NTSA to School Officials: You Don't Have to Do the Right Thing
September 19, 2023
The National Tax-Deferred Savings Association (NTSA) works 24/7 to convince teachers and school administrators that up is down and down is up (see NTSA and the Big Lie). They are now basically telling school officials: When it comes to the 403(b), you are under no obligation to do the right thing.
Time Out for Key Term: Fiduciary
Before proceeding let's start with a term: Fiduciary. According to Investopia a fiduciary is a "person or organization that acts on behalf of another person or persons, putting their clients’ interests ahead of their own, with a duty to preserve good faith and trust. Being a fiduciary thus requires being bound both legally and ethically to act in the other’s best interests."
Another Absurd NTSA Document
I am just a simple country blogger, but it would seem to me, especially when it comes to money, saving, investing, and retirement plans, it would be good to have someone looking out for my best interests. Not according to the NTSA. Desperate to maintain the broken K-12 403(b) multi-vendor model and fearful that consultants are beginning to influence public school business officials, the organization has a message: You are under no obligation to do the right thing.
Consider the organization's latest effort to prevent school officials from acting in their employees best interests. In something called The Value of Choice the organization reports that...
Public School Business Officials are regularly approached by consultants and others in the retirement industry about changing their multiple provider 403(b) plan to a single provider structure. The typical “pitch” to move from a multi to single provider design is littered with inaccuracies and misstatements crafted to scare school leaders into changing. Things like: “Your 403(b) Plan is subject to ERISA …” “You are a fiduciary …” “Multi-provider plans are hard to administer…”
Let's take these "things" one at a time.
"Your Plan is subject to ERISA" — The Employee Retirement Income Security Act of 1974 (ERISA) requires sponsors of retirement plans to act in the best interest of their employee/participants (i.e. act as a fiduciary). Sponsors of 401(k) plans are required to abide by ERISA. Sponsors of public K-12 403(b) plans aren't. NTSA gleefully trumpets this fiduciary loophole: "All K-12 public education plans are statutorily exempt from ERISA and the fiduciary requirements associated with ERISA." Translation? Do the right thing? Forget about it! It cannot be emphasized enough that there is nothing preventing school districts from doing the right thing. Case in point: Montgomery County Public Schools in Rockville, Maryland went single vendor for both their 403(b) and 457(b) plans.
"You are a fiduciary" — NTSA has some great news for school officials: Exemption from ERISA means you aren't required to act in the best interest of your employees so don't! Fiduciary smiduciary.
"Multi-provider plans are hard to administer” NTSA has more good news for employers looking to not act in the best interest of their employees: "While administering multiprovider 403(b) plans does have some nuanced characteristics, moving to a single provider structure does not mitigate those complications." Again, I am just a simple country blogger, but you tell me which plan would be harder to administor: 1) Apple Computer's one vendor 401(k) plan; or 2) the Dallas Independent School District's 40+ vendor list. Note that one of the vendors in the Dallas ISD plan — Equitable — was fined $50 million by the SEC. I wonder why this same Equitable product isn't offered in 401(k) plans? I wonder why NTSA doesn't make this product available in its retirement plan? I wonder why NTSA has a single vendor retirement plan? It's almost like NTSA is saying: Do as we say and not as we do.
Chef's Kiss
The fact the NTSA uses the phrase crafted to scare school leaders into changing while attempting to scare school officials from changing is just next level.
The Association of School Business Officials (ASBO) International Has a Sponsorship Problem
ASBO is one of the go-to organization's that school benefits officials turn to for guidance. The problem? Three of their "strategic partners" are high-cost 403(b) providers: American Fidelity, Equitable, and Security Benefit. See our ratings of these companies here.
Stay wise and well (and inform your employer about NTSA and ASBO).
