Here is how it works:

A district hires a company, a TPA, to perform the role or making sure the district is compliant with the Federal regulations when it comes to 403B plans, which are like 401K plans. The TPA works to track contributions, check the status of requests for plan loans, and process distribution requests, among other duties.

Most schools plan to have a TPA and a separate list of vendors who will participate and abide by the Federal regulations. Employees can choose any vendor off the list, including MEA Financial/Paradigm. Due to the new regulations, the market has decreased dramatically because many companies simply don't want to mess around with the reporting requirements for these particular plans. Left on the short list is the MEA.

Introducing Paradigm

The MEA Financial Services arm is a program that most folks don't know much about. This arm of the MEA, called Paradigm, is offering to act as TPA and vendor in districts. This is problematic for a few reasons. First, if the MEA serves as TPA they have access to participants' information, which could allow for an unfair advantage in marketing their investment products. This would be true for any TPA/Vendor duplication.

The second problem is that the ultimately, the MEA would love to be the only provider on the list, instead of being one of many options folks will have. This would give them a corner on the market. Currently, 403b vendors are not a negotiable item. Could that change in the future? Maybe, but it may not even have to be negotiated by name.

As we have seen with MESSA, the provider has been negotiated over for years due to union requirements and laws making it difficult for districts to bid out insurance.

Is the 403b program headed down the same road as MEA MESSA, with the MEA Financial Services being the favored provider and allowing the MEA to earn tons of cash they can use for political purposes? I hope not. It is going to take vigilant school districts and state government to make sure this doesn't happen.

Working the Board Room

I have seen our local union step up pressure to insert themselves into the discussion of 403b vendors, even when it isn't a negotiable item. I couldn't figure out why they choose to speak out on a topic that seems to be a cut and dry issue. After doing a little research, I see exactly what their stake is in these changes. In fact, their Summer Leadership Conference even highlighted the issue:

116 The IRS Has Done It Again! The New 403(b) Regulations
and How to Make Them Work for You
2:45-4:15 p.m.
This session will repeat as Session 510.
Recent IRS changes to the regulation of 403(b) Tax Sheltered
Annuities have dramatically altered how the employer will administer
your 403(b). This session will outline the significant changes
and explain what actions employers, participants and investment
providers are taking in light of these new regulations. Additionally,
the session will show how to implement tax advantage strategies for
participants under the new regulations. Presenter: Bruce Reaume

Mr. Reaume is the Regional Manager/Western Region of sales for MEA Financial Services.

It looks like there is a new MEA game in town.