403bwise is a 501(c)(3) nonprofit organization.

The K-12 403(b) is broken.
Together we can fix it.
Dan's Blog

Blog: California K-12 Teachers Have Great 403(b) Choices.
They Just Don't Know It.

August 14, 2019

When it comes to the K-12 403(b) plan in California, it’s a little like television. There is a ton of bad TV but there is also Atlanta, Barry, Breaking Bad, Chernobyl, Game of Thrones and Silicon Valley (fill in your own favorite show here). It’s the same with K-12 403(b) plans in California. Most school districts offer 35 plus vendors with the overwhelming majority of the companies selling high-fee insurance products pushed by high-commission sales agents. But dig a little deeper, and you find that nearly all California teachers have at least a couple of really good vendor choices.

In the Vanguard?

It might surprise many to learn that most vendor lists in California offer Fidelity, and/or TIAA-CREF, and/or Vanguard. Yes, Vanguard is on a surprising number of California K-12 403(b) vendor lists. Additionally, every single school district in the state either has or can easily add CalSTRS Pension 2. This is a quality, low-cost 403(b) plan designed and administered by the state teacher pension agency CalSTRS. This product was created to ensure that every California teacher has access to at least one quality, low-cost 403(b). Note: To add CalSTRS Pension 2 call (888) 394-2060. 

Putting Claim to the Test

The state of California runs a superb 403(b) resource called 403bcompare which posts the vendor list of every school district in the state. While I haven’t looked at them all – California is a huge state – I have looked at many of them, and I have yet to find one with all bad choices. I recently put this claim to a test. It wouldn't be feasible to look at all of the vendor lists but using an online random letter generator, and an online random number generator I looked at the vendor lists from three randomly selected school districts.

I started by using the letter randomizer tool to get the letters: R, M, and D. I then used the number generator to select one district in each letter. Here's what I found...

Letter R

  • 57 school districts and community colleges begin with this letter
  • Randomization yielded number 52 which is the Roseville Joint Union High in Placer
  • This district has 33 403(b) vendors including CalSTRS Pension 2, Fidelity, and Vanguard

Letter M

  • 91 school districts and community colleges begin with this letter
  • Randomization yielded number 39 which is the Merced River Elementary School District
  • This district has 44 vendors including CalSTRS Pension 2, Fidelity, TIAA, and Vanguard

Letter D

  • 31 school districts and community colleges begin with this letter 
  • Randomization yielded number 30 which is the Dunsmuir Joint Union High School District
  • This district has 22 vendors including CalSTRS Pension 2 and Fidelity

I encourage others to coduct a similar investigation. The saddest revelation was that my former emloyer Corona-Norco Unified has the single worst California 403(b) vendor list I have seen. If it wasn't for CalSTRS Pension 2 the 403(b) in this district would be an utter disaster. 

The Problem: Sales Agents

While I don’t have access to 403(b) contribution information for these districts, I do for the Los Angeles Unified School District. Despite having access to CalSTRS Pension 2 and TIAA, 84% of LAUSD 403(b) contributions go to agent sold products. Why? Because LAUSD teachers, like most teachers, don’t know what they don’t know. Then they meet a sales agent who "educates" them. This is isn't education, it's a time share presentation. 

The Solution: Colleges of Education

Imagine if every teacher in training learned about the 403(b) before she or he entered the profession? Let’s not imagine that. Let’s make that happen. We will promoting this idea more broadly soon, but if you are affiliated with a college of education and would like me to come to your campus to speak about 403(b) issues — at no cost — or have me conduct a video conference contact me.