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NTSA Supports Extension of Fiduciary Standard to Governmental 403(b) Plans

Chris DeGrassi of NTSA

Well this is out of left field. I think Tara Siegel Bernard's New York Times articles are having an affect. Less than a week after two scathing articles about the non-ERISA 403(b) market were released, a major trade organization for 403(b) sales agents has come out in support of extending the Department of Labor's Conflict of Interest rule to government 403(b) plans.

The full release is below and can also be read here.

What is left unsaid is who in the organization supports this, many of the members of the organization were against the rule and some are currently part of trade groups that are suing to have it overturned. Further, the release didn't say that the members would be encourage to follow the DOL rule regardless of whether it was implemented for government or not.

Non-Profit Universites Sued Over 403(b) Programs

Image: Ray Bartkus

I was a bit surprised to see this lawsuit as I'd pretty much kill to have the providers listed in the programs being sued (Fidelity and TIAA - who are not defendants).

I'm not getting a warm and fuzzy with this lawsuit, though it may prompt system wide change, I fear that the schools will pay out a lot of money for operating programs that were, relatively speaking, pretty good.

If you think these programs are bad, you ain't seen nothing until you've dug into the world of public K-12 403(b) programs. As I dig into the lawsuits, I'll have more commentary.

Here is a short excerpt and link to the New York Times article by Tara Siegel Bernard:

Shark Week: Remembering AFT's "Shark Attack" 403(b) Screed

Once again it's Shark Week and I thought it might be worth remembering an article written by an American Federation of Teachers trustee way back in 2000 called Shark Attack. This is the 16th anniversary of the article.

Don Kuehn authored "Shark Attack: Investors in 403(b) plans, beware: You are especially vulnerable to predators" and it was a powerful shot across the bow of an industry hell bent on taking advantage of Teacher's good nature. The article has become legend in the 403(b) activist world and this seems like a good time to remember that original article, here is a link to it, but I've also reproduced it in full below.

I've read that the odds of an actual shark attack are 1 in 3.8 million. Considering there are about 3.8 million teachers in the United States, perhaps the analogy isn't exactly perfect, but the bite taken out of a teacher's retirement from bad products certainly is gruesome.

You'll notice a familiar name, Steve Schullo...he's still fighting, 16 years later.

Bob Toth: 403(b) and the Fiduciary Rule

Attorney Robert Toth has a quick piece on 403(b) plans and the new Department of Labor Conflict of Interest Rule. Here's an excerpt:

Non-ERISA 403(b) plans

 

Arguably, the plan participants most exposed to inappropriate product placement are those in public school plans.  Yet, these participants  are  excluded from much of the fiduciary rule’s protections, except where an adviser makes the recommendation to rollover those funds to an IRA. This is the same for state university 403(b) plans, as well as non-ERISA 403(b) plans for private tax exempt orgs-including “non-electing” church 403(b) plans (churches can elect to be covered by ERISA). Why? Because these plans  are not subject to ERISA, and 403(b) plans are excluded from Code Section 4975 (which is the prohibited transaction section under the Tax Code which makes the DOL rules apply to non-ERISA IRAs). This non-application really does have the potential to have a number of ancillary effects on those products, which constitute a significant percentage of the marketplace. I would also think it would serve as further incentive for the DOL to limit the application of the 403(b) “safe harbor” rules which are otherwise used to prevent ERISA’s application to certain 403(b) plans.

 My only critique is that Bob believes the Rule applies to rollover advice from a 403(b) and in a previous webcast Attorney Fred Reish said he doesn't believe it does. This will have to be sorted out.

Scott Dauenhauer, CFP, MPAS, AIF

Last Week Tonight Promotes Fiduciary

HBO's John Oliver and his Last Week Tonight show spent it's time last night taking down the Financial Advisor industry in a segment that named names and took no prisoners. Watch it below (might not be safe for work):

Scott Dauenhauer, CFP, MPAS, AIF
(and yes, a Fiduciary!)

Annuity Chart They Don't Want You To See

Sometimes I just type random annuity words into google to see what comes up. You'd be surprised.

This weeks treasure is a document from The Annuity Source, Inc. and it lists all the latest annuities they are selling and the commission rates.

It's marked "For Agent Use Only. Not For Consumer Distribution", but it's available on the open net...so, here it is (18 pages of annuity products and their commission schedules):

Annuity Commissions

10 Organizations That Don't Give A Sh*t About You

In the last two days, ten organizations that represent companies that sell financial products to Americans filed suit to stop the Department of Labor's Conflict of Interest rule from becoming effective.

This means that these companies and their members want to stop a regulation that would require advisors to put their client's best interest ahead of their own.

Video: The Busy Teacher's Guide To Doubling Their 403(b)'s Earning Potential

Teacher and fellow 403(b) warrior, Mark Eichenlaub recently posted a nice video about increasing your 403(b)'s earning potential. I encourage you to watch. It's great to see a new crop of 403(b) activists popping up across the country and leading their own movements. Mark recently got Fidelity add to his school district! Imagine an army of Eichenlaubs across the US working to make 403(b) plans better, the future is bright for low fees and quality providers in 403(b), but the fight is long and not nearly over.

Enjoy, Scott Dauenhauer CFP, MPAS, AIF

Sad: Equity Indexed Annuities Continue Setting Sales Records

Is it any surprise that a product that has little oversight, pays large commissions and offers amazing incentives to agents for selling is setting the world on fire in terms of sales?

