simple case of follow the money...and the greed...and the power. CTA is no different than any other highly politicized organization: its members are the last thing it cares about.

 

This is definitely a true statement with the New York State United Teachers but is false when it comes to its largest local affiliate, the New York City's United Federation of Teachers-----as the world turns.

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