November 20, 2019

Jim Lundy Comments on Federal and State Investigations of 403(b) and 457(b) Plans

Life Annuity Specialist reports that the Securities and Exchange Commission (SEC) is looking hard at plan administrators in its probe of financial companies selling investment products to teachers in 403(b) and 457(b) plans.

Partner Jim Lundy told the industry publication that the agency is likely to “aggressively” pursue the probe, and added that “these investigations are significant because historically regulators have not focused on this area of the financial services industry.”

A recent report by The Wall Street Journal also showed that New York’s financial services regulator had sent letters to a dozen major insurers requesting information about their sales practices. According to Lundy, this reported probe of sales tactics and costs involved with 403(b) plans “appears to focus on the annuity practices of the insurance industry,” and that both the SEC and New York state probes appear to be the “first industry-wide foray and investigative activity into any potential abuses” in the specific retirement savings plans.

He also noted that many of these 403(b) and 457(b) plans aren’t subject to ERISA and its higher regulatory standards because they are for state and local government employees, including public school teachers.

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