Two New Jersey Teachers report the same salary history. The first year they earned $30,000 with annual increases of 3 percent. 10 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 for teachers known as the New Jersey Supplemental Annuity Collective Trust (SACT).

Q.: With that said, why do New Jersey teachers have about $250 million, in 403(b) savings, with the 403(b) SACT and about $25 billion, in 403(b) savings, with 403(b) brokers?

A.: The 403(b) SACT began operations in 1963 and has yet to adopt an investment-choice menu. Teacher contributions are arbitrarily invested in a common-stock fund managed by the New Jersey Division of Investment. There are no investment choices.

Complaints against 403(b) plans are, usually, over excessive fees and commissions, not for the lack of investment choices. The absence of SACT investment menu represents a clear violation of the Fiduciary Standard. For 57 years, 403(b) brokers have been very busy selling their unsuitable commission-based investment menus to New Jersey teachers.

Of Note: The City of New York did not establish a 403(b) plan for its Teachers until 1970 when it was decided that Teachers must be shielded from the commission-based investment broker. To that end, the Department of Education appointed the Teachers’ Retirement System of the City of New York (TRS) as the exclusive provider of 403(b) investments.

The investment menu consists of six investment funds all managed by the TRS. Today the TRS manages in excess of $35 billion of 403(b) savings while the 403(b) brokers manage zero.

Since 1963 there have been 15 New Jersey governors. Why have each of them offered-up teachers as 403(b) prey?

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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