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403(b) Gaslighting 101 🎭

October 29, 2019

gaslight [gas-lahyt]

verb (used with object), gas·light·ed or gas·lit, gas·light·ing.
to cause (a person) to doubt his or her sanity through the use of psychological manipulation:
How do you know if your partner is gaslighting you?


It's good to have friends in the 403(b) industry. One FO4 (Friend of 403bwise.org) shared with us talking points from a recent 403(b) plan "education" presentation put on by the insurance industry. It appears to be a masterclass in gaslighting and illustrates the level of deception the industry can stoop to maintain a broken system that punishes teachers.

Reportedly, representatives from the insurance industry — American Fidelity, Horace Mann, Security Benefit, and Voya — led by AXA teamed up at a recent Association of School Business Officials conference in Washington, DC to share the following:

  • You have heard numerous reports in the news regarding 403(b) lawsuits, fines and pending litigation... disregard as this doesn’t apply to you
  • You are not a fiduciary
  • Don’t ever fall for the single vendor/401(k) model or you will be considered a fiduciary
  • Don’t go single vendor just because of fees
  • As the coming AXA whitepaper with NTSA will support... more vendors = higher participation + higher deferrals + higher account balances
  • Move to single vendor equates to a participation rate of 8%
  • His close… the three most scary words a CFO/Business Manager can hear “ERISA Best Practices”

Sigh. Where to begin? No fiduciary would ever recommend a multi-vendor plan. No 401(k) employer would ever recommend a multi-vendor plan. These five firms don't have multi-vendor plans themselves. It would be great great if they did! I would love to see sales agents peddling sandwhiches and fee-laden investments in the lunchrooms of AXA.

Multi-vendor plans do not lead to higher participation rates. The K-12 403(b), which operates in a largely multi-vendor environment, has been mired in a 35%-40% participation rate. Do you know who has a rising participation rate? Montgomery County Public Schools in Rockville, MD. Guess what they did two years ago? They went to a single vendor

Fees don't matter? Love that one. Math says otherwise. At every opportunity school business officials and participants should ask representatives of these firms how much they pay in investment fees. 

Literally as I started penning this blog the following article by The Wall Street Journal popped into my inbox: SEC Probes AIG Unit on Retirement Products for Teachers. The story described an investigation into the insurers' K-12 403(b) unit Valic that "appears to be part of a broad inquiry by the SEC into sales of high-cost products in retirement plans set up for schoolteachers, university employees and other public sector workers." The story also contained this nugget: Jay Clayton, the chairman of the SEC, has expressed a general concern about the prevalence of high-cost investment products in teachers’ retirement accounts. “Teachers provide a tremendous service to our country,” Mr. Clayton said in a statement provided to The Wall Street Journal. “It is important that our teachers have full and fair information about fees, costs and conflicts of interest associated with their investments.”

Monday, in a story detailing absurd 403(b) legislation in Texas, veteran personal finance writer Scott Burns of the Dallas Morning News called insurance industry 403(b) practices a "fee scheme" that works "fine for the insurance industry. But it makes saving an almost fruitless activity for teachers." He compared the arrangment to the Jerry Reed song "She Got the Goldmine (I Got the Shaft)."

While it is true that K-12 employers can ignore the spate of higher education 403(b) lawsuits. It is also true that K-12 403(b) plans are in the crosshairs of the SEC and the press.    

False Bravado

When the shock of reading the falsehood that moving to a single vendor reduces participation wears off, you realize that a presentation intended to scare and bully school business officials through falsehood and gaslighting, is instead a declaration of the industry's deepest fears: informed regulators, informed media, informed school business officials, and ultimately informed consumers. 

To school officials reading this: How will you know if your are being gaslit? If any of these five companies — American Fidelity, AXA, Horace Mann, Security Benefit, and Voya —are on your vendor list, you may have been gaslit.