403(b)ill of Rights Refresh
July 4, 2024
The 403(b)ill of Rights is one of the first 403(b) blog posts I ever wrote. It first appeared around July 4, 2000. Over the years I have made incremental improvements. What follows is a refresh. Amendment 12 may be considered radical. Frankly, it's radical that it is even needed.
We the people of the K-12 403(b) plan, in order to form a more perfect retirement vehicle, establish justice, insure investing tranquility, provide for the common fairness, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity, do ordain and establish this 403(b)ill of Rights for the K-12 403(b) investors of the United States of America.
Amendment 1. Right to at Least One Quality Low-Cost Vendor
School districts must offer access to at least one quality, low-cost vendor. The following companies serve the K-12 403(b) market and offer quality, low-cost products: Aspire Financial Services, CalSTRS Pension 2 (California only), Fidelity Investments, TIAA, T. Rowe Price, WEA Trust (currently only in Wisconsin), and Vanguard.
Amendment 2. Right to Objective Financial Education
Employers must provide objective plan information and 403(b) eduation to employees, especially new hires. 403bwise is happy to assist in the 403(b) education effort. We will gladly put on — at no cost — interactive video sessions. Reach out to us via the "Contact Us" link at the top and bottom of this page.
Amendment 3. End Agent Trawling at Schools
Sales agents must be banned from K-12 campuses. No more agent-run "free" lunches and "information" seminars especially at new hire orientations. See: An Even Fishier Smell in the Teachers' Lounge. Also no more spamming employees with "you are eligible to meet with a financial professional" non-sense. See: Latest TDS Phishing Expedition.
Amendment 4. Advisor Fiduciary Pledge
Anyone selling K-12 403(b) product must sign a Fiduciary Pledge requiring them to put their client's interests above their own. We have created the 403(b)wise Advisor Fiduciary Pledge for this purpose.
Amendment 5. Union Ethics
Unions must cease accepting "donations" or any other financial support from financial institutions that sell 403(b) products to their members. Furthermore, Unions must take an active roll in improving K-12 403(b) and 457(b) plans.
Amendment 6. Fee, Surrender Charge & Performance Disclosure
Vendors must supply a clear breakdown of all fees (including M&E charges, loads, exit charges, operating costs, maintenance fees, and 12b-1 fees), surrender penalties, and performance data.
Amendment 7. End to Unreasonably Long Vendor List
Plans should contain a manageable number of quality vendors. Regular audits should be conducted to achieve this goal. Furthermore, employers should utilize the Request for Proposal (RFP) process to leverage economies of scale to get the best combination of pricing and services.
Amendment 8. End to the Term TSA
The 403(b) plan should be known as just that: the 403(b) plan. Calling it a TSA (tax sheltered annuity) or a TDA (tax deferred annuity) is confusing and leads participants to falsely believe they can only invest in annuity products. All plan information, including salary reduction agreements and payroll documents, should only use the term 403(b).
Amendment 9. Better On Line Plan Information
School district 403(b) plan information stinks almost as much as the choices they make available. Do better. Make it easier to find plan information.
Amendment 10. Add a 457(b) Plan (Better Yet Add Your State-Based 457(b) Plan)
Due primarily to it's requirement of more employer oversight, the 457(b) can often be a better plan than the 403(b). Every school employee should have access to a quality, low-cost 457(b) plan. Many states make excellent state-run plans available to teachers. In fact, all states should make their state-based 457(b) plan available in ALL school districts.
Amendment 11. Allow Percentage Contribution
Allow 403(b) and 457(b) contributions on a percentage basis instead of a dollar amount. That way when a school employees salary goes up, his or her 403(b)/457(b) contribution increases without having to fill out a new Salary Reduction Agreement.
Amendment 12. Make the K-12 403(b) Subject to the Employee Retirement Income (ERISA) Security Act
Educators (and employees of most non-profits) are the ONLY employees in the country not protected by a fiduciary standard. It's why K-12 403(b) vendor lists are often long and awful. This must change. Make the K-12 403(b) subject to the same fiduciary protection 401(k) participants enjoy: ERISA.
We Have Only Just Begun to Fight
That is it. Twelve simple ideas that are hardly revolutionary. What might school districts hope to gain by implementing the 403(b)ill of Rights? How about more happy, loyal, dedicated employees who will be better prepared for a dignified retirement.
Like the United States Constitution, we consider the 403(b)ill of Rights a work in progress. Articles and amendments could and should be added as necessary. Our battle cry? We have only just begun to fight!
Stay wise and well.
