The third part of the excellent LA Times series on private pension plans concludes with an expose of how the union that is supposed to represent the interests of its members - endorses substandard pension plans in exchange for payments to the union.
RETIREMENT AT RISK: LAST OF THREE PARTS
Unions' Advice Is Failing Teachers
Labor groups have joined forces with investment firms to steer members into savings plans that often have high expenses and poor returns.
By Kathy M. Kristof Times Staff Writer April 25, 2006
Second-grade teacher Crystal Mendez was in the staff lunchroom at 42nd Street Elementary in the Crenshaw district when an investment broker introduced herself and started talking up a retirement plan. Mendez, fresh out of college, thought she could trust the woman because her company had been endorsed by the Los Angeles teachers union. Mendez agreed to put $400 a month into a retirement account. She assumed her money would be invested in stocks. Just 22, she figured she had plenty of time to ride out any dips in the market. She said the saleswoman told her: "Leave it to me."
Nearly two years later, when her boyfriend started bragging about the returns he was earning on his 401(k), Mendez took a closer look at her own account. "He was earning 15% a year and I was earning 3%," she recalled. "I thought, 'There's something wrong here.' "Mendez's money was languishing in a fixed-rate annuity, an investment ill-suited to someone in her early 20s.
Worse, she would have to pay a steep penalty to bail out. Public-school teachers across the country are in similar predicaments. And many have their unions to thank for it. Some of the nation's largest teachers unions have joined forces with investment companies to steer their members into retirement plans with high expenses that eat away at returns.
In what might seem an unlikely partnership, the unions endorse investment providers, even specific products, and the companies reciprocate with financial support. They sponsor union conferences, advertise in union publications or make direct payments to union treasuries.
But the real shock is that the union leader's are selling out their member's futures... for peanuts.
United Teachers Los Angeles, which represents 44,000 members in the Los Angeles Unified School District, doesn't receive direct payments for its endorsements. But firms that get its seal of approval can be counted on to advertise in the union newsletter and donate to union causes.
"It allows us to put the touch to them when we are raising money for any purpose," said UTLA spokesman Steven Blazak. "For the times that we come to them and say, 'Will you be a sponsor and kick in a few hundred bucks?,' it's nothing in the grand scheme of things - not compared to the money they are making."
So... it's nothing in the grand scheme of things that for a few bucks thrown into the union's coffers - the union's leaders recommend to their members savings plan with low returns and high expenses.
And if this is how the UTLA treats it own members - why do you think the Los Angeles School District run by a school board they financed and elected is such a disaster?