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Why a School District’s 403(b) Vendor List Is Mostly Annuities

Updated August 25, 2026. Quick answer: A California school employer’s approved 403(b) list runs to a median of 94 products, and 1,232 of the 1,318 employers approve more annuity products than fund products. Two rules explain it and neither is about quality: ERISA does not reach a public school plan at all, and the state registry statute forbids conditioning registration on the disclosures and forbids ranking anything. The cheap option is usually already on the list — 1,200 of 1,318 employers approve at least one product costing $100 a year or less — and nobody is paid to name it.

What is usually said, and what the sources say

The usual explanation for a long, annuity-heavy 403(b) menu is that the district chose badly, or was captured, and that a better-run district would have vetted the list. That assumes somebody had a legal duty to vet it.

In a public school district nobody did. A public school 403(b) is a governmental plan, and ERISA says in one line that it does not apply. California, the only state that publishes the underlying data, then wrote a registry statute that forbids the board from conditioning registration on what the disclosures say and forbids it from ranking anything. The list is a register, not a recommendation – and the numbers show what a register produces.

The list is a register, not a shortlist

Two rules do most of the work, and neither is about which product is better. The first is federal. ERISA opens by saying what it covers and then, in a single line, what it does not: “such plan is a governmental plan” (29 U.S.C. 1003(b)(1) (ERISA sec. 4(b)(1))). The Act defines the term in its own words: a governmental plan “means a plan established or maintained for its employees by the Government of the United States, by the government of any State or political subdivision thereof, or by any agency or instrumentality of any of the foregoing” (29 U.S.C. 1002(32) (ERISA sec. 3(32))). A public school district is a political subdivision, so the fiduciary duty, the prudence standard and the duty to monitor providers that a private employer’s 401(k) runs under simply do not reach the plan. There is no federal rule requiring anyone to have looked at the list.

The second is state, and it is more specific than it looks. California built the registry that produces every number on this page, and wrote into the same chapter that “Registration may not be conditioned upon the content of the information” (Cal. Educ. Code sec. 25101(b)) and that the board “The board shall have the authority to organize data, but may not subjectively rank or give preference to a vendor or product” (Cal. Educ. Code sec. 25104(d)). Registration turns on filing the disclosures, not on what they say. A product with a sixteen-year surrender schedule registers on the same terms as one without.

What California did do, in one sentence, is switch off the teacher’s old right to go elsewhere. Insurance Code section 770.3 said that when a 403(b) annuity is purchased, “the employee shall have the right to designate the licensed agent, broker, or company through whom the employee’s employer shall arrange for the placement or” purchase (Cal. Ins. Code sec. 770.3). Education Code section 25115 then says that for registered products “the provisions of Section 770.3 of the Insurance Code do not apply” (Cal. Educ. Code sec. 25115), and section 25114 says “Except as provided in this section, an employee shall select from registered 403(b) products” (Cal. Educ. Code sec. 25114). The right to name your own company became the right to choose from the register.

What the register actually contains

Every California school employer’s approved list is published, product by product, in the same state database. Counting all of them at once gives the shape of the problem rather than an anecdote.

What was countedThe count
School employers with at least one active approved product1,318
Median number of approved products on a list94
Median annuity products on a list60
Median mutual-fund products on a list34
Employers approving more annuity than fund products1,232 of 1,318
Employers approving more fund than annuity products80 of 1,318
Employers approving no active fund product at all10
Employers approving no active annuity product at all40
Employers already approving a product costing $100 a year or less1,200 of 1,318

Counted from every active product in the CalSTRS 403bCompare registry on 2026-08-25: 134 active products across 1,318 employers, 119,195 product-employer approvals in all, of which 60.4 percent are annuity products. The registry counts products approved, not dollars invested.

The median list is 94 products long. That is the finding underneath the finding: the complaint is usually that the list is too narrow, and in California it is enormous, unranked, and impossible to work through without help — which is precisely the condition under which whoever turns up in the staff room decides it.

The composition is lopsided. 1,232 of the 1,318 employers approve more annuity products than fund products; 80 are the other way round. 10 employers approve no active fund product at all.

Product typeActive productsPublish an annual costMedian annual cost on $10,000Carry a surrender scheduleFlagged as paying a commission
Variable Annuity2222 of 22$209 (range $92–$497)20 of 2218 of 22
Fixed Annuity170 of 17not published for any of them9 of 1714 of 17
Equity Indexed Annuity310 of 31not published for any of them30 of 3131 of 31
Mutual Fund6464 of 64$143.50 (range $54–$777)4 of 6432 of 64

All 134 active products in the registry on 2026-08-25. Annual cost is the site’s own standardised figure: “Annual cost for this product is based on a $10,000 balance and assumes you are invested in one fund. It includes required product fees, and also applies the average expense ratio of all investment options.” (CalSTRS 403bCompare, product page footnote).

