The K-12 403(b) Tax
August 23
In a recent podcast Professor Scott Galloway nailed the core problem with multiple vendor K-12 403(b) plans…
“One of the biggest mistakes we make in marketing is believing that choice is a good thing. No it’s not!” he exclaimed. “Choice is a tax. Consumers don’t want more choice. They want to be more confident in the choices presented.”
Consider what an educator faces investing in a 403(b) in the school district in my town of Redlands, Califoria: 38 financial companies (each with dozens of investment choices). Thirty-five of these companies are mostly awful. One — Equitable Financial — just paid a $50 illion fine to the SEC. Sure there are three good vendors — CalSTRS Pension 2, Fidelity Investments and Vanguard — but how does an employee who knows nothing about the 403(b) make a wise decision?
- 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
- Fiduciary Trust Company of New Hampshire
- Franklin Templeton Investments
- GWN Securities, Inc
- Horace Mann Investors, Inc.
- Horace Mann Life Insurance Company
- Industrial-Alliance Pacific Life Ins Co, US Branch
- Invesco (formerly OppenheimerFunds)
- IPX Retirement
- Lincoln Investment, LLC
- Lincoln Nat'l Life Ins Co (Lincoln Financial Group), The
- Metropolitan Life Insurance Company
- Midland National Life Insurance Company
- 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
- Vanguard Group, The
- Voya - ReliaStar Life Insurance Company
- Voya Retirement Insurance and Annuity Company
Tax on Time. Tax on Savings Balance.
Sifting through this list is a tax on time and ultimately an educators nest egg. The overwhelming number of Redlands Unified employees who choose to use a 403(b) will sign up with a high-cost vendor because 1) They don’t know any better 2) Their employer doesn’t have their backs. This “tax” will cost Redlands Unified employees hundreds of thousands of dollars in lost savings.
Employers: End the K-12 403(b) Tax
Grab control of your 403(b) plan like this district has done so your employees will be confident in the choices presented.
Stay wise and well (and end the K-12 403(b) tax).
