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Dan's Blog

Green Light for Single Vendor 403(b) Plans In California? 🚦

December 21, 2021

In early December a seemingly innocuous benefits article began circulating among the K-12 403(b) advocacy community. Written by benefits attorney Jeff Chang and titled School District 403(b) Plans and Investment Selection, some believe (hope?) it is anything but benign. 


The core problem with K-14 403(b) plans in California is that public school and community college 403(b) plans are prevented from putting their plans out to bid. Let that sink in for a moment. School districts and community colleges wishing to offer their employees the best pricing and retirement plan education are prevented from doing so because of legislation that predates Watergate? At least, these entities think they are prevented from putting their plans out to bid. You can read more about the legislation that public schools think handicap them from offering great 403(b) plans.  

Higher Ed Lower Costs

Guess what California public education systems offer a high-quality, low-cost single vendor 403(b) and 457(b) plan to its employees? The University of California system (Berkeley, Davis, UCLA, et al.) and the California State University system (Cal State Fullerton, Cal State Long Beach, and San Diego State et al.). Each system has a single vendor plan through Fidelity Investments (just like Montgomery County Public Schools). Not only that, they offer online enrollment. Say what?

UC System Wisely Bucked 770.3

In his article, Jeff Chang shared that way back in 1982 The Regents of California successfully defended a lawsuit against their ability to control their retirement plan. As Mr. Chang wrote: "...if the employer is acting as a fiduciary to select and monitor the plan’s investments, it apparently can allow participant-direction of investment without … making section 770.3 applicable."

What Are You Waiting for LAUSD, San Diego USD, San Francisco USD?

Imagine if the largest districts in the state took control of their 403(b) plans? Imagine if they offered a simple, low-cost 403(b) and 457(b)? Imagine if they touted it as an employee benefit? Imagine if other districts followed suit? As John Lenon wrote: "It’s easy if you try." 

Imagine a Better 403(b) World

Imagine there's no 770.3
Or that it simply doesn't apply
No 403(b) hell for teachers
Above us only sky
Imagine all the people
Saving more today... Aha-ah...

Imagine there's no high-cost annuities
It isn't hard to do
Nothing to kill or die for
And no sales people in lounges, too
Imagine all the people
Saving at a rapid pace... You...

You may say I'm a dreamer
But I'm not the only one
I hope someday you'll join us
And the 403(b) world will be as one

Imagine no surrender charges
I wonder if you can
No need for greed or hunger
A brotherhood of one
Imagine all the teachers
Living in a low-cost 403(b) world... You...

You may say I'm a dreamer
But I'm not the only one
I hope someday you'll join us
And admit 770.3 is dumb


Stay wise and well (and push California school districts and community colleges to challenge 770.3).

Related Podcast:

Green Light for Single Vendor 403(b) Plans in California? Does article by benefits attorney offer path for California K-14 403(b) plans to go single vendor? Listen Now »