Is There Really “Appropriate Separation” Between ZUK and Great American Plan Administrators?


In a recent letter to School Business Officials (SBO’s) regarding 403(b) Compliance, a ZUK representative claimed it “has appropriate separation between the TPA, product manufactures and education providers thus eliminating conflicts,” but is this statement true? My opinion is that it is not.

One of the “free” Third Party Administrators (TPA) that ZUK uses or at least recommends to some of the districts they service is GAPA, or Great American Plan Administrators. I decided to test this “separation.”

I guess one can measure “appropriate” however one desires, for my purposes “appropriate separation” will mean that the TPA does not benefit financially in the form of commissions from the sale of 403(b) and other financial products. This seems like a reasonable way of defining “appropriate.”

Let’s exam the relationship between ZUK, product manufactures, education providers and GAPA.

GAPA or Great American Plan Administrators is a subsidiary of the Great American Life Insurance Company (GALIC) and is also affiliated with Annuity Investors Life Insurance Company (AILIC).

Great American is a product manufacturer and markets '14' 403(b) products in California according to (vendor numbers 1167 and 1092). Each of these products pay a commission to selling agents and Great American earns revenue from the sale and ongoing servicing of these products. My research shows that Great American and Annuity Investors Life Insurance Company are both on all “Approved Vendor” lists that Great American Plan Administrators does the “compliance” for (in California). Does this sound like “appropriate separation” when the administrator who supposedly does the work for “free” benefits financially when certain products are pushed over others? Utilizing my definition of “appropriate,” this relationship doesn’t pass the test and I think we’ve discovered how Great American Plan Administrators can offer “free” compliance.

Of course, it doesn’t end there. We’ve established that there is NO separation between the TPA and the product manufacturer, let alone “appropriate separation,” but what about the appropriate separation between the TPA and the “education providers”.

Who are the “education providers” in this case? ZUK financial advisors. Are conflicts eliminated by allowing ZUK advisors to provide “education” and are the ZUK advisors really separate from Great American?

I’ll let you decide. I went to the public ZUK website and clicked on “The Advisors” link and looked up each advisor that works for ZUK on the state of California Insurance website to see who these advisors were registered to do business with, it is publicly available information.

Of the 19 advisors listed on the site, 16 were licensed and appointed with GALIC and 18 with ALIAC. Only one representative is not appointed with a company affiliated with Great American Plan Administrators. This doesn’t mean that every ZUK representative sells Great American annuities and life insurance or that any of them are required to sell Great American annuities and life insurance. However, it is interesting that ZUK recommends GAPA and states they are “eliminating conflicts” when in fact the conflicts that exist are quite large. Not only does GAPA offer products for sale, almost the entire ZUK advisor team is licensed to sell them. I can tell you from experience in working with clients that were former ZUK clients that nearly every client I took over from ZUK had at least one product sold to them from GALIC or ALIAC. So, is this how GAPA offers capital intensive “compliance” services for free? I think the mystery is solved as to why ZUK offers the GAPA TPA service and how it is offered for free.

Its one thing to advertise yourself as “unbiased and objective” its another thing to be unbiased and objective and I don’t think the evidence presents a case that ZUK “has appropriate separation between the TPA, product manufactures and education providers thus eliminating conflicts.”

Free is an enticing word, however the IRS wasn’t joking when they created the new 403(b) regulations and they expect employers to comply. Using a free service that does not generate revenue from compliance is an open door to problems in my opinion. Entities that perform free services to subsidize product sales will inevitably end up cutting corners (at least in my experience), something employers cannot afford. Employers need a partner whose primary business is 403(b) compliance, not 403(b) product sales.

Full Disclosure: I am a consultant to the California State Teachers Retirement System 403(b) Comply and Pension2 service offerings.


A client of mine is now contributing to a new 3121 plan (commonly referred to as a Social Security Alternative Plan) and that plan is now with Great American. Why is this important? The employer that this plan is with hired the gentleman from ZUK whom I refer to above to take their 403(b), 457(b) and 3121 plan out to bid. Whether the employer knew or understood that this individual worked for ZUK and was a product peddler is unclear at the moment, but an RFP (request for proposal) was conducted and guess who won the bid - ZUK. ZUK brought in their own 457(b) that pays their reps a commission and brought in Great American Plan Administrators as the TPA (the "free" TPA). It was a foregone conclusion who would be hired, imagine ZUK being hired to "consult" and then choosing someone else. So who did ZUK choose to offer the 3121 plan? None other than Great American Financial Resources's insurance subsidiary Annuity Investors Life Insurance Company and guess who is the agent on the policy? The ZUK consultant....sound like appropriate separation to you? This is the Quid Pro Quo, the free administrator is awarded with annuity product sales made by ZUK. Only in the land of non-ERISA 403(b) could this occur.