Many of the public sector workers relying on pension funds for their retirement are being milked by exorbitant fees in an opaque fashion. Anne Tergesen and Gretchen Morgenson report at the Wall Street Journal:
The pitch from the president of the Indian River County teachers union couldn’t have been clearer.
Liz Cannon, who heads the Indian River chapter of the Florida Education Association, urged union members to buy retirement investments from Valic Financial Advisors Inc. through a firm owned by the union. That way “we also make money,” she said in a November 2017 newsletter, through regular dividends.
What Ms. Cannon didn’t mention was that investments from Valic, a unit of giant insurance company American International Group Inc., can carry high costs that may translate to a smaller nest egg when teachers retire.
The setup is one of an array of similar deals in which unions and other groups get income from endorsements of investment products and services—often at the expense of teachers and other municipal employees.
In teachers’ 403(b) plans, annuities account for more than half of invested assets. Annuities, largely sold by insurance companies, typically offer a pension-like lifetime income, but they can entail annual fees as high as 3% of invested assets.
A Nationwide Mutual Insurance Co. subsidiary pays millions of dollars a year to organizations including the National Association of Counties, the International Association of Fire Fighters and the United States Conference of Mayors, or their affiliates, in return for endorsing retirement plans it administers for municipal workers, according to documents filed with regulators and local governments.
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.
Read more here.
If you’re willing to fight for Main Street America, click here to sign up for my free weekly email.