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Dan's Blog

Pennsylvania 403(b) Unicorn 🦄

May 18, 2020

Pennsylvania presents quite the 403(b) dichotomy. On one hand, the state is home to the Vanguard Group, the world’s largest mutual fund company, a firm widely lauded for its investor ownership and rock bottom investment costs. Unfortunately, it is also home to state legislator Jake Corman, who sponsored and got passed Act 5, a provision mandating that all school districts have at least four K-12 403(b) vendors. Why would Corman do this? Certainly not to advance competition. Apple Computer has one vendor for its 401(k) plan. Why? Because Apple Computer knows the best way to get optimal pricing and services is to make financial vendors compete for their services. Mr. Corman did the opposite. He all but guaranteed that teachers will be subjected to high-cost insurance products sold by commission-based sales agents. 

Room for at Least One-Low Cost Vendor?

One would think that if you are going to block competitive bidding, surely one of the four vendor spots would be reserved for a low-cost company like Vanguard. You would think wrong. If Corman cared about teachers he would have made this a requirement. He doesn't and didn't. We have interacted with at least a dozen Pennsylvania teachers since the law went into effect on July 1, 2019 and we have yet to see a vendor list with even one low-cost vendor. We have been working with a Pittsburgh area teacher who has tirelessly been trying to add one low-cost vendor. He has run into one roadblock after another, mostly from his union.

Typical Pennsylvania K-12 403(b) vendor list. 

I Don’t Believe What I Just Saw

Then on Friday, May 15, 2020 at about 10:30am Pacific time it happened. My podcast partner Scott Dauenahuer and I were doing a joint Zoom event on the 403(b) with Next Gen Personal Finance when a Pennsylvania teacher (from Abington Heights School District) shared her vendor list. We had to look at it twice. Then we looked at it one more time. Our eyes were not deceiving us. At the bottom of an ugly vendor list, was a thing of beauty. Dare, we say a unicorn?


Freedictionary.com labels a unicorn: “Something that is greatly desired but difficult or impossible to find.” Merriam-Webster describes a unicorn as “something unusual, rare, or unique.” The K-12 403(b) is all too real for Pennsylvania teacher forced to endure high costs.

Message to Pennslyvania School Districts, Unions and State Legislators

Hey school districts, unions and state legislators: What the hell are you doing? An investing firm, often described as a unicorn among financial firms, is located in your state. It is a job creator and revenue generator for your state. It brings prestige to your state. How is Vanguard not on every Pennsylvania K-12 403(b) vendor list? 


Stay well.