Tennessee Throws Teachers to the Wolves
June 3, 2025
Tennessee just made saving for retirement harder for teachers, and at the cost of its own highly-regarded state-run 401(k) and 457(b) plan: RetireReadyTN. The recently passed so-called Fairness in Benefits Act compels school districts to allow private companies to "educate" employees about their 401(k), 403(b) and 457(b) products. Tellingly, the law only applies to teachers and state workers participating in the Tennessee Consolidated Retirement System (TCRS).
Why Is This a Problem?
Anyone remotely familiar with the K-12 403(b) knows that the plan is objectively awful. Unlike the 401(k), there is no fiduciary oversight required of the employer. This means the products offered do not have to be vetted for quality. As a result, the majority of K-12 403(b) plans are awful. We have the data to support this. Our School District Plan Rating project rates the quality of public K-12 403(b) plans. To date we have posted and graded data from 5,299 districts which represent more than 3 million teachers. The grades are as ugly as teaching salaries in Mississippi.
- A-rated districts — 3.1%
- B-rated districts — 0.4%
- C-rated districts — 62.5%
- D-rated districts — 17.6%
- F-rated districts — 14.9%
See: Our Rating System Explained
Why Pass This Bill?
Word is getting out that the products sold in the majority of K-12 403(b) plans are awful. Companies who profit from this broken system and their lobbying group The National Tax Deferred Savings Association, part of the American Retirement Association (ARA), hate this. Consequently, they have embarked on a national effort to knee cap school districts' ablility to reform their own 403(b) and 457(b) plans. We have reported on these efforts.
- Illinois Reform Bill Falls Short
- NTSA to School Officials: You Don't Have to Do the Right Thing
- NTSA Spikes Bill on 457(b) Legislative "Win"
- NTSA Works Against Teachers Best Interests
- NTSA and the Big Lie
Tennessee state Senator Adam Lowe (R-Calhoun) carried the water for this bill, but it has the NTSA's fingerprints all over it as evidenced by the gleeful press release title: "Retirement Plan Knowledge Set to Expand in Tennessee" put out by its sister organization ASPPA.
The Requirements
- Employers must allow private entities to share information about alternative retirement and supplemental benefit plans.
- Information must be developed by private entities around qualified retirement plans (e.g., 401(k), 403(b), 457(b), and others under IRS rules).
While sales pitches must occur after hours, we know from experience that tactics will include inundating employee email inboxes and cell phones. Since "after hours" for teachers is not when the students go home, it's easy to imagine sales agents rolling onto campus as the students depart.
"It’s an invitation to financial predators to sell products that might look like they are employer-approved when in reality, there is no oversight. It’s a trojan horse," said 403bwise Director of Research and fiduciary planner Scott Dauenhauer, CFP®.
How It Hurts the State's Own Excellent 401(k) and 457(b) Plans
We give the state's RetireReadyTN 401(k) and 457(b) plans our highest rating [see our data on the state of the 403(b) in Tennessee; how their state pension works; and our rating of RetireReadyTN]. Private companies selling far worse plans will seek to talk teachers out of the excellent state plan, and into their far worse plans. Those not yet in the state plan will certainly not be told about it by private companies pitching their own plan.
A Better Bill
If Tennessee really cared about educators, it would pass a bill requiring school districts to put their 403(b) plan out to bid, or they would disband the 403(b) plan entirely in favor of RetireReadyTN.
What Tennessee Educators Should Do?
It's simple: Avoid the 403(b) and private sales pitches, and go all in on the excellent RetireReadyTN 401(k) and 457(b) plans.
Stay wise and well and fight private corporations and lobbyists efforts to make their retirement outcomes worse.
