Quid Pro Quo, Dano? Why Would Dan Flynn Gut 403(b) Cost Caps?
November 19, 2019
Dan Flynn is mad. The Republican member of the Texas House of Representatives lashed out at the Dallas Morning News for characterizing legislation he authored — HB 2820 — as harmful to teachers. He has requested a retraction from the paper. If up is down and black is white. Then yes, the paper errored.
How To Hurt Teachers
Veteran personal finance columnist Scott Burns wrote that Mr. Flynn’s legislation “declared open season” on teachers and made Texas safe for investment “predators.” The law, which went into effect on September 1, 2019, eliminated the following:
- 6% front end and/or back end load caps
- 10-year surrender charge caps
- Annual cost caps of 2.75%
To clarify, Mr. Flynn’s legislation permits investment firms to charge loads exceeding 6%, impose surrender charges longer than 10 years, and assess annual costs of more than 2.75% in teacher 403(b) plans. And he is the one upset? He’s lucky teachers aren’t doing sit-ins in his office. If anything, he should be thanking Mr. Burns for pointing out how damaging his legislation will be to teachers. I mean no one versed in retirement savings issues would ever author such legislation, right? If Mr. Flynn had done his homework, he would know that the K-12 403(b) is a cesspool of abuse by financial firms. So much so that the SEC is investigating 403(b) sales practices.
How To Help Teachers
If Mr. Flynn truly cares about the plight of teacher 403(b) plans, he would author legislation that required the following:
- End to sales loads
- End to surrender charges
- Annual cost caps of 0.5%
- Require Fiduciary Duty in 403(b)
How To Help Yourself?
So why would Dan Flynn author HB 2820? In 2018, he received $176,264.31 in campaign contributions from finance, insurance and real estate interests. A cynic might wonder if Mr. Flynn was currying favors for the financial sector. A simple way to dispel these concerns would be to answer the following:
- Whose idea was the legislation?
- Did you ever meet with or talk with teachers prior to writing your legislation?
- Did you ever meet with or talk with anyone in the insurance or financial industry prior to writing your legislation?
- In particular, did you ever meet with or talk with any of the finance, insurance or real estate firms who contributed $176,264.31 to your campaign coffers last year?
- What is an appropriate amount to pay in investment costs?
- How much do you pay in investment costs?
- Are surrender charges appropriate, and if you believe they are, why?
- Do your investments include surrender charges?
- What is an appropriate load charge?
- Do you invest in products that assess loads?
- Do you believe Equity Indexed Annuities are appropriate investment products?
- Do you invest in Equity Indexed Annuities?
What and Who is Really Behind This Legislation?
Answers to these questions would help the public better understand Mr. Flynn’s legislation motivation. And perhaps his anger.