Maui, Cabo or Sicily...Choose Your Annuity Incentive!

Ever wonder what's behind those annuity recommendations? Here's a taste.

I've posted a few of the potential trips that annuity producers can take this year and next for selling fixed annuities.

Do you want to goto Maui? Just sell $3.5 million in annuity premium and you'll get a stay at the Ritz-Carlton! Even better, if you sell enough you could take a trip across to the next island, Lanai for three more days. Here is a video from American Equity about what an agent can expect.

You can also check out their website:

http://marketingcenter.american-equity.com/aspx/Campaign.aspx?n=32&c=10

Perhaps Maui and Lanai are to far away, maybe you'd like something similar, but a little closer to home and with an advantageous exchange rate. Los Cabos, Mexico is behind door number 2! Amernican National will send you and a guest to The One and Only Pamilla resort.

2017 Cabos Conference

Perhaps beach destinations aren't up your ally. Maybe you want a little more culture. After all, whenever one things of an annuity salesperson they think "cultured"! Well, LSW (National Life Group) has all the culture you can handle with a trip to Sicily.

NLG Sicily Chairman's Club 2016 Qualification Flyer

Next time someone is pitching you an annuity, ask them about their compensation and what trips it might qualify them for (then watch their face turn white). This shit needs to stop.

These companies must be good because they have America or National in there name...good grief.

Scott Dauenhauer, CFP, MPAS, AIF

Teachers: Stop Replying To These Postcards

My wife gets a postcard in the mail at least every sixty days from a company that won't give its name,but the return address is "California Pension Administrator" and is located in Sacramento.

Dan Otter, 403bwise and What's Next for Educators and Advisors

Dan Otter, of 403bWise.com on a webcast with the Finance for Teachers Network. Enjoy.

Dan Otter Webcast on Finance For Teachers Network

In April, Dan Otter (403bWise.com) joined Dave Grant for a webinar hosted by The Finance For Teachers Network. Here is the video:

Enjoy.

Scott Dauenhauer, CFP MPAS, AIF

Upcoming IRS 403(b) Webcasts

Accumulated Sick and Vacation Pay Deferred to 403(b) or 457(b) Plans

June 2, 2016 - 2 p.m. Eastern Time

IRS Presenters:

Lori Stieber, Revenue Agent, Office of Federal, State and Local Governments 

Patricia A. Regetz, Revenue Agent, Office of Federal, State and Local Governments 

Learn about:

• When is accumulated sick and vacation leave pay subject to Federal Employment Taxes
• When can taxes be deferred and for how long?
• What is an elective contribution?

Register Here

Understanding the Universal Availability Rules in a 403(b) Retirement Plan

May 19, 2016 - 2 p.m. Eastern Time

IRS Presenters:

Bob CreMeens, Senior Program Analyst, Office of Employee Plans 

Mary Lou Bailey-Funk, Senior Internal Revenue Agent, Office of Employee Plans 

Reese Scripture, Senior Internal Revenue Agent, Office of Employee Plans 

Learn about:

• Basic universal availability rules
• Treatment of adjunct faculty at universities
• Treatment of part-time, seasonal, and temporary employees
• The 20 hours per week and the 1,000 hours rules
• Controlled group situations and concerns
• Mayo ruling on medical residents and its impact
• The required notice to employees each year
• Ways to find, fix, and avoid universal availability errors

Register Here

NEA Still Not Practicing What It Preaches

The NEA Valubuster Plan Is Up To 21x The Cost of Their Own 401(k)

Fifteen years ago I exposed the National Education Association's (NEA) poor practices when it comes to the 403(b) in a piece titled "Does The NEA Practice What It Preaches?". Very little has changed. The NEA's wholly owned subsidiary NEA Member Benefits Corporation continues to operate, market and profit from the selling of 403(b) products to their members, all the while installing a top notch retirement plan for themselves.

TRR Podcast #26: How @NTSA403B + @NEAToday make saving in #403b hard

Podcast #26: NTSA & NEA

As a follow up to my recent posts regarding the NTSA and the NEA, Dan and I discuss the latest developments in the 403(b) world. You can find our latest podcast here.

Reference materials:

NEA Making Big Bucks From Members Selling Expensive Annuities

NTSA Continues Shameful Campaign Against California Public Employees

NEA Making Big Bucks From Members By Selling Expensive Annuities

NEA Member Benefits Reported Annual Fees of $2.7 Million

The NEA's wholly owned subsidiary NEA Member Benefits receives a base fee of $2.7 million per year (escalating each year depending on specific unmentioned milestones) to promote the expensive NEA Valuebuilder 403(b) product(s).  

It's Time For The SEC To Regulate Indexed Annuities

Indexed Annuities Need More Regulation

Indexed Annuities are big business and are the path to big profits, yet they are essentially unregulated and sold by people who have no requirement to put their client's interest ahead of their own. It's time that Indexed Annuities and the people who sell them become properly regulated.

403bWise Launches Site Re-Design and Expansion

Top 403(b) education, advocacy and news site 403bWise.com has launched a re-design and an expansion.

Since 2000, 403bWise.com has provided unbiased information on 403(b) plans to our nation's educators. In addition, the site has helped advocate for better 403(b) plans. 403bWise is the best known 403(b) site on the internet (much to the consternation of the insurance industry) and today it just got better, with promises of additional improvements in the future.