California: You Also Have a 403(b) Problem...
August 8, 2023
In my last blog post I detailed the mess that is Texas 403(b) plans. But the state I reside in — California — cannot and does not get off the hook. Our vendor lists are just as bloated as those in Texas (see below). California, however, has several key advantages over the lone star state (does the one star represent the Yelp score for it's K-12 403(b) plans?). It also has a simple solution available that would make it's K-12 403(b) plans the envy of the nation.
The Problem
Like Texas, California K-12 403(b) vendor lists are simply too long. Below is just one example.
Chaffey Joint Union High 403(b) Vendor Choices
- AIG Retirement Services
- American Fidelity Assurance Company
- American Funds Distributors, Inc. (AFD)
- American United Life (AUL), a OneAmerica Financial Partner
- Americo Financial Life and Annuity Insurance Company/Great Southern Life Insurance Company
- Ameriprise Financial Inc.
- Brighthouse Financial
- CalSTRS Pension2
- CTA Voluntary Retirement Plans for Educators, LLC
- Equitable Financial Life Insurance Company
- Fidelity Investments
- Franklin Templeton Investments
- Global Atlantic Financial Group
- GWN Securities, Inc
- Horace Mann Investors, Inc.
- Horace Mann Life Insurance Company
- Industrial-Alliance Pacific Life Ins Co, US Branch
- Invesco (formerly OppenheimerFunds)
- IPX (FPS Group)
- Lincoln Investment, LLC
- Lincoln Nat'l Life Ins Co (Lincoln Financial Group), The
- MassMutual, through its subsidiary, C.M. Life Insurance Co.
- Metropolitan Life Insurance Company
- Midland National
- Modern Woodmen of America
- National Life Group through member company Life Insurance Company of the Southwest
- Nationwide Life Insurance Company
- New York Life Ins. & Annuity Corp.
- North American Company for Life and Health
- Orion Portfolio Solutions (Formerly FTJ FundChoice LLC)
- Pacific Life Insurance Company
- PFS Investments Inc
- PlanMember Services Corp
- Putnam Investments
- Security Benefit
- Thrivent Financial AKA Thrivent Financial for Lutherans, Thrivent Mutual Funds
- Transamerica Life Insurance Company
- USAA Life Insurance Company
- Vanguard Group, The
- Voya - ReliaStar Life Insurance Company
- Voya Retirement Insurance and Annuity Company
- Waddell & Reed, Inc
Golden State Advantage #1 — 403bcompare.com
The state pension agency CalSTRS created and maintains the investment fee information and 403(b) vendor comparison tool 403bcompare. The easy-to-use resourse makes it a snap to see how Equitable/AXA levels a 1.2% mortality and expense fee on every investment choice. Yikes. This doesn't even include the cost of the underlying investment. So if you want a simple target date fund from Equitable it will cost you 2.3%! — the 1.2% M&E fee plus 1.10% for the actual fund. Double yikes. To add insult to injury Equitable may also hit you with a surrender charge if you want to switch to a better vendor. Triple yikes!
Golden State Advantage #2 — CalSTRS Pension 2
CalSTRS created an excellent, low-cost 403(b) product — Pension 2 — that is available to every district in the state and is available in nearly every district.
Simple Solution: Go Single Vendor
For years 403bwise and many others thought that due to archiac 1970's era insurance code, California school districts were prevented from going single vendor. Not so. See our story Green Light for California Single Vendor Plans which details exactly how they can do this.
Stay wise and well (and let's make Calfornia K-12 403(b) plans the envy of the country; and the bane of high-cost companies).
