Ed Dressel:   0:03
Welcome to another podcast with RetireReady Solutions. This is Ed Dressel and today I'm excited to bring a different perspective to the table. Jim Westrum is with the school district out of Minneapolis and has a different perspective for 403(b) advisors on what an advisor brings to the table and what they're looking forward to, and some of their internal processes. Jim, would you go ahead and introduce yourself?

Jim Westrum:   0:24
Thank you for having me today. My name is Jim Westrum. I'm the executive director of finance and business with the Wayzata Public Schools. We are a public school district of about 12,000 students located in a suburban area of the Minneapolis-St. Paul metropolitan area, Minnesota. And my role is to primarily act as a district CFO and assist our human resources in making sure that we are aligned with our mission and vision when we are looking in employee compensation strategies.

Ed Dressel:   0:59
So you said 12,000 students, how many teachers and employees does that give you total?

Jim Westrum:   1:05
Sure, as I mentioned, we have about 12,000 students, and we have about 1,500 employees that are employed by the Wayzata Public School.

Ed Dressel:   1:14
So let's jump in. You're obviously going to be exposed in detail to the 403(b) plans. What's a little bit of your 403(b) philosophy?

Jim Westrum:   1:24
The 403(b) philosophy and the school district is, we want our compensation packages to be aligned with our district's mission, our vision, our values and our strategic direction. And because we're a service organization, it wouldn't be a surprise that we would have many employees and that compensation and benefits would be a large part of our expenditures on an annual basis. Our 403(b) philosophy is that we seek to leverage the Internal Revenue Code 403(b)  tools to maximize the use of taxpayers dollars as we design an attractive compensation package that allows the district to not only attract, retain, and reward high quality staff to fulfill our mission, but we also want to make sure that our employees are ready when the time comes for them to consider retirement. Clearly, in recent years, there's been an over-arching  migration from defined benefit plans to defined contribution plans in the private sector, and we're kind of anticipating that that would probably occur in the public sector and specifically in public schools in the near future.

Ed Dressel:   2:28
For people not familiar with what happened in Minnesota, what's happened in the pension system there specifically? And how does that impact in the move to the 403(b)?

Jim Westrum:   2:39
Yeah, actually, in Minnesota as well as throughout the country, I think there is a more focus on the under and unfunded pension liabilities that have been promised over many, many years to our public employees. And we've seen that pretty much get phased out and shifted from a defined benefit plan to a defined contribution plan in the private sector. And we anticipate that that will occur more and more frequently in the public sector as well. So knowing that that the public's appetite for pension plans and for the expenditures associated with that, we think there's a migration to  leverage the 403(b)s with our employees. Recently in Minnesota, the legislature has done some charity provisions, which basically means that they have reduced the amount of promises and pension income for current retirees as well as for future retirees. And so, as far as good and best practices for an individual teacher or an individual public school employees, they're going to want to make sure that they are leveraging Social Security, personal savings, tax-deferred savings and other tools so that they're ready to retire when that time comes.

Ed Dressel:   4:02
So pretty typical from what's happening around the country.

Jim Westrum:   4:05
Yes, it is very typical.

Ed Dressel:   4:07
So, working with collective bargaining, how are you getting buy in from the employees?

Jim Westrum:   4:13
Yes, as you know, in school districts, many school districts have collectively bargain employment agreements, which means that, for instance, our custodians might belong to a union or our teachers may belong to the union. Quite honestly, over many years, it's been it's been difficult to fully explain and provide a lot of clarity on the value of tax deferred savings for employees, as well as the corresponding matches or employee/employer matches that are actually bargained to incentivize a behavior. So many people who are financially astute understand that if you start saving early and saving in a tax deferred vehicles such as a 403(b), and also having an employer make some type of contribution to incentive behavior to make it even more attractive, it's important that people understand the value of that. In the past, it's been difficult to explain that, because typically, financial matters are expressed in a spreadsheet or expressed using somewhat complex mathematical equations. One of the things that we found in the school district that I'm in, when we were encouraging increases in district matches to encourage increased participation in employees tax deferred elections, we often found that the employees didn't have a lot of clarity around that. One of the things that we found really helpful is we looked at TRAK and TRAK actually takes into consideration a number of different factors which helps to add to the clarity that we were able to communicate with the collectively bargained employee negotiator. So, for instance, every employee is at a different stage in their life. You might have a 25 your old new hire. You may have a mid-career employee, or you may have someone who's near retirement. So it's very difficult to come up with a answer or some type of information that is understanded or relevant to all employees. But with TRAK, we were able to, on the fly, pretty much demonstrate the effectiveness and the outcomes of improving our increasing employee elections or improving or increasing the district matching contributions. And we were easily able to show how that wouldn't impact a 25 year old, a mid-year employees and someone approaching retirement. Also giving consideration to the fact that there is usually a number of different primes associated with retirement. Social Security has an impact. Public pension plans have an impact. Personal savings have an impact. And, of course, tax-deferred savings through a vehicle such as a 403(b) have an impact. And what we found the most valuable is with TRAK, we were able to clearly demonstrate and get buy in from the members of the negotiating team that this was really beneficial for all of their members, not just for a certain portion of their members.

