Two New Jersey Teachers report the same salary history. Their first year they earned $30,000 with annual increases of 3 percent. Ten percent of their salary was contributed to their 403(b) account. The contributions generated an 8-percent return.

After 40 years, Teacher A has an account value of $700,000, while Teacher B has an account value of $1.1 million.

Q.: Why the massive difference?

A.: Teacher A paid the 403(b) brokers about 2.2 percent in unwarranted fees and commissions, while Teacher B contributed to the zero-cost state-administered 403(b) plan known as the New Jersey Supplemental Annuity Collective Trust (SACT).

With that said, why does the SACT manage roughly $250 million while the 403(b) brokers manage about $25 billion?

Where’s The Menu?

The SACT began operations in 1963 and has yet to adopt an investment-choice menu. Teacher contributions are arbitrarily invested in a common-stock portfolio managed by the New Jersey Division of Investment. There are no investment choices.

The absence of an investment-choice menu is a clear violation of the Fiduciary Standard, 403(b) brokers have been very busy, since 1963, selling their commission-based investment menus to New Jersey teachers.

Nationally, complaints against 403(b) plans are for alleged excessive fees and commissions; not for lack of investment choices.

Mr. Frank is a fee-only Retirement Financial Planner and a retired city high school Teacher of Accounting. He can be reached by phone at (732) 536-9472, or via email at

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