Teacher pensions are a consumer issue. Why doesn’t our union care about this?

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Patty Hill, who teaches algebra at Kealing Middle School in Austin, Tex., became angry after reviewing a colleague’s annuity contract. “It is not being transparent there that is infuriating to me as a mathematician,” she said. Credit: Ilana Panich-Linsman for The New York Times

For years we have been fighting to protect public employee pensions from attempts by elected public officials to raid them or failing to pay what they owe.

The issue was famously clarified (because I quote her constantly) by Illinois legislative pension thief Elaine Nekritz when she told a teacher who accused the legislature of stealing from our pension fund, “Stole it? We didn’t steal it. We never paid it in the first place.”

Even though the Illinois Supreme Court has affirmed the pension protection clause of our state constitution, many current teachers and future teachers have pensions that are at risk. Even current retirees cannot afford to let down our guard.

What is becoming increasingly clear is that there are a number of ways to steal a pension.

A few weeks ago the New York Times business writer wrote about the consumer threat and theft of 403(b) annuities that teachers and other public sector workers have their retirement savings invested in.

As risky as defined contribution annuity like a 401(k) may be as compared to our defined benefit pensions, they are a safe bet compared to a teacher’s 403(b)s.

This morning Bernard is back again writing about the 403(b) scam.

It is a must read for any current teacher concerned about their retirement savings.

How do investors know whether the product is appropriate for them?

Craig McCann, a former economist for the Securities and Exchange Commission, has built a computer model that is intended to make those calculations. He has employed close to a dozen people with Ph.D.s in math to dissect indexed annuity products as part of his firm’s work, which provides analyses for regulators and litigators representing investors. He said it took years for his team to master them.

“No agent selling these or investors buying these has the foggiest idea of how these work,” said Mr. McCann, who reviewed Ms. Lindert’s contracts.

But indexed annuities have to make sense for at least some investors, right? Perhaps for the incredibly risk averse? “No,” he said, without hesitation. “Never.”

Though it appears that investors have some exposure to the stock market, he says many are left with a return they could have achieved with a supersafe bond portfolio, without paying an obscured 2.5 to 3 percent annual fee charged by the annuity provider. “They are all Rube Goldberg machines,” he said.

What Bernard doesn’t go into much is the aiding and abetting that school districts and the two teacher unions do in carrying out this scam.

Both function to steer teachers to their approved annuity salesmen and firms.

The NEA does it in exchange for a fee from the investment company.

Regulations governing 403(b)s must be strengthened and the teacher unions must be made to look after the interests of their members on this issue.

5 thoughts on “Teacher pensions are a consumer issue. Why doesn’t our union care about this?

  1. “Stole it? We didn’t steal it. We never paid it in the first place.”

    She may be right about that, Fred. It’s probably more akin to embezzlement than theft.

  2. Its stunning its worse than the 401k and those are bad enough. I know they are offered in Illinois . The good news is the offerings I saw at a state university were similar to a 401k….the bad news is they were similar to a 401k…..I have been thinking about what advice I would give to a teir 2 who also has very diminished retiree health benefits……and I really am at a loss and I have had a securities license. Yeilds are at all time lows …it makes the market at all time highs. Even at these historic levels only 1 % of all 401ks and IRAs are over a million. I am working with 2 Indiana techers who are brilliant inventors and that will fund their health care….pension decent but no health. …I digress but only to a point. A young teacer with no pension and pooer pay wont have an entrepreneurial option. I could suggest the welfare option but we no that is a target as well…..I hate being such a downer but its hard not to be when your union and public employer will sell your future to hucksters….and the Times is spot on I read the whoe thing and the biggest crime here is its not a crime.

  3. Dear Fred,
    It is not a question of the union looking out for it’s membership. There isn’t much of that going on at all. The question really seems to be: “Will the I.E.A./ N.E.A. sell you down the river now or later?”

    The “seat at the table” argument is a non starter, particularly when nothing meaningful gets said by those sitting in that seat. The good of the membership seems subordinate to the protection of leadership power. Ever since the failed attempt to trade retiree pension rights away (in an effort to reduce the impact of future pension reductions on their active members), the union has been silent on many issues. Perhaps the new motto is “Don’t make waves”.

    Our former “union” doesn’t represent retirees anyway. The I.E.A. view is that retiree interests only have value as tokens to be traded away to protect other interests. So it is not surprising to me that they would aid and abet the theft of retirement money. After all, retirees aren’t their problem. By the time the rip off is discovered, you are just another retiree.

    My uninformed advice would be to stay away from anything recommended or endorsed by your union or your district. You will never know if the arrangement is fair to you until it is too late to do anything about it. Stick to index funds. Don’t expect something for nothing. There is no “free lunch”.

    Any retiree needs to think long and hard about even continuing to belong to this organization. (Maybe active membership should reflect upon this as well). For retirees, the I.R.T.A. seems a better choice. At least they fight for us.

  4. That is why I always skip my appointment to set up a 403(b) account with the representative that sets up camp in our teachers’ lounge for one week every fall. I am told that I must make an appointment, and I must talk to the rep. (Is there a state law that requires teachers to be subject to the 403B sales pitch to cover Springfield’s abdication of their pension responsibility?)

    I don’t know, but I refuse to listen to a sales pitch that is supposed to lead to me parting with more of my hard-earned money. I just tell the rep that I’m flat-out not interested as I cut through the lounge. I don’t make enough money to hand over a portion of it to the Wall Street/Rauner casino, and I already have a flimsy 401K from my years working in the private sector.

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