Ed Dressel:   7:28
So you're using our solution, TRAK-- and just to let everybody know, Jim met me at a conference in Arizona a few years ago and came over and picked up the solution for use in this context to help explain to the negotiators the benefits you're bringing to the table in terms that make it really clear for them to understand.

Jim Westrum:   7:46
That is true. What I found the most attractive about TRAK is that it allows us to easily demonstrate the coordination of a number of factors, such a Social Security benefits, pension benefits, 403(b), savings and then other personal savings. And the use of TRAK's software strengthen both the district's and the collectively bargain union's leadership endorsement of adding and or increasing matching 403(b) contributions, including special pay plans and employee salary deferral strategies as well.

Ed Dressel:   8:21
And that parallels with the ARA and the NTSA in their research does--showing them that an integrated benefit analysis really helps people understand how to move forward. Well, I mean what you're saying, it's  not only individual teacher, but it is also "Hey, we're in negotiations. We want to show what we're bringing to the table." Let me show you what the benefits we're bringing to your teachers at various points in their career. And people, you're engaging the negotiators, which are very different context than they ever thought of using their solution. So what is your current policy for 403(b)  providers, and how do you ensure that your employees have access to these providers?

Jim Westrum:   8:59
Sure. Our current practice in the way that a school district is, we are currently working with high providers. We have two platforms that are self service, and then we also have three full service financial advisors who work with the district and specifically with our employees. The district went through a formal RFE request for proposal process in 2009 and we selected this model. This was in part due to the fact that the district previously had simply been a remitter,  but now we decided to actually take on the role as a plan sponsor. As you're probably aware, school districts are non-ERISA, so we are not required to take on a fiduciary responsibility. However, from a strategic standpoint and from the school board's perspective as well as our employees' perspective, we wanted to make sure that we were following best practices. So the district administration went through a thorough review again in 2019 in anticipation of the March 2020 IRS opportunity to adopt a new agreement. And since that point, we have adopted and approved an IRS approved plan and continue to look at leveraging the tools associated with the 403(b) contributions, salary deferrals and special pay plans.

Ed Dressel:   10:20
So in the context of RFBs when an advisor coming says, "Hey, I want to work with you"-- did any of them bring education tools such as TRAK to the table? And if so or if not, what impact would it have on somebody saying, "Hey, I want to help. Here's how I'm gonna bring the education process to your teachers." What impact would that have been on an RFB?

Jim Westrum:   10:37
As a school district evaluates its strategic partners, I think we're always looking for three things. We're looking for operational excellence--will that strategic partner deliver quality, price and ease of use? We're also looking for product leadership. Does that advisor create the best products and service is, and are they able to differentiate themselves from others? And then finally, we're looking for customer intimacy. We're wanting to make sure that the advisor delivers what our customers want and what our customers need. So as we're going through an RFP process, I think it would be really valuable if the advisor or the company that was seeking to partner with the school district, actually did share that they had tools available that they could share not only with the district administration, but with the employee groups and individual employees as well. So we're always looking for ways to make sure that we're using taxpayer dollars wisely. I'll just share with you really quick that we spent about 2% of our entire operating budget on 403(b) matches and that's strategic in nature because we believe that the compensation package goes beyond simple compensation. We believe that health insurance is a valuable benefit for employees. It allows us to attract and retain, make sure that our employees stay with us. We believe other benefits. You're probably aware--dental insurance, life insurance. But we think one of the stronger benefits to make sure that our employees stay with us for the duration is that they are able to retire when they are ready to retire. And so the 403(b) match and the 403(b) elective deferral there also a critical part. I think many of our employees, as I mentioned before, are in different parts of their life or different parts of their career. So you may have a new 25 year old employee who's just joining your organization. Retirement's probably the furthest thing on their mind, but we all know from all of our education that you need to start saving when you're in your early career. But we also have people in the middle of their career where they're busy with family and other activities, and then we have people who are approaching retirement. In all cases, I think it's critical that our financial advisors or investment advisors who seek to be a strategic partner with the school district, have the ability to clearly communicate and share the benefits associated with them, with their product, and how they can create an integrated benefit analysis for our employees.

