California teachers: In-plan annuity rider fees unfair; lawsuit in mediation
December 26, 2024 by John Hilton
Several California teacher lawsuits over in-plan annuity costs have been consolidated into one case involving rider fees.
The judge is giving participants plenty of leeway for mediation, with a trial dates scheduled for November and December 2026.
The initial lawsuits, filed in the Northern District of California, alleged several violations of the California Education Code and the California Unfair Competition Law. Teachers claimed the cost of the annuities ate into their 403(b) retirement plans.
Click HERE to read the full story via INN
Wink’s Moore on the Market: So, this is an article by John Hilton at InsuranceNewsNet about indexed annuities used within 403(b) plans.
California teachers are in mediation with three insurers, alleging “several violations of the California Education Code and the California Unfair Competition Law.”
Interestingly, the plaintiff’s attorney is on-the-record for saying that, “as a result of insurance companies’ aggressive marketing tactics and incomplete disclosures, teachers were often funneled into indexed annuities that came with high fees and low returns while providing huge profits for the insurance companies peddling them.”
I cry foul on at least part of this. The contract provisions are all explained plainly in the regulator-required product disclosure. AND- the three companies named have some of the most thorough disclosures that I have seen in the annuity business.
And I see everyone’s disclosures.
If this is truly about riders, I can see where they are coming from with the “high fees” comment. Of course, that is relative.
And the low returns? Blame them on a low interest rate environment, that didn’t turn around until 2022. Indexed annuity returns may have been low, but so were fixed annuity returns, CD returns, etc.
There is no way that any indexed annuity has “fees [that] average over 3.4% per year.” The highest fee on an indexed annuity GLWB is 1.75% per year.
“Plaintiffs claimed that the use of participation rates, caps, and spreads unfairly masked the true cost of the annuity products?!?”
GTHO.
If these products didn’t limit the potential for indexed gains, they couldn’t provide a guaranteed 0% return in addition to a return of premiums paid, plus interest.
“If a fee is not disclosed on 403bCompare[dot]com, a vendor may not charge it.”
Well then, who the heck is responsible for keeping that website updated? Why aren’t THEY being held responsible?
Does anyone have more information on this website? The features it discloses are minimal, and an embarrassment to the state of California, IMHO.
Sheesh! -sjm
