“This discussion is really a cautionary tale for everybody in this room,” Brad Hope, Managing Partner with OMNI & TSACG Compliance Services, said at the outset of a Feb. 27 general session at the 35th NTSA Summit in San Diego.
It’s about knowing where the industry is going and remembering where it’s been.
“The 403(b) market, compared to other defined contribution spaces, is unique—there’s a reason it’s unique and a reason it should stay unique,” Hope added. “We’re going back in time to talk about what the employer’s responsibilities are and are not. And we’ll discuss participants, which is the most important thing for everyone in this room. We want educators and their staff to be able to retire comfortably after serving our kids and the nation’s children.”
He then launched into the history of 403(b)s, which Congress codified in 1958. Tax-sheltered annuities helped public schools and university employees, many of whom did not have a pension. From 1958 to 1974, annuities were the only investment vehicle available, with mutual funds added in 1974 and CITs possibly soon.
He also detailed several current trends, beginning with the retirement regulatory and industry trends, including an “explosion” of regulations, the ongoing impact of fee disclosure requirements, tax reform, and the toll of low-interest rates.
State and district financial trends include:
- Pension plan funding issues.
- Budget concerns.
- The need to manage the risk of non-compliance.
- The need to prepare teachers for retirement outside of traditional pension plans.
Education profession trends include a younger average age of teachers, teachers entering from other professions, a greater percentage of teachers with advanced degrees, an increasing comfort level with technology, and an awareness of other retirement plan investment options.
“With new products, market entrants, platforms, distribution models, and choice, change is inevitable,” he concluded.
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