|We thank our veterans for their service.
Free lunches were all the rage last week as insurance salespeople from the Horace Mann Insurance Company offered their wares in exchange for free food at three different schools. Yummy? Maybe not.
Here’s their MO, one that is repeated all too often in our schools: Some of our members get a free meal while some are enticed to sign a contract with a financial commitment that can have negative repercussions for the member. The product that is sold to the member is an insurance-laden, tax-sheltered annuity that is expensive and comes with a hefty “surrender” fee. The insurance add-on can cost a modest investor thousands of dollars, if not tens of thousands, over a career. The “surrender” fee can penalize you for 5 to 8 years should you wish to withdraw from your contract.
There are many problems with this situation. First and foremost, it’s a violation of the state ethics law to exchange or receive something of value for access to solicit in a public workplace. So, bottom line is, these salespeople are not supposed to be in our schools. Plus it’s a bad financial practice and can prove harmful to our members.
Last Wednesday Horace Mann tried to give away a free lunch at Excel High School in South Boston as part of their “teacher appreciation” campaign. The luncheon was canceled — at our urging — per directive from the school department. On Thursday, Horace Mann was at the Jeremiah Burke giving away more food; this event slipped by and was held. On Friday, Horace Mann had a breakfast scheduled at the Russell Elementary; that event was cancelled. The week before, Horace Mann was at an elementary school giving away a two bicycles, and their reps got time at a PD session. Last March, Horace Mann was at the Haynes EEC. And so on. Each visit, each offer of food, is illegal.
There have been multiple directives issued by the superintendent’s office over the last three years warning about this practice. Here’s one that the school district’s Office of Labor Relations sent out two weeks ago, on October 24:
“It appears that schools are AGAIN permitting insurance sales people onto BPS premises during the school day. Please remind principals and headmasters and employees in the schools about the Superintendent’s Circulars SAF-12 School Access Control and LGL-4 School Visitors. The District does not sanction the presence of these salesmen on BPS property.”
So why do Horace Mann and other salespeople persist? Because their visits to schools are profitable. For them. Regardless of how many luncheons or breakfasts they sponsor, or bicycles they raffle off — regardless of how noble or generous they may appear to be — their salespeople are making heavy commissions from our members. What’s more, there are MANY better tax savings, tax-sheltering options available to our members.
Here’s an excerpt from an article in Kiplinger’s Personal Financemagazine in July 2012. You’ll notice that the free lunch-for-a-signed-contract concept is widespread:
“Tracy Callard, a 48-year-old elementary school teacher in Wichita, Kan., is working on a grassroots effort to try to get 403(b) options that are more like her other investments, which she has been carefully researching for years. She had been happy with a low-cost 403(b) from TIAA-CREF when she taught at a private school. But when she shifted to the public school system in 2009, she was disappointed that none of the familiar low-cost companies — such as TIAA-CREF, Fidelity and Vanguard — were on the list of available 403(b)s. Instead, the list of 14 approved vendors was dominated by insurance companies selling annuities.
” ‘I think people have no idea what they’re buying,’ she says. ‘A salesman will bring a big sandwich to the teachers’ lounge and chat up the teachers, and the next thing they know, they are signing up for a direct investment from their paycheck with no understanding of the fee structure.’ ”
We have five main objections to Horace Mann and others gaining access to our schools and soliciting business from our members, wandering our corridors, visiting our teachers’ lounges, or attending our PD events:
There’s a whole world of tax-saving and tax-deferral opportunities available in Boston. We urge our members to look around for them. Here’s a letter from the BTU to Excel High School staff that goes into much of the above in greater detail and can get you started. (Read the Burke’s letter of explanation.)
In the meantime, please let us know if Horace Mann or anyone else offers you a free lunch.