LAUSD Has a 403(b) Problem
December 13, 2022
The latest data on Los Angeles Unified School District 403(b) contributions is not great from a participant perspective. The overwhelming majority of the twenty plus vendors are terrible. In fact only one offering — CalSTRS Pension 2 — is low cost. It is the only vendor to earn our highest rating: green. The rest of the vendors are a mix of yellow and mostly red vendors. See how we grade vendors and rate districts.
High Level Numbers
- $2,562,545,136 of assets under management (more than $3 billion when grandfathered accounts are included)
- 41,519 accounts
- 16,887 active accounts
- Monthly contributions are close to $8 million
- Annual contributions are around $95 million.
Vendor Data
- 68% of participants contribute to 5 companies (National Life Group, Midland Life Group, CalSTRS Pension 2, Equitable, and ReliaStar Life Co.)
- 9% of participants contribute to the one low-cost plan CalSTRS Pension 2
- 43% of participants contribute to either an equity index annuity or a fixed annuity
- 12 companies have less than 2% of the assets
- 17 companies have less than 2% of the participants
Most Participants
- National Life Group — 9,651
- Midland Life Group — 6,500
- CalSTRS Pension 2 — 3,574
- Equitable — 3,275
- ReliaStar Life Co. — 3,105
A Failed Plan
When five times as many participants contribute to two of our lowest rated companies — National Life Group and Midland National Life Group (both receive our lowest Red minus grade) — as contribute to the one green rated vendor available — CalSTRS Pension 2 — the plan is an abject failure.
The Solution
Do what other big city districts have done and begin the process of moving to a single, low-cost vendor. New York City is single vendor. Chicago Public Schools is single vendor. As benefits attorney Jeff Chang of Best Best & Krieger LLP has written, California school district absolutely can move to single vendor. Does LAUSD have the courage? Will they put employees over vendors?
Stay wise and well (and it's time for LAUSD to move to single vendor)
Data courtesy of the RIAC Investment Subcommitee 12.8.22