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NEA Rakes In Millions Selling Annuities To Teachers
For over half a century, NEA has been in the business of selling financial and investment products to teachers.
According to Wikipedia, the National Education Association (NEA) is the largest labor union in the United States. It represents public school teachers and other support personnel, faculty and staffers at colleges and universities, retired educators, and college students preparing to become teachers.
NEA has just under 3 million members, with membership levels dropping every year since 2010. Conservatives, libertarians, and parents' rights groups have criticized the NEA's progressive positions. NEA has affiliate organizations in every state and in more than 14,000 communities across the United States. State affiliates of the NEA regularly lobby state legislators for funding, seek to influence education policy, and file legal actions.
At the national level, NEA lobbies the Congress and federal agencies and is active in the nominating process for Democratic candidates. While it has a stated position of "non-partisan,” it almost exclusively supports the Democratic Party. From 1989 through the 2014 election cycle, says Wikipedia, NEA spent over $92 million on political campaign contributions, 97% of which went to Democrats.
NEA members sit on the boards of many state teacher pension funds which oversee the investment of hundreds of billions in retirement savings.
Less well-known is the fact that NEA has long been in the business of providing investment advice to teachers through an investment management affiliate registered with the U.S. Securities and Exchange Commission, NEA Member Benefits. That is, the powerful union is also an investment adviser that profits from selling certain retirement products to teachers.
NEA has long been in the business of providing investment advice to teachers through an investment management affiliate registered with the U.S. Securities and Exchange Commission, NEA Member Benefits.
According to SEC filings:
NEA Member Benefits (“NEA MB”), in existence for over half a century, was established by the National Education Association (the “NEA”) to develop, implement, and administer voluntary benefit programs and services for NEA members… NEA MB has been in the business of marketing voluntary benefits, such as life insurance and credit cards, to members of the NEA since the mid 1960’s…
But NEA MB sells more than just life insurance and credit cards to teachers.
In its SEC filings, NEA MB provides further disclosure regarding an agreement it has with Security Benefit Corporation to sell variable annuity contracts and mutual funds to teacher retirement and health plans:
NEA MB is a party to the NEA Retirement Program Service Agreement (the “Agreement”) between NEA MB and Security Benefit Corporation (“SB”). Pursuant to the Agreement, NEA MB provides administrative, marketing, and related services in connection with the NEA Retirement Program (the “Program”). The Program involves investments in variable annuity contracts and mutual funds underlying 403(b), 457, IRA, 401(k), and Health Reimbursement Account contracts. Through SB’s marketing and sales, the Program is available to NEA members and eligible employers (principally state and local school systems and districts and NEA-chartered state and local educational associations) as a means for such employers to provide their eligible employees and their retirees with retirement plan investment options.
Here’s what Security Benefit Corporation’s website has to say about the NEA products it sells:
The NEA Valuebuilder Program provides investment products (the NEA Valuebuilder products) in connection with retirement plans sponsored by school districts and other employers of NEA members and individual retirement accounts established by NEA members. Security Distributors, and certain of its affiliates (collectively Security Benefit) make the NEA Valuebuilder products available under this program pursuant to an agreement with NEA's wholly-owned subsidiary, NEA Member Benefits (MB). Security Benefit has the exclusive right to offer the NEA Valuebuilder products under the program, and MB generally may not enter into arrangements with other providers of similar investment programs or otherwise promote to NEA members or their employers any investment products that compete with the NEA Valuebuilder products. MB promotes the program to NEA members and their employers and provides certain services in connection with the program. Security Benefit pays an annual fee to MB based in part on the average assets invested in the NEA Valuebuilder products under the agreement. You may wish to take into account this agreement and arrangement, including any fees paid, when considering and evaluating any communications relating to the NEA Valuebuilder products.
So, how much money does NEA MB make from selling variable annuity contracts and mutual funds to teachers? Millions annually from an annual base fee alone, according to its SEC filings:
NEA MB is compensated for such services by SB pursuant to the terms of the Agreement as described below. Pursuant to the Agreement, NEA MB receives from SB an annual base fee, which in 2021-2022 was $3,827,256 (emphasis added). The annual base fee may be reduced when certain products are no longer available under the Program. These fees were the subject of negotiation between NEA MB and SB.
NEA MB makes millions annually from an annual base fee alone for selling variable annuity contracts and mutual funds to teachers.
NEA MB filings warn about the potential conflict of interest involved with the union selling these investments to its members:
Payment of the annual base fee by SB creates a potential conflict of interest and gives NEA MB an incentive to partner with SB to make the Program available to NEA members. To address this conflict, NEA MB conducted extensive due diligence and selected SB as the exclusive program provider. As a result, NEA MB does not work with any other product provider and clearly and expressly advises employees of Eligible Employers of this exclusive relationship.
But NEA MB does not keep all of the millions it rakes in from selling financial products to teachers. It shares some of cash—very little—with certain NEA-sponsored state education assocations for their assistance in the marketing of NEA-sponsored financial services programs.
NEA shares some of the cash it rakes in from selling investment products to teachers—very little—with certain NEA-sponsored state education assocations for their assistance in the marketing of NEA-sponsored financial services programs.
According to its SEC filings:
In exchange for their assistance in the marketing of NEA-sponsored financial services programs, NEA MB pays certain NEA-chartered state education associations up to $15 per new participant in such programs and up to $0.80 per year per ongoing participant in such programs, including in each case the Program. NEA MB pays a minimum of up to $10,000 per year to each such state association, depending on the programs marketed to the association’s members. The Program is the only product made available by NEA MB that involves investments in securities.
According to SEC filings, the total paid to state associations for their assistance in the marketing of NEA-sponsored financial services programs in FY 2021-22 was $173,614.
The fact that NEA rakes in millions from selling variable annuity and mutual fund investments to teachers is troubling to Dean Dennis, President of the Ohio Retirement for Teachers Assocation. Dennis has two concerns:
“First, I question whether NEA, which claims to have conducted extensive due diligence and selected a variable annuity firm as the exclusive program provider to its members, is really up to the task. Should NEA even be involved with picking winning and losing investments for teachers?
Second, since NEA-sponsored state organizations are involved in selling investments and share in the related compensation, their members serving as trustees overseeing public pension investments may be conflicted in fulfilling their fiduciary duties.”
Finally, investment consultant Chris Tobe has concerns about annuities in retirement plans:
“The Biden Administration and U.S. Department of Labor, just yesterday, questioned the high risks and high hidden “junk fees” related to annuity products in retirement plans. So, it’s clear, teachers should demand transparency and low-cost investments in their retirement savings plans.”
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