Maryland teachers may be losing thousands from their retirement savings without knowing it

When Matt Gresick signed up for a retirement plan, he didn’t think anything of it. The Howard County teacher and his colleagues got free breakfast at their meeting with a representative from the retirement savings company, who quickly earned their trust.

“OK, they gave us bagels, they’re not bad people,” Gresick recalled thinking back in 2007. Educators, he said, are pretty trusting.

The history teacher started investing right away. He didn’t realize until 15 years later that he’d paid $15,000 in fees.

The salesperson passing out bagels was from Equitable Holdings Inc., formerly known as AXA, one of the subjects of a 2016 New York Times series on the expensive retirement plans sold to teachers. It’s the same company that in 2022 paid a $50 million fine to Securities and Exchange Commission for misleading over a million investors, mostly public school educators.

Gresick is among the Maryland teachers sounding the alarm about companies like Equitable that are still allowed to sell high-priced plans in Maryland schools. Many teachers, he said, don’t know they have far less-expensive options and could be keeping more of their earnings.

Instead of a 401(k), public school employees are offered a 403(b) to save their retirement money. While federal law requires employers to pick 401(k) providers that are in employees’ best interests, it doesn’t apply to 403(b) plans, said Daniel Otter, head of a nonprofit that advocates for teachers.

“Teachers are really left unprotected by federal oversight,” Otter said.

As a result, Maryland school systems often partner with several 403(b) vendors whose salespeople entice busy educators with free food and promises of financial security.

It’s easy for a new teacher to think the companies are endorsed by the school system, Otter said. “You’ve got health insurance, you know you’re contributing to a pension. Here’s someone who seems to be from the district, who is showing me another way to save.”

It was 2020 when Paul Lemle, a Howard County teacher, noticed the fees on his retirement savings account were higher than he thought. Voya Financial was taking 1.75% from his savings balance, which didn’t sound like a lot, he said. But it adds up. Lemle noticed that by the end of his career, he’d be paying $6,000 a year in fees.

“And that will make it so that your retirement savings disappear much faster than if you had a low-cost provider,” he said.

Lemle found out Howard County offers more than one plan, so he switched to Fidelity Investments, which charges him only .015%, costing him about $50 a year in fees.

Lemle, now head of the Maryland State Education Association, the state’s teachers union, is trying to spread the word.

“Whenever one of these sales reps comes around, we schedule our own meetings and we say to people, ‘Look, you got to know what these things cost you. They’re not free,’” Lemle said.

Equitable and Voya said in emailed statements that their fees were comparable to those of other 403(b) providers, and that they serve thousands of educators across the country.

“Supporting our nation’s educators is an important part of our business and we remain committed to helping all of our participants build a secure financial future,” Voya officials wrote.

Brian Bassett, a spokesperson for Howard County Public Schools, said he couldn’t comment on employees’ specific plans, but noted the fees the district negotiated with Equitable and Voya are in line with the six other vendors the system approved.

Not every vendor will work for all employees, Bassett said, and taking out loans from a 403(b) plan, for example, could contribute to high costs. He encouraged employees to ask the system’s benefits office if they need assistance, and noted that information about the vendors is available on the district’s website.

School systems have to recognize the need for low-cost providers, said Lemle, which shouldn’t be hard since district officials are often paying into the same plans. But it takes work: negotiations with unions, submitting a request for proposal so vendors can bid, and “you have to educate people that this is happening.”

It happened in Baltimore. At a February school board meeting, a teacher’s email was read aloud by a school official. The 14-year educator was warning others about “one of the biggest scams facing Baltimore City educators.”Teachers, she wrote, are signing up for 403(b) plans the school system offers thinking they’re setting themselves up for financial stability. Now, they know the companies are “predatory in nature,” she wrote.

“Why would you allow non-reputable 403(b) financial firms to aggressively solicit us and extort us for our hard-earned money?” the teacher asked.

She described sales reps coming into their schools to “pressure” educators to sign up “without disclosing the high fees and penalties.” Vanguard is the one reputable company the city offers, she wrote, and it’s not easy to switch.

Members of the Baltimore Teachers Union stepped in. They spoke at board meetings, created explainer documents for veteran and new educators warning them about the sales reps and explained how to switch to Vanguard, said Nathan Ferrell, a member of the union.

A city school spokesperson said in an email that the district and union share a commitment to addressing challenges staff face with the retirement options. They’re hoping to secure a “new supplemental retirement recordkeeper” by July 2025. It’s a third-party company responsible for tracking contributions and other actions in a retirement plan.

In the meantime, the teachers union has relied on resources from Otter’s nonprofit, 403bwise.

After obtaining the list of vendors for over 5,000 school districts, the group launched a plan rating system. The better the vendors, the better the grade. Here are the grades for school systems in the Baltimore region:

• Anne Arundel: A
• Baltimore City: C
• Baltimore County: F
• Carroll: A
• Harford: A
• Howard: C

Baltimore County Public Schools declined to comment on the rating. Cindy Sexton, president of the Teachers Association of Baltimore County, said the union occasionally hears members talk about retirement plans, but “it’s not a pressing issue that’s really come to our attention.”

Otter says he puts the responsibility of having good vendors on school systems. He has empathy for district officials, he said, because it’s another thing added to their plates, but it’s something they must take care of. He also thinks there’s room for improvement among teachers unions. Some are better than others about offering solutions to this issue for members, he said. His nonprofit offers free one-hour Zoom sessions for educators who want to learn more.

Gresick, the Howard County educator, is now using Fidelty, one of the vendors with the best ratings from 403bwise.

“They didn’t have the bagel breakfast,” he said, “but I’m OK with that.”

About the Education Hub

This reporting is part of The Banner’s Education Hub, community-funded journalism that provides parents with resources they need to make decisions about how their children learn. Read more.