Coordinate this with the rest of your retirement plan

A pension election is usually a one-time choice you cannot revisit, and an adviser can weigh it against your other income, your spouse’s position and how long the money has to last, though that does not replace the numbers in your own plan documents.

Before you start, what actually happens. The form is run by Kapitalwise, our advisor-matching partner. Kapitalwise sends your details to advisers who pay for the introduction, so expect calls and texts. Clear Money Guide is paid when you submit the form, whether or not you ever hire anyone. This is free to you and there is no obligation to hire anyone.

The Kapitalwise form opens here. You stay on this page.

What happens when you press the button

It asks about nine questions (age, investable assets, location), then your name, email and phone number, and verifies the phone by text. Nothing loads and nothing reaches Kapitalwise until you press the button. Submitting the form does not guarantee an adviser or a match. This matching form is not tax or legal advice.

Why annuities can be there at all

The statute that creates the account describes two ways to fund it, and both are named. Section 403(b) is written around an annuity contract; the alternative, the custodial account at section 403(b)(7), works only where the amounts are “invested in regulated investment company stock or a group trust” (26 U.S.C. 403(b)(7)(A)). There is no third door. A 403(b) cannot hold individual shares, and it cannot hold anything the employer has not put on the menu. The IRS says the second part itself, in its own summary of the plan type: “Investment options are limited to those chosen by the employer” (IRS, IRC 403(b) tax-sheltered annuity plans).

So the annuity is not an intruder in a plan designed for funds. It is the original form, and the fund option is the addition. What changed is who does the selling: an insurance product is sold by a licensed agent who is paid to be in the building, and a low-cost fund option is not.

The cheap option is usually already on the list. In this registry 13 active products cost $100 a year or less on a $10,000 balance, and 1,200 of the 1,318 employers already approve at least one of them. The cheapest, at $54 a year, is San Diego County Schools Fringe Benefits Consortium 403(b) Plan. The state’s own plan, CalSTRS Pension2 – Personal Wealth Plan, costs $56 a year and is approved by 1,260 of them.

VendorProductTypeAnnual cost on $10,000Average expense ratioEmployers approving itSource
EmpowerSan Diego County Schools Fringe Benefits Consortium 403(b) PlanMutual Fund$540.39%136registry entry
CalSTRS Pension2CalSTRS Pension2 – Personal Wealth PlanMutual Fund$560.31%1,260registry entry
Aspire-IPXIPX – Access to Vanguard fundsMutual Fund$710.11%489registry entry
Aspire (Advisor Trust)IPX – Access To Vanguard FundsMutual Fund$730.13%438registry entry
Victory Capital Management, Inc.USAA Mutual FundsMutual Fund$760.76%403registry entry
RBB Funds Inc.RBB Free Market FundsMutual Fund$800.75%41registry entry
Aspire (Advisor Trust)IPX – Fidelity FundsMutual Fund$910.67%438registry entry
Lincoln Nat’l Life Ins Co (Lincoln Financial), TheMulti-Fund Group Variable AnnuityVariable Annuity$920.67%984registry entry

The cheapest active products in the registry by the site’s own annual-cost figure. 13 active products come in at $100 a year or less on a $10,000 balance, and 1,200 of the 1,318 employers already approve at least one of them.

That is the sentence to take away. The problem is not usually that a district refused to approve anything cheap. It is that the cheap thing is item forty on an unranked list of 94, and nobody is paid to walk into a staff room and name it.

What this page does not settle

This page counts one state’s registry and reads two statutes. It does not rank any product, name a best option, or say what any teacher should hold.

Every district figure on this page is California’s. California is the only state we found that requires 403(b) vendors to register their products and publishes the result, so it is the only state where this is countable at all. Forty-nine states are not measured here, and nothing on this page should be read as a national average.

Texas has a 403(b) certification statute at Insurance Code chapter 1580. We could not read it: statutes.capitol.texas.gov served a 1,700-character navigation shell on the HTML route, on the PDF route and on a second HTML path, so the chapter is named and not quoted.

The registry counts products, not dollars. A district that approves sixty annuity products and thirty-four fund products is not thereby a district whose teachers hold sixty annuities; nobody publishes participant assets by product, so the share of money is unknown.

Sources

Related: How to Read a District’s Approved 403(b) Vendor List · The 403(b) Salesperson in the Staff Room · 403(b) Contract Exchange · Finding an advisor who understands a teacher · 403(b) vs 401(k): what actually differs · CalSTRS retirement decisions.

General information drawn from the federal statutes and regulations, the California Education and Insurance Codes and the CalSTRS 403bCompare registry named above, not legal, tax or financial advice. Statutes are amended and registered products change; the figures here are what each source said on the date above, and each is linked so you can check it.

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