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The K-12 403(b) is broken.
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Dan's Blog

School Districts: You Got the 403(b) Power ✊🏽

November 6, 2019

Dear School Districts,

Thank you for all you do. Running a school district is complex and important. Plus, you have so many stakeholders to please: student, parents, teachers, the community, school board members, local and state-wide politicians, voters, etc. etc. I don’t pretend for a moment to think that what you do is easy. But there is one relatively easy-ish thing you can do to help teachers: offer good 403(b) plans.

Yes, K-12 403(b) plans fall outside of ERISA (1974 Employee Retirement Security Act) oversight. Yes, keeping your plan in compliance takes some time and some resources. And yes, third party administrators (TPAs) can take over this burden at almost no cost to you. But at what cost to teachers?

By almost all measures, the K-12 403(b) retirement plan is a disaster for teachers. They typically only have access to high-cost products sold by high-commission sales people. Participation rates are below 40 percent.

You have the power to take control of your 403(b). Do what Montgomery County Public Schools in Rockville, MD did. They put their plan out to bid and selected one low-cost vendor. Guess what? Costs went down (for the school district and the employees) and participation went up.

The SEC and the media are scrutinizing K-12 403(b) sales practices. This is excellent news. But how soon until the media and the public start scrutinizing K-12 employers? Why don’t employers take control of the 403(b) they will surely ask?

Tragically, the insurance industry got legislation passed in California and Pennsylvania that prevents school districts from moving to a single, competitively bid vendor. This means teachers in those states will save less for retirement. Often, significantly less.

The overwhelming majority of school districts can follow MCPS’s lead. Once they do, it will put enormous pressure on California, Pennsylvania and other such states to rescind their anti-competitive legislation. 

In closing, who do you want calling the shots for teachers? You or the insurance industry?


The 403(b) Advocacy Community

You got the power
To keep a teachers’ retirement savings from burnin’
You got the power
To keep the insurance industry wheels from a-turnin’