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Dan's Blog

Chicago Public Schools Goes Single Vendor 😃

December 7, 2021

For almost as long as I have run 403bwise (March 2000), we have been beating the drum for K-12 403(b) plans to go single vendor. The reasons are many:

  • Simplicity
  • Better pricing
  • End to sales environment
  • Less employee confusion
  • Ability to move to better vendor later*

Chicago Public Schools (a.k.a. City of Chicago SD 299) recently announced it was moving to a single vendor 403(b) and 457(b) plan. We had heard rumors about this. We had heard it was going to be an excellent plan. But we also heard the winning vendor was... AIG. As I joked in our recent podcast on this development (link to pod below), you can't spell "gigantic piece of shit" without an A, an I, and a G. Just last year, AIG/Valic paid out $40 million to settle with the SEC for nefarious sales practices in the K-12 403(b) market in Florida. 

The Dets

So how good is the new CPS plan?

  • $28 per person annual record keeping fee (Vanguard charges $60)
  • 12 core mutual fund options — including Vanguard 500 Index (0.04%) and Vanguard Total International Stock Index (0.11%)
  • Vanguard Target Date Funds charging 0.09% 
  • Fixed interest option with a 2% guarantee for 24 months
  • Roth 403(b) and Roth 457(b)

Resources

403bwise Plan Rating

The CPS 403(b) went from a C grade to an A grade as a result of this move.  

403bwise Event on New Plan

Join us on January 26, 2022 for a panel discussion about the new plan with three CPS teachers. This free, one-hour Zoom event starts at 4pm PT/5pm MT/6pm CT/7pm ET. Register here

Stay wise and well (and push your district to go to single vendor).

 

* Most K-12 403(b) plans are individual contracts (i.e. contract between vendor and each employee). This is in contrast to a group contract between the vendor and the employer. Group contracts are much easier to migrate to a new vendor. This gives the employer extra leverage. 

Related Podcast:

Chicago Public Schools Goes Single Vendor We discuss Chicago Public Schools move to a single vendor 403(b). It has excellent pricing and investing options. The biggest surprise? AIG is the vendor.   Listen Now »