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Dan's Blog

403(b)ill of Rights

July 4, 2021

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, ICMA-RC, TIAA, T. Rowe Price and Vanguard. 

Amendment 2. 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 3. 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 4. 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 5. 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 6. 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 7. Knowledgeable Benefits Administrators

Benefits administrators must possess 403(b) training and knowledge. Moreover, they must be permitted the freedom to provide general plan information to employees without fear of legal reprisal.

Amendment 8. 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. 

Amendment 9. 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 10. Add a 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-wide plans available to teachers. 

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. Employer Fiduciary Standard

Educators (and employees of some non-profits) are the only employees in the country not protected by a fiduciary standard. It's why 403(b) vendor lists are often long and awful. This must change. At a minimum, the fiduciary standard that applies to the 457(b) must apply to the 403(b).    

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 well.