Comedian Jon Stewart Shows Way on Who to Direct Outrage at for New Pennsylvania 403(b) Rule
Comedian and former Daily News host Jon Stewart appeared on Capitol Hill Tuesday imploring Congressional members to ensure that 9/11 first responders, many of whom have suffered profoundly, continue to have access to healthcare. [Side note: Can you imagine such a thing happening in the countless first world countries who provide national healthcare?] As Brian Boyle of The Los Angeles Times pointed out, Stewart doesn’t “punch down” at the underlings charged with defending bad public policy. Instead he has always gone after those enacting bad policy.
Four Vendor Requirement
We recently learned that the state of Pennsylvania passed legislation in 2018 that goes into effect on July 1, 2019 requiring school districts to have at least four 403(b) vendors. This is wrong-headed on so many levels. You don’t get lower pricing and better services by having more vendors, you get these outcomes by making financial firms compete to earn the business. When it comes to 403(b) or 401(k) vendors, less is more. And that’s what many school districts in Pennsylvania were doing: reducing vendor lists through competitive bidding in order to get lower cost investments and better service. As I mentioned in Hey Pennsylvania K-12 Teachers: The Insurance Industry Just Made Your 403(b) Plans Worse, Apple Computer doesn’t have four 401(k) vendors. No, they have one vendor selected through competitive bidding.
Financial Press Notices
I was happy to see that Greg Iacurci of Investment News picked up the Pennsylvania 403(b) news and penned Pennsylvania law requires multiple record keepers for 403(b), 457 plans. In it he quotes Jennifer Kocher, spokesperson for Jake Corman, the legislator who sponsored the anti-competitive legislation. Ms. Kocher said: “the provision around multiple retirement-plan vendors was meant for diversification and is a fairly routine practice for the state.” I cringed reading this. The “diversification” false flag is an argument long pitched by the insurance industry desperate to maintain their high-fee stranglehold on the K-12 403(b) marketplace.
It was easy to initially be mad at Ms. Kocher. Especially when she added: "We don't just pick one company for one thing. We require different bids and different options." Uggh. Yes, when it comes to say, a new road, the state — hopefully — gets multiple bids. But, surely, Pennsylvania doesn’t have all bidders engage in the work? That is what Act V does.
Better Know a District
The real outrage should be directed squarely at Jake Corman who sponsored the legislation. We and others are very curious about his motivation for enacting this law. It would be remarkable if he just woke up one day and said, “Geez, you know what? Let’s make teacher 403(b) plans more costly and more confusing.” We are hearing that at least one financial firm in particular will benefit from this new act. I sure hope that firm has at least 4 vendors in the retirement plan they provide their employees. I hope they pester employees in the staff lounge and at their cubicles. And there better be some onerous surrender charges. Now that would be a "Moment of Zen."