Union-Sponsored Plans Burn Teachers
Some of the nation's largest teachers unions have joined forces with investment companies to steer their members into retirement plans with high expenses that eat away at returns.The NEA, instead of representing reachers, is messing with their money:
In what might seem an unlikely partnership, the unions endorse investment providers, even specific products, and the companies reciprocate with financial support. They sponsor union conferences, advertise in union publications or make direct payments to union treasuries.
The investment firms more than recoup their money through sales of annuities and other high-fee products to teachers for their 403(b) plans — personal retirement accounts similar to 401(k)s.
New York State United Teachers, for instance, receives $3 million a year from ING Group for encouraging its 525,000 members to invest in an annuity sold by the Dutch insurance giant.
The National Education Assn., the largest teachers union in the country with 2.7 million members, collected nearly $50 million in royalties in 2004 on the sale of annuities, life insurance and other financial products it endorses.
Teachers unions across the country — including those in Las Vegas and San Diego and statewide teacher associations in Pennsylvania, Michigan and Oregon — have struck their own endorsement deals.
Unions in Dallas, Miami, Phoenix, Seattle and Atlanta, among others, refer members to products approved by the NEA and typically receive a share of endorsement revenue in return.
Buyers of an NEA-endorsed annuity sold by Security Benefit Life Insurance Co. pay annual fees totaling at least 1.73% of their savings. That is about 10 times as much as they would pay in 403(b) plans available from Vanguard Group, T. Rowe Price and other low-cost mutual fund providers.The story tells of teachers earning 3% on retirement plans -- in other words, losing money after fees -- while regular folkes not "represented" by a union are earning 15%.
The costliest option in the NEA-endorsed plan charges 4.85% a year. That means an investor would have to earn a return of nearly 5% just to break even.
How could this happen? Well, because unions are good and corporations are bad, of course!
Regulations require that those bad corporations screen investments in order to protect employees. Good unions have no such regulatory requirements -- because of their lobbying clout, natch -- so unscrupulous and underperforming investment companies rush to the unions full of union-trusting rubes who are easy marks.
So the question is: Are the teachers we trust the education of our children to getting smart enough to tell their unions to stop focusing on liberal politics and start focusing on them?
Tags: Union, Teachers union, LA Times, Teachers