Thursday, October 31, 2013

NAGDCA 403(b) Pre-Conference Session

A good 403(b) session that I missed at the Louisville conference this year at NAGDCA.

Ben Taylor did a great job moderating a panel topic that can sometimes get bogged down in the weeds. 

Scott Dauenhauer, CFP, MSFP, AIF

Wednesday, October 23, 2013

Otter on Chatzky Blog: A 403(b) Crash Course

Jean Chatzky runs a great personal finance website and blog over at, she also runs an online "Money School" that you would be wise to check out.  Speaking of "be wise"...our very own WiseGuy Dan Otter of has a guest post up today on Jean's blog, A 403(b) Crash Course.

A 403(b) Crash Course, By Dan Otter

Imagine you are at a retirement plan party. Not a retirement party — there are no gold watches being given out here. But a party attended by the various retirement plans. There’s the famous 401(k) and it’s quirky but increasingly popular sibling the Roth 401(k). There’s the modest IRA, with some of its cousins: the Roth IRA, the SEP IRA, and the Rollover IRA. Even the granddaddy of them all, Social Security, is in attendance. Then there’s this other plan. It’s kind of off by itself. You can’t quite place its name. Is it called the 401b? Or, wait, isn’t it called a tax sheltered something?

Close. The plan is actually called the 403(b). But it is commonly, and erroneously, referred to as a TSA or Tax Sheltered Annuity. Created in 1958, it predates the more famous 401(k) by twenty years, yet it remains a bit of a mystery. Why? Probably because the 403(b) covers a smaller subset of employees working in generally less glamorous positions: K-12 employees, college and university employees, pubic health care workers, and not-for-profit workers. Plus, public school teachers and administrators typically have pension plans, so for them the 403(b) is a supplemental plan.

Here’s what you need to know to make small talk with and about the 403(b):

For the rest, you'll have to jet over to Jean's blog.

Scott Dauenhauer

Tuesday, October 08, 2013

Annual Notice Requirement BullSh*t - A Marketing Gimmick

The following is an opinion piece, but based on actual events.

"The IRS requires that we verify that every employee has attended a meeting to learn about their 403(b) plan, so you must fill out this form.  We won't contact you unless you check the box that you want financial planning help"

This was the paraphrased message a teacher heard yesterday somewhere in Southern California and likely somewhere everyday in America after being forced into a meeting where someone with the title "Financial Consultant" tells them they can have a "free" financial plan (worth $500) just by meeting with this altruistic individual.

I call Bullsh*t!

Actually, that someone was my wife, at her school during a meeting she was required to attend where someone from the district's 403(b) "Compliance Administrator" was presenting.  I'll keep the name of the company a secret so as to avoid being sued for telling the truth.

What is the truth?

The truth is that the IRS DOES require a "meaningful notice" be communicated to each employee on an annual basis stating that they can participant in the 403(b) plan.  But not even the insurance agent based NTSAA believes that this "notice" must be in-person, there manual states:

"The notice must be provided in a manner designed to ensure delivery to each employee individually. For example, posting a notice in the employee lounge by itself is not an acceptable delivery method. However, a sum- mary provided at a benefits fair followed up by quarterly payroll stuffers would probably suffice. There is no requirement for a written receipt from each employee that they have received the annual notice." (emphasis added)

So why does it appear that "Advisors" from the "Compliance Administrator" are telling school districts that this is a requirement?  Why did my wife have to sit in on a presentation from the "Compliance Administrator" who was selling their services as if they were qualified Financial Planners and not salespeople and then fill out a form stating that she attended?  The reason given: If the IRS audited the school district they would use it as proof of compliance.

The idea here is that the same thing couldn't have been accomplished by a simple letter, an e-mail or a payroll stuffer - it had to be in person, which is clearly not what the IRS demands.  This is a clever marketing ploy to get in front of employees to sell the financial products of the "Compliance Administrator."  It's not like letter don't exist to send to employees, I found one pretty quickly using, here.

The irony is that I just wrote a whole piece on deceitful CTPA practices.

Why does this annoy me so much? It's deceitful.  It's one thing to offer in-person meetings as a service to a school district, it's quite another to make the employees sign what are in fact lead cards to verify they've been to a presentation under the guise of compliance.  I wonder, do they go through the cards and track down every single employee who didn't sign one or didn't attend a meeting? Doubtful.  

The school district meets their requirement of meaningful notice by providing just that, a meaningful notice - a letter in a teacher's box, a payroll stuffer, whatever else they might think of.  If they choose to add meetings to provide additional notice - great!  But don't make the meetings mandatory, don't hold them during hours where teachers are supposed to be working and don't do it under the guise that they are required for compliance.

These meetings are sales meetings disguised as compliance.  Whether the "Compliance Administrator's" corporate office knows this is going on is unknown to me, but they couldn't be the only company doing this, I hear it all the time - everywhere.

The last thing the financial services industry needs right now is more dishonesty, using IRS compliance sell financial products is just that.

Scott Dauenhauer, CFP, MSFP, AIF