NTSA and the Big Lie
February 21, 2023
"It is difficult to get a man to understand something when his salary depends upon his not understanding It." - Upton Sinclair
The National Tax-Deferred Savings Association has a problem. It's entire existence relies upon convincing the public that up is down and down is up. The organization pushes the biggest of retirement savings lies: teachers and school employees — and only teachers and school employees — must be served by numerous, high-cost, sales agent-sold investing products. Like clockwork, the organization churns out papers and "research" to support this falsehood. The latest nonsense is called Apples and Oranges: Why K-12 403(b) Plans Work.
Do As We Say Not As We Do
Guess how many vendors you have if you work for the NTSA? One. Which is weird because on page 4 of this 2018 NTSA "research" paper it champions "The Benefits of Choice" while warning on page 5 about the dangers of reducing choice. Guess how many vendors the largest and arguably most successful American company — Apple Inc. — makes available in it's 401(k) plan? One. Guess how many "research" papers the NTSA or its parent organization the American Retirement Association (ARA) have written urging 401(k) providers to move to a multi-vendor, high-cost, sales agent-sold plan? Zero.
See former NTSA head Brian Graff respond to a question about his organization's retirement plan (1:11 mark). Graff is speaking to the Los Angeles Unified School District Oversight Committee. He is there because the district was exploring the possibility of moving to the type of defined contribution structure (single vendor) Graff enjoys. Note: NTSA used to be called NTSAA. Graff is currently the CEO of the ARA.
Rotten Apples
Let's dig into the NTSAs 2023 effort to prolong The Big Lie. Let's start with the title: Apples and Oranges: Why K-12 403(b) Plans Work. Clearly the paper is trying to draw a comparison with the 401(k). So let's do that. Does this look like a plan that works?
Participation Rates
- K-12 403(b) — 27%
- 401(k) — 82%
Source: NTSA and Lincoln Financial Group
But most teachers have a pension and that's why participation rates are so low you say. OK. Let's compare participation rates with state and local employees who like teachers typically have both a pension plan and a defined contribution plan. Does this look like a plan that works?
Participation Rates
- K-12 403(b) — 27%
- State and local 457(b) — 44%
Source: Lincoln Financial Group
Say What?
Page 4 contains this beauty:
For participants, 403(b) accounts operate similarly to an individual retirement account (IRA) established with a local personal banker. The advice 403(b) participants receive is similar to that found with a typical bank IRA, although the fees paid for that advice are typically well below those found in an IRA.
Ah, what? Bankers are charging north of 3% and imposing even more onerous surrender chargers? Let's say this is true and "personal" bankers are charging even more than K-12 403(b) sales agents. It's a little like saying: the guy who ripped me off only took one of my cars.
More and Better Choices?
Page 4 contains a case study in double speak.
More and Better Choices: Another comparison drawn with 401(k)s — one often promoted by 401(k) vendors — is the supposed advantage in restricting choice in access to funds and fund providers. While too much choice can indeed be intimidating for those making investment decisions unaided, the K-12 403(b) market typically offers not only investment advice – but access to investment advisors – in rough proportion to the number of those platform investment options.
There is so much here...
- Let's start with the phrase "supposed advantage in restricting choice" is beyond rich from an organization that restricts choice in it's own retirement plan.
- The chiding of 401(k) providers for praising the single vendor approach is just a "chef's kiss" of absurdity. If only Apple Inc., Ford, Google, Microsoft, et al. was as wise as the NTSA who promote multi vendor plans for teachers and school employees, while mocking the single vendor approach, but who also utilize the single vendor approach. Say what?
- NTSA inadvertently gives the game away with this phrasing: ...too much choice can indeed be intimidating for those making investment decisions unaided. It's the very essence of what they do: They fight single vendor. They promote multiple vendor. Why? Because they say too much choice requires the use of a financial "professional". Guess who the organization represents? Not fiduciary advisors. But sales agents who are only too happy to put educators into products a 401(k) provider and fiduciary advisor would never be allowed to offer.
The K-12 403(b) is Broken and NTSA Knows It
Decades of sales agent driven plans and only 27% participation rate. Yeah, that sounds like a plan that is working. To date 403bwise has graded 3,833 school district 403(b) plans. Does this look a plan that works?
- A: 140 (3.7%)
- B: 19 (0.5%)
- C: 2,200 (57.4%)
- D: 855 (22.3%)
- F: 619 (16.1%)
The paper should really be called Apples and Oranges: Why the Current Broken K-12 403(b) Environment Works for the NTSA.
Stay wise and well (and fight the status quo)
