
Teachers Pay High Fees for Retirement Funds - JumpCrisscross
https://www.wsj.com/articles/teachers-pay-high-fees-for-retirement-funds-unions-are-partly-to-blame-11576684664
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lotsofpulp
I don't see any reason an employer or union wouldn't offer
Vanguard/Fidelity/Schwab for 401k/HSA with access to the < 0.05 ER index funds
if they really were putting their employee or union members' interests first.

I assume they're probably getting some kickback or something from the
arrangement of restricting the 401k/HSA member's funds to high fee
investments.

Edit: At least for an HSA, one can transfer the funds out into a Fidelity HSA
account immediately. With a 401k, you have to wait until you leave your
employer, but with an HSA, just request a transfer of funds to your Fidelity
HSA, which is free and you can invest in anything you like.

~~~
Ididntdothis
I don’t understand why 401k even exists. The money should go into an IRA
controlled by the owner. The employer should have no say in this. The same
should go for health insurance....

~~~
harikb
Edit: See jlmorton's correction below. Creation was indeed accidental. Leaving
my comment unchanged.

When 401k-s originally started, it was considered ground-breaking in that it
was a way for employers to use their purchasing power (or choosing power) to
get lower cost management of funds. It was envisioned as a great thing for
employees and employers.

But we all know that is now how new laws are created. A bunch of lobbyists
from financial sector lobbied to create this new instrument, which in turn
directs more money to them.

Any instrument where the employee doesn't get to control the management of the
money is bad for the employee.

There is a similar situation with FSA (Flexible Spending Account). That is day
light robbery. Employee has to guestimate how much medical expenses they have
in the year. Estimate too little and you lose the tax savings. Estimate too
much and the FSA management organization keeps the unspent money. What was
originally deducted from your paycheck doesn't come back to you with a 10%
additional penalty. No, the person loses 100%. FSA says the money goes to the
employer to offset the management costs. This is like the real-estate sales
person claiming the seller is paying them.

~~~
Ididntdothis
I agree about FSA. It’s stupid in every conceivable way. But don’t they roll
over now? At least to some degree.

~~~
nimajneb
As far as I know it's Health Savings Account (HSA) in a high-deductible health
insurance plan that rolls over, not a FSA.

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ptmcc
My wife works for the local school district, and when she started I helped her
navigate the retirement plan options.

They actually have numerous 403b providers to choose from, including Vanguard,
but they basically offer no guidance (probably fear of some sort of liability
or fiduciary duty).

But of course they allow their providers to come to facilities and offer
"retirement advising" meetings. Naturally, the most predatory providers are
the ones that have sales people to send out to make field visits. What's worse
is that it is very unclear that this is not a district/HR-sponsored event, but
purely a sales meeting from a provider.

My wife, thinking she was doing the responsible and proactive thing, went to
one of these meetings with Valic. She very nearly got hooked into their scam
of expensive, high-fee, garbage annuity products within her 403b. When she
brought the paperwork home I was dumbfounded with how utterly terrible the
product is, and how lengthy and opaque the prospectuses are. By the way,
"Valic" literally means Variable Annuity Life Insurance Company.

She was massively frustrated by the experience, especially on top of the
stresses of being new to a job she nearly got suckered into an awful
retirement plan, and the district does basically nothing to oversee that the
providers are actually any good.

Fortunately we were able to bail on Valic and sign up with Vanguard, which is
a great option. Unfortunately, one has to a) know what they are looking for,
and b) go out of their way to find it and sign up.

This is one of those cases where "freedom of choice" devolves into "buyer
beware". Having lots of options is not inherently a good thing when many of
those options are hot garbage and information and guidance is not transparent.

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dangerboysteve
This Frontline doc (2013) paints a nice picture.

[https://www.pbs.org/wgbh/frontline/film/retirement-
gamble/](https://www.pbs.org/wgbh/frontline/film/retirement-gamble/)

Many pension funds are screwing their members with high fee mutual funds
resulting in 2-3%+ haircuts on annual returns. And this does not include all
the mystery fees on top of everything else. Imagine what the compounding
effects on this is. And these funds are shitty compared to Vanguard index fund
over time. It comes down to shady backroom deals, kickbacks and incentive
based selling.

edit: added year of the doc.

~~~
elliekelly
12b-1 fees[1] are the biggest scam the mutual fund industry has going.

[1] [https://www.fool.com/investing/general/2010/10/15/why-we-
opp...](https://www.fool.com/investing/general/2010/10/15/why-we-
oppose-12b-1-fees.aspx)

~~~
blaser-waffle
Is anything like that in Canada?

