Crunch Time for Illinois 403(b) Reform Bill
May 21, 2024
A bill that would eliminate front-end loads and back-end loads, and cap fees has reached a critical juncture. After moving out of committee last week on a bipartisan basis SB 2568 must be brought to the Illinois legislative floor and voted on this week.
Crafted by educator-turned legislator Karina Villa, who was burned by an unsuitable high-cost variable annuity products while working in education, the bill would:
- Eliminate front-end and back-end sales charges
- Limit asset-based admin fees to 0.50%
It would require all vendors to make available:
- target-date index funds with an expense ratio that is less than or equal to 0.25%
- broad-based domestic index fund with an expense ratio that is less than or equal to 0.10%
- broad-based bond index fund with an expense ratio that is less than or equal to 0.10%
- international index fund with an expense ratio that is less than or equal to 0.10%.
Finally, advisors would be limited to charging 0.50% annually.
Industry Hates Bill
As you can imagine the industry hatest this bill. Correction, the part of the financial services industry that profits handsomely off the broken K-12 403(b) environment hates this bill. Their national lobbying arm, the National Tax-Deferred Savings Association hates this bill. Sales agents who trawl teacher lounges hate this bill. Fidelity Investments doesn't hate this bill. Vanguard doesn't hates this bill. Fiduciary advisors don't hate this bill. This should tell you all you need to know about the bill.
Are You an Educator in Illinois and Want to Help?
There is no guarantee this bill will even be brought to the floor for a vote. Such is the power of the opponents. If you are an Illinois educator and you want to do your part, please contact your state legislator and urge them to not only bring the bill to a vote, but to support it. You can find your representative here.
Whether the Bill Passes, Fails, or Doesn't Even Get a Vote, Karina Villa is a Hero
Scott and I have spoken to state legislators about this bill, participated in Zoom calls with opponents which can best be summed up by Upton Sinclair's sage words “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”), and participated in countless meetings with the Senator and her impressive staff. In all our years of working on K-12 403(b) reform we have met few people more impressive than Senator Karina Villa. The image that came to mind time and time again in Zoom calls with mostly men working in the financial services industry who would "explain" to Ms. Villa why her bill that would help teachers is misguided, is that of the Tiananmen Square 'Tank Man'. Whether this bill ever sees the light of day, she can hold her head high. Against enormous odds, expected and unexpected opposition, she has been nothing short of an inspiration.
Succeed or fail, it has been an honor to work with you on this, Senator, I mean, Tank Woman.
Stay wise and well (and know that pass or fail 403(b) reform is coming).
