The following is an opinion piece, but based on actual events.
"The IRS requires that we verify that every employee has attended a meeting to learn about their 403(b) plan, so you must fill out this form. We won't contact you unless you check the box that you want financial planning help"
This was the paraphrased message a teacher heard yesterday somewhere in Southern California and likely somewhere everyday in America after being forced into a meeting where someone with the title "Financial Consultant" tells them they can have a "free" financial plan (worth $500) just by meeting with this altruistic individual.
I call Bullsh*t!
Actually, that someone was my wife, at her school during a meeting she was required to attend where someone from the district's 403(b) "Compliance Administrator" was presenting. I'll keep the name of the company a secret so as to avoid being sued for telling the truth.
What is the truth?
The truth is that the IRS DOES require a "meaningful notice" be communicated to each employee on an annual basis stating that they can participant in the 403(b) plan. But not even the insurance agent based NTSAA believes that this "notice" must be in-person, there manual states:
"The notice must be provided in a manner designed to ensure delivery to each employee individually. For example, posting a notice in the employee lounge by itself is not an acceptable delivery method. However, a sum- mary provided at a benefits fair followed up by quarterly payroll stuffers would probably suffice. There is no requirement for a written receipt from each employee that they have received the annual notice." (emphasis added)
So why does it appear that "Advisors" from the "Compliance Administrator" are telling school districts that this is a requirement? Why did my wife have to sit in on a presentation from the "Compliance Administrator" who was selling their services as if they were qualified Financial Planners and not salespeople and then fill out a form stating that she attended? The reason given: If the IRS audited the school district they would use it as proof of compliance.
The idea here is that the same thing couldn't have been accomplished by a simple letter, an e-mail or a payroll stuffer - it had to be in person, which is clearly not what the IRS demands. This is a clever marketing ploy to get in front of employees to sell the financial products of the "Compliance Administrator." It's not like letter don't exist to send to employees, I found one pretty quickly using, here.
The irony is that I just wrote a whole piece on deceitful CTPA practices.
Why does this annoy me so much? It's deceitful. It's one thing to offer in-person meetings as a service to a school district, it's quite another to make the employees sign what are in fact lead cards to verify they've been to a presentation under the guise of compliance. I wonder, do they go through the cards and track down every single employee who didn't sign one or didn't attend a meeting? Doubtful.
The school district meets their requirement of meaningful notice by providing just that, a meaningful notice - a letter in a teacher's box, a payroll stuffer, whatever else they might think of. If they choose to add meetings to provide additional notice - great! But don't make the meetings mandatory, don't hold them during hours where teachers are supposed to be working and don't do it under the guise that they are required for compliance.
These meetings are sales meetings disguised as compliance. Whether the "Compliance Administrator's" corporate office knows this is going on is unknown to me, but they couldn't be the only company doing this, I hear it all the time - everywhere.
The last thing the financial services industry needs right now is more dishonesty, using IRS compliance sell financial products is just that.
Scott Dauenhauer, CFP, MSFP, AIF