My RRSP returns are not impressive despite shooting for low cost options,
including popular Vanguard funds...

~~~
elliekelly
Yes, I don’t know the regulatory framework that allows it off the top of my
head but they’re often called “trailer fees” in Canada. Look in the fund
prospectus for disclosures relating “shareholder service fees” and “embedded
commissions”. If you work with an advisor ask whether they (the advisor)
receive compensation from any of the funds they recommend.

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kevindong
It amazes me how inexpensive the bribes companies pay out are in comparison to
the profit they make off of the deals generated by the bribes.

> The Nationwide subsidiary paid $4.58 million to the National Association of
> Counties in 2017, the latest available data. About 1.6 million county
> employees and retirees have participated in 457 plans for which Nationwide
> is the record keeper, said Brian Namey, a spokesman for the county
> association.

$4.58 million / 1.6 million employees = $3.03/employee

> At the International Association of Fire Fighters, about 100,000 of the
> 292,000 members are in a Nationwide retirement plan, according to union
> President Harold Schaitberger. He said the union’s for-profit subsidiary,
> called the International Association of Fire Fighters Financial Corp., earns
> $3.4 million a year for various product endorsements—$2.5 million of it from
> Nationwide—and sends the parent union $2.45 million to support programs that
> benefit firefighters.

$2.5 million / 100,000 employees = $25/employee

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theOneTrueOld
Nickel and dimed to death.

The person that first came into my classroom to offer to help me set up a 403B
ends up being one of the most expensive 403Bs options I have per the website
[https://www.403bcompare.com/](https://www.403bcompare.com/)

And then on top of it all my school district employer even charges me a
monthly fee of $3 just to send money to my 403B.

Edit: It's actually the 403B admin that is charging me the $3 a month.

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bifrost
Unions in CA are also why teachers can't get disability insurance. Have to go
out for surgery? You get nothing.

~~~
kazagistar
If a union isn't democratically controlled by the workers it's not a proper
union, and if it is, it is possible to make work for the majority of its
employees, at the very least. So what's the full story you are missing here?

~~~
bpodgursky
Union bosses have control over raises, promotions, and hours granted to
members. They also have built-in powers of communication and messaging control
(both publicly and within the union)

In corrupt unions, the bosses absolutely will use that power to punish
employees seen as challenging their authority or a leadership change.

Saying "oh, they can vote them out" sounds great from the outside, but if you
have a family, you're not going to start an insurrection if it means losing
your job, healthcare, and getting blacklisted from being employed in other
(union) shops.

~~~
gamblor956
This is a very wrong understanding over how unions work these days.

Union "bosses" don't control raises, promotions, or hours, and haven't for
several decades. Union bosses simply don't have the power they used to have
(and for some reason, are still portrayed as having in TV or movies). The
Irishman, for example, is based on a decades-old perception of union bosses
that was only ever true of the NY-based unions...decades ago.

"Superstore" on NBC is actually a pretty accurate portrayal of how unions work
in real life: pretty mundane, and not all that different from being non-
unionized.

~~~
bpodgursky
I'm not saying this is universally true. There are a lot of decent unions.

But the longshoreman unions, for example, absolutely still work this way.

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sct202
Many private companies also have high fee funds in their investment fund
options and pensions. A lot of people running these things aren't always aware
of all the options they could be taking because they only meet with sales
people.

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bryanlarsen
Unions are the reason that teachers have retirement funds in the first place.
That doesn't excuse them from the ridiculously high fees, but don't throw out
the baby with the bathwater.

~~~
dvdhnt
I can't believe how much union busting is going on in these comments. People
take for granted the little wins labor has gotten over the last century.

~~~
bluGill
The union has done good, but they are taking more credit than they deserve for
those wins. Many would have happened anyway because labor is a limited
competitive resource (at times, for some jobs) and so if you want to get good
people you need to treat them well even when times are bad.

Unions have done good. They have also done bad. Most people will only
acknowledge one side of that.

~~~
bryanlarsen
My uncle died in a construction accident that would never have happened on a
union site. So while there may be two sides, implying that the sides are
similar is classic whataboutism.

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pathseeker
The title on HN apppears to have been altered to leave out the substantive
part. The purported cause is unions.

" Teachers Pay High Fees for Retirement Funds. Unions Are Partly to Blame. "

~~~
blaser-waffle
It was changed because "partly to blame" is disingenuous and creates a bias
right off the bat.

"Partly to blame" could be anything -- could be 5%, could be 50% responsible.

Sure, they're partly to blame, but greedy hedge funds could be 90% responsible
and the Unions just sort of went along with them.

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aphextron
Unions are not perfect. But they are the only protection individual laborers
have left against the unstoppable power of modern corporations. Don't ever
fall for the endless slandering laid against them by capitalists.

~~~
seibelj
Employees have the ability to switch jobs, whereas unions make it hard to join
a different shop at the same seniority level as before. I would rather be able
to switch jobs easily than have to follow union rules.

~~~
Pfhreak
This is FUD. There are seniority based unions, and there are merit based
unions. Nothing about a union means you can't negotiate, have merit based
promotion, etc.

Also, as someone in tech, I constantly hear people talking about downleveling
when they change jobs, I hear people talking about unclear promotion criteria,
etc.

~~~
esoterica
All unions are structurally designed to reward tenure. Current members of the
union can vote but future members cannot, and current members have more
seniority than future members, so union members will always vote to screw over
the people who join the union after them.

~~~
gamblor956
This is FUD, and runs counter to what players' unions in professional sports
have actually done...every single time they've negotiated in the past decade.

~~~
esoterica
Have you never heard of rookie vs veteran contracts? Player unions are
incredibly stacked in favor of senior players.

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aphextron
Unions Have Lost Most of Their Power, and Labor is at the Complete Mercy of
Capital. Slander like this is partly to blame.

~~~
gamblor956
It's the myth of merit. Tech workers like to think they're highly-paid based
on merit (and not simply because demand far exceeds supply), and also that
they are the best at negotiating high salaries.

Of course, these same workers were getting completed shafted out of tens of
billions in collective salary due to anti-poaching agreements that limited
their bargaining power.

