(b)Mused: “Consolidating” Views

August 5, 2011 (PLANSPONSOR (b)lines) – If you are a member of the PLANSPONSOR (b)lines 403(b) group on LinkedIn you know that a recent article opposing efforts to consolidate 403(b) plan vendors by Brian Graff, Executive Director and CEO of the American Society of Pension Professionals and Actuaries (ASPPA), has some folks riled up.

Graff contends that, “The result of this kind of consolidation is not better products for teachers. The real consequence is that teachers have fewer choices, including the right to work with the very advisors they’ve grown to trust.”   

Scott Dauenhauer, President at Meridian Wealth Management, noted in a blog post that nowhere did the article talk about participant’s rights to conflict-free fiduciary advice, and that it focused on restraining competition by allowing any vendor that wants to offer a product (in a school district) to offer such product without obstruction. “Graff certainly doesn’t support such a vision for the 401(k) industry, so why for the 403(b)?” Dauenhauer asks. See 5 Questions Brian Graff & ASPPA/NTSAA Should Answer Publicly.  

The Los Angeles Unified School District, which had been cited in Graff’s article as an example where the National Tax-Sheltered Accounts Association’s (NTSAA) had prevailed in blocking its move to consolidate vendors, responded to Graff, noting “We find it odd that [ASPPA] should risk its professional reputation by siding with the most expensive 403(b) vendors against the rights of teachers and other school employees.”  

Though Graff’s article said advisors “should know that NTSAA is the only organization fighting for them and fighting for the right of teachers to work with them,” opposition is as old as the 2007 regulations that provided the administrative impetus for doing so. PLANSPONSOR has reported on such challenges from a school district in Minnesota (see District Wins Fight over Vendor Change Arbitration); the Chicago Teachers Union (see Chicago Teachers Union Opposes Move to Central Recordkeeper); and teachers in Newport News, Virginia, Utica, New York, and Baltimore County, Maryland (see Newport News School Employees Howl over 403(b) Vendor Limits).  

However, my concern is for the employers/districts. Although ASPPA and the NTSAA can be commended for comments to legislators to help ensure regulations are less burdensome for employers, Graff’s article and the groups’ efforts to combat consolidation in states’ and public school districts’ plans shows little consideration for the burdens imposed by the status quo – the costs of staffing for or securing help with monitoring transactions among multiple vendors, as well as the administrative burden to provide accurate participant account information. Such things are why the districts are trying to consolidate in the first place.   

On its Web site, ASPPA says it is “acting on behalf of its 7,500+ members to improve retirement income policy.” And its members include “actuaries, consultants, administrators, insurance professionals, financial planners, accountants, attorneys, and human resource managers.” However, it may be leaving out some members in its lobbying efforts.