Tuesday, February 19, 2008

Threats & Apologies - American Fidelity Wants Me Quiet

I received the above letter today from American Fidelity Assurance Company. They are trying to shut me up because I don't like their company.

A quick background:

My wife's school district utilizes American Fidelity Assurance Company as their provider of Section 125 Cafeteria plans. I've been in several Sec. 125 plans over the years and this one is the most onerous and conflicted I've encountered. From what I understand (and I could be wrong), American Fidelity Assurance Company does the administration for free, however as a condition of offering the plan for free they require that they meet with each employee each year in order to get their elections. The way they require it is that if you don't meet with the AFA reps your Health Insurance premiums will be deducted After-Tax, instead of Pre-Tax.

You don't have to buy anything from these insurance agents, but if you don't meet with them you don't get to participate in the section 125 plan and suddenly you are in a very small group of people who actually have their health insurance premiums deducted after-tax. Contrary to what the district has been told - an individual does not need to make a positive election each year to have health insurance premiums be deducted pre-tax. AFA requires this so that their insurance agent representatives can meet with you. Why would they do that? Is it to better serve their clients? Is it an attempt to sell more products and services? They do offer additional products like 403(b), disability, life, and Cancer insurance. I think I might feel pressured, kind of like attending a time share presentation. If I want to contribute to a 125 plan, I should be able to go online, or fill out a form and be done with it - not so with this plan.

Here is where it gets interesting. I have an alert on Google for "403(b)" and the other day I received an e-mail that a story or press release containing the term 403(b) had been posted - I clicked on the link and proceeded to read that a school district was about to hire American Fidelity as their 403(b) plan administrator. Given my bad experience with them I sent the school district an e-mail stating the following:

"Your district is looking to approve or begin talks to approve American Fidelity as your 403(b) administrator - I implore you to table this vote and look for another provider. American Fidelity is a wolf in sheep's clothing. They have one goal - to sell expensive, bad 403(b) products to your employees. They have been banned by the Pentagon from Military bases because of their poor behavior. They are not a good company to do business with. If you like I can give you names of companies to look at - but American Fidelity is not a good company.

I live in California and subscribe to a google alert on 403(b) plans - that is how I saw this was up for a vote. I have nothing to sell you, just don't want to see the teachers suffer by purchasing poor products from salespeople."

I made a mistake however - it turns out there are TWO American Fidelities. One is American Fidelity Life Insurance company, the other American Fidelity Assurance Company. The press release only stated "American Fidelity," thus I believed the company they were going to hire was the same that had been banned by the Pentagon - American Fidelity Life Insurance Company - you'll see the New York Times Article below doesn't make the distinction either. So, I incorrectly stated that the company the district was hiring was banned by the Pentagon - they were not. However, my opinion of American Fidelity Assurance company has not changed - I still do not like them.

It was the e-mail that I sent that prompted the above letter to me to Cease and Decist.

They threatened to sue me and to investigate me for stating my opinion about the company through my experiences with the company. This would be like me writing to a school district who chose Pepsi over Coke and told them not to choose Pepsi because I had a bad experience with them and they don't taste as good - Pepsi could not sue me for my opinions based on facts. American Fidelity Assurance company would like me to keep my opinion to myself by threat of lawsuit. This is clearly an infringment on my free speech.

By the way, I'm not the only one who has had a problem with AFA and voiced it, the article below is easy to find on the net:

American Fidelity Assurance Deception

I want to make clear that I was wrong to state that American Fidelity Assurance Company was banned by the pentagon - however, in my defense I never once said American Fidelity Assurance company was banned by the military. The press release mentioned American Fidelity and American Fidelity is a company that was banned by the military. For all of you who are confused, there are two American Fidelity's, apparently unrelated - American Fidelity Assurance Company, a company that I dislike - but is not banned by the Pentagon from military bases and American Fidelity Insurance Company - a company that IS banned by the Pentagon - and another company I dislike.

Bottom line - this letter and threat are another reason I would be very wary of allowing a company like American Fidelity Assurance Company (who is not banned by the Pentagon) to be my administrator.

Keep in mind that I called AFA and apologized for confusing their company with that of another company with nearly the exact same name - however I would not take back my opinions based on experience. This didn't resolve anything as it is my opinions they were upset about, not necessarily the fact that they were confused with another company by the same name.

In the future, American Fidelity SHOULD make sure that when they are mentioned in a press release that it state American Fidelity Assurance Company - not simply American Fidelity.

Amazingly, American Fidelity Assurance Company to my knowledge (I searched all of Google's archives) has not issued a press release to state that they are a different company from American Fidelity Life Insurance Company - something you'd think they would do to ensure people don't get confused. I couldn't find a single press release, doesn't mean they didn't release one, I just can't find it. I did find a few articles about them that aren't so nice:

Federal Jury Orders American Fidelity To Pay 10.8M

Fisher Invokes Fifth Amendment Over 40 Times (in AFA case)

Below is the article from the New York Times that fails to specify whether the American Fidelity they are referring to is American Fidelity Assurance of American Fidelity Life Insurance.

New York Times Makes Same Mistake

Just so we are clear - I made a mistake in thinking that American Fidelity Assurance Company was some how affiliated with American Fidelity Life Insurance Company - an easy mistake to make. American Fidelity Assurance Company is not and has not been banned by the Pentagon......I still don't like them though. Also, to make matters more confusing, they do have a subsidiary named American Fidelity Amerilife.

I stand by my comments - minus the pentagon barring.

Scott Dauenhauer, CFP, MSFP, AIF

Tuesday, February 12, 2008

Monday, February 11, 2008

School workers find costlier choices in saving for retirement

The new regulations may be helping the IRS to track 403(b) plans better, but it is at the expense of teachers retirement. In Texas, even fewer low-cost providers are showing up on the approved statewide vendor list, meaning higher fees for participants and lower account balances at retirement. The new regs are having the short term affect of solidifying the high-cost, non-fiduciary based products as the ones that are offered. I hope this will change as the years pass.