Friday February 20, 2004

The Thrill of Victory, The Agony of Defeat - Envoy Learns its Fate

The Attorney Generals office of the State of California has taken a big step in protecting educators best interests, and I bet most educators have no idea. Early last year, a company by the name of Envoy Plan Services created a firestorm of controversy when they came out of nowhere and started adminstering several California school district 403(b) & 457(b) retirement plans. The controversy surrounded how they charged for their services. Envoy charged vendors for their services - this effectively cut out low, mid, and many high cost vendors from district providers lists and created an opportunity for Envoy to funnel money into their own products. Myself, CalSTRS, 403bwise, and many mutual fund, insurance companies, and broker/dealers joined together in a rather wierd informal alliance to ensure that teachers would not be subjected to the long term affects of Envoy (see my Teachers Advocate newsletter for all the details).

Yesterday, the Attorney Generals office effectively put a stop to Envoy Plan Services method of charging for their services by putting out an opinion stating that charging vendors is not an option in California, it is prohibited. For the full text of the opinion you can go to This is a victory for school teachers in California.

The question becomes "what will school districts do?" They should do several things. First, they should review their contract with Envoy and consider firing them if Envoy will not Cease & Desist their current arrangement for compensation. Second, they should decide if they want to pay for Envoy's services themselves (unlikely), if they don't they have several options. Thirdly, they need to work on behalf of the vendors who have paid Envoy's fee for the time periods invovled and require that Envoy or the E & O carrier for Envoy refund all fees that the vendors paid. The requirement of those fees was illegal and thus the vendors should be reimbursed and Envoy should pay for it. If school districts do not do these things they will face additional scrutiny by the media, unions, educators, planners, and vendors - something they probably don't need right now.

If Envoy decided to change its ways and offered a structure that works for everyone, perhaps I wouldn't be against them as the TPA, but at this point I have problems with the way they have handled things as well as the ethics of the company.

This is a victory for educators, and a defeat for Envoy - I have no doubt however that we haven't seen the last of Envoy....stay tuned!!