[apteacher]

The following site includes a rebuttal to the LA Times article on union kickbacks to financial vendors:

http://www.washingtonea.org/index.php?opti...id=627&Itemid=0

It is a pretty weak rebuttal that can be attacked on many fronts; however, I was surprised to learn that NEA Member Benefits, which endorses Valuebuilder/Security Benefit, is a for profit company. Wow, here I thought that the main objective of NEA was to serve its members, and now I find that NEA MB is trying to make profits off of them.

In fairness, the article states that,

" it operates as close to a break-even margin as it can and any surpluses it may have are poured back into the services and products that NEA Member Benefits provides ..."

But this rings hollow to me.

This post has been edited by apteacher: 07 May 2006 - 04:56 PM

[JudyS]

The following site includes a rebuttal to the LA Times article on union kickbacks to financial vendors:

http://www.washingtonea.org/index.php?opti...id=627&Itemid=0

It is a pretty weak rebuttal that can be attacked on many fronts; however, I was surprised to learn that NEA Member Benefits, which endorses Valuebuilder/Security Benefit, is a for profit company. Wow, here I thought that the main objective of NEA was to serve its members, and now I find that NEA MB is trying to make profits off of them.

In fairness, the article states that,

" it operates as close to a break-even margin as it can and any surpluses it may have are poured back into the services and products that NEA Member Benefits provides ..."

But this rings hollow to me.

Hi, apteacher,

Well, there you are! You found a link to the article that I had been asked NOT to put here... and I agree that their arguments are weak, flawed, and indicate a misunderstanding of the issues. For instance, because schools as "decentralized" there's a problem? PuLEEEEEEEZE! Like big companies with 401(k)s aren't?? No, no, no. The difference is that 401(k)s are OFFERED, and 403(b)s (at least as designed by Security Benefit) are SOLD. Big difference.

Judy

[Herbert]

AP; there is a huge rebuttal in the NEA's response; Under Facts About Fees' the article states that the NEA receives no income from the endoresement. This statement is a direct refutation of the LA Times article whichs states that NEA received nearly 50M from insurers. It is possible that one statement is correct, and one is false. It is possible that both statements are correct. What are the facts here?

Herbert Hussey

[JudyS]

Herbert,

NEAMB (a wholly owned subsidiary of NEA) receives $$ from Security Benefit, but NEA itself does not. I think that's the distinction.

Judy

[sschullo]

Also, the most glaring omission is just how much do NEA members pay for the 403b services and then compare those fees associated with a low fee plan such as Vanguard or TIAA CREF. If every NEA member were given those comparison facts on one sheet of paper in plain English, then I believe that a great many members would be motivated to do this themselves. Some wouldn't believe that they are paying that much because the fees are abstract for the moment because it reflects over long periods of time. The remaining individuals will absolutely refuse to admit and vehemently deny that they might have been taken by the sales force. The NEA leaders belong to the latter group.
Steve

[apteacher]

Herb,

1) You mentioned that the article states that NEA receives no income from endorsements. However, here is an excerpt from that article:

"NEA Member Benefits receives a relatively small payment from Security Benefit Group, the underwriter of the NEA Valuebuilder Program."

This "relatively small payment" amounted to $2 million in 2004. I suppose this IS a relatively small payment considering what Kathy Kristof noted in her LA Times article, namely:

"The most recent disclosure on file with the Labor Department shows that the NEA received $49.6 million from Security Benefit Life Insurance, the provider of Valuebuilder, and other endorsed companies in 2004."

2) Who benefitted from this payment? My answer would be:

a) Security Benefit, which received NEA's seal of approval, and the trust of teachers who assumed that they would be getting a good deal.

b) NEA MB, a for-profit company.

This post has been edited by apteacher: 07 May 2006 - 11:50 PM

[apteacher]

Here is an excerpt from an April 2005 article from Forbes:

"NEA Valuebuilder investors pay annual fees of up to 5.6% of their fund balance, including a "mortality and expense risk" charge of up to 0.9% (TIAA-CREF charges less than 0.1%) and mutual fund charges of up to 3%; cancel in the first year and you take a 7% hit.

To get independent agents to flog this dud, Security Benefit pays first-year commissions of up to 8%. That is in addition to overrides, expenses, bonuses and trailing commissions, not to mention "expense-paid due diligence trips and educational seminars." Security Benefit defrays the cost by itself taking kickbacks of up to 0.4% of assets from the mutual fund firms whose funds it offers to teachers. The good news: Only 60,000 NEA members own Valuebuilder, and 40,000 of them are in a mutual-fund-only product that spares them insurance fees."

The article was published about a year ago. Here is the site at which you can read the entire article:

http://www.forbes.com/execpicks/forbes/2005/0425/100.html

[Herbert]

Herb,

1) You mentioned that the article states that NEA receives no income from endorsements. However, here is an excerpt from that article:

"NEA Member Benefits receives a relatively small payment from Security Benefit Group, the underwriter of the NEA Valuebuilder Program."

This "relatively small payment" amounted to $2 million in 2004. I suppose this IS a relatively small payment considering what Kathy Kristof noted in her LA Times article, namely:

"The most recent disclosure on file with the Labor Department shows that the NEA received $49.6 million from Security Benefit Life Insurance, the provider of Valuebuilder, and other endorsed companies in 2004."

2) Who benefitted from this payment? My answer would be:

a) Security Benefit, which received NEA's seal of approval, and the trust of teachers who assumed that they would be getting a good deal.

b) NEA MB, a for-profit company.


OK, AP TEacher, you got me. I read the article again, but I missed the section that said the amount NEA got from Security Benefit was 2M. Please tell me where I missed it.

Herbert Hussey

[apteacher]

Herb,

I actually called NEA MB to find out for myself how much was paid and was flat out told that the figure was $2 million. Straight from the horse's mouth.

[Herbert]

AP: I am glad that you got the information, but that is the problem; that figure is not in the article. In fact, the rebuttal appears to state the opposite of what the article says, though it makes a vague referrance to the NEA getting a small fee from the insurance company.

Herbert Hussey

[apteacher]

Herb,

Yes, the WEA article mentions a "relatively small fee" paid by SB. How deceiving can one be?

The problem with NEA MB is that it purports to be saving money for teachers. Here is a quotation from its web site:

"Thanks to the buying power of 2.8 million members, you can save with exclusive Insurance Programs, Financial Services and Member Discounts designed to meet your ever-changing needs."

As a result, I can see a member thinking that Valuebuilder MUST be a good deal because NEA MB is using its "buying power" to drive down costs for "Financial Services" such as 403b plans. As I have previously pointed out, Valuebuilder hardly saves anyone money.