I don’t consider myself particularly hip to pop culture, but I recall seeing some references to “Throwback Thursday” on social media. In the interest of this phenomenon, I started to think about what 403(b) plans looked like 10 years ago. How much have they changed?

Flashback to 2005 … The Wall Street Journal describes the 403(b) market as “wild.” That’s right, a Wall Street Journal article printed on Aug. 25, 2005, included a quote describing the 403(b) market as the “wild, wild west.” It highlighted unscrupulous sales persons, overpriced retail annuity products and a lack of consistent regulatory oversight when ERISA does not apply (such as in the public schools referenced in the article).

So, how has the 403(b) market changed in the last 10 years? 

  • Final regulations went into place in 2009.
  • All plans, ERISA and non-ERISA, are required to have administrative procedures in place to help ensure compliance with the requirements of the tax code.
  • Generally, procedures have tightened surrounding distributions and transfers.
  • Fiduciary due diligence for ERISA plans helps ensure investments offered by the plan to participants are prudent.

Unfortunately, fiduciary due diligence doesn’t exist in the non-ERISA space. This includes public schools. In fact, in many states, it is required to be an open market.
Also see: "Washington: A model approach to improving retirement savings?"

That doesn’t mean there aren’t responsible financial professionals getting good and prudent investments for their clients. There are. But there are also plenty of unscrupulous financial professionals in these arrangements selling high-priced products to teachers.

In that regard, even though much has changed in the last 10 years, we may still describe the 403(b) market as “wild.” In your opinion, what changes remain to be seen in the 403(b) market?

Friedman is the tax-exempt national practice leader with the Principal Financial Group, an investment management and retirement leader. A noted expert on 403(b) plan design, he has been consulting with tax-exempt organizations for more than 20 years and has been in the retirement plan business since 1986. A version of this blog originally ran on The Principal blog. Follow Aaron on Twitter @1AaronFriedman1.

Insurance products and plan administrative services are provided by Principal Life Insurance Company. Securities are offered through Princor® Financial Services Corporation, 1-800-547-7754, Member SIPC and/or independent broker dealers.  Securities sold by a Princor Registered Representative are offered through Princor. Princor and Principal Life are members of the Principal Financial Group® (The Principal®), Des Moines, IA 50392. © 2015 Principal Financial Services, Inc.

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