Ed Dressel:   13:18
So what type of things can advisors do to help create strong working relationship with the school district or business administrator, such as yourself?

Jim Westrum:   13:25
Our district practice is to form a strategic alliance with our 403(b) providers, both with the provider and the financial advisors as well. We line our compensation packages with their district's mission, business values and strategic direction. The district seeks to leverage the Internal Revenue Code 403(b) tools to maximize the use of taxpayer dollars in an attractive compensation package that allows the district to attract, retain and reward high quality staff to serve the district stakeholders. And as you know, it's a public school district. We're looking at students and education. With that being said, we value the knowledge and the customer service our financial advisors bring to the table and partner with them to communicate the value to employees. We view our partners in the context of providing operational excellence, customer intimacy, and product differentiation so that we can demonstrate that we are looking out for our employees as well as all stakeholders.

Ed Dressel:   14:23
What are some of the things that you 403(b) providers have done to help promote the program in your school district?

Jim Westrum:   14:29
In the Wayzata district our 403(b) providers have worked closely with the district administration as well as leadership within each of the collectively bargained employee groups. This allows us to create unanimous support of employee education and participation in preparing for retirement. Specifically, over the years, we have been fully utilizing and leveraging all the best components of the Internal Revenue code 403(b)  architecture. This includes salary deferral, both pretax and we've actually added Roth in recent years as well. Because there are appropriate times to save on a pretax basis in a 403(b) and there are appropriate times to save in a Roth or 403(b). We're also using 403(b) employer matches to incentivize behavior. We think that value of an employee electing to defer a portion of their salary for retirement is valuable. And by adding a 403(b) employer match, we think that will help to incentivize the employees to save even more. The district has also utilized the non elective employer contribution strategy associated with 403(b).  We have used that to encourage perfect attendance. Many of our employees work during the school year and have the summer where they can do routine medical examinations and dental appointments and such. And so if an employee minimizes the number of sick days that they utilized during the instructional year, we will actually reward them by making a non-elective employer contribution into their 403(b). We think that's a valuable way to make sure that our employees and our teacher specifically are in the classroom, when our students are in the classroom. And then finally, we have also utilized the post employment funding for retirement and severance. Any school districts will actually make some type of severance payment. Or they may also pay for a new sick days at the time that an employee separates service. And so that is another benefit associated with the 403(b) Internal Revenue Code provision, useful for our school district. Our 403(b) financial advisors normally attend our annual benefit there, and they also have ample opportunities planned by both the district and the unions to allow employees the opportunity to learn more about the strengths of participating in a 403(b) plan. And we think participation in a 403(b) plan is important from hire date all the way til the retirement age. So we've created an environment where we have attempted to provide information and demonstrate the district's commitment to the value as an advisor, as a strategic partner.

Ed Dressel:   17:16
What additional types of things would you like to see 403(b) providers bring to the table?

Jim Westrum:   17:21
I think one of the most value added things that a 403(b) provider can bring to the table would be to continue to give financial literacy instruction to our employees. I know a number of the 403(b) providers have websites, and they allow their employees to kind of go in and do a little self serve lesson on different strategies that will allow them to gain additional financial literacy. However, we all know how difficult it can be to go in and do self serve learning on a website. I think it would be really valuable for an advisor to actually attempt to set up appointments with employees of the school district and subsequently clients of that advisor and go over an integrated benefit analysis such as is  available with the TRAK software. We found a very useful to go in to TRAK and create integrated benefit analysis, and we found that it was quite easy to do that for people at different points in their career. I believe that an integrated benefit analysis provides enough clarity to really convince and corroborate that 403(b) participation is important.

Ed Dressel:   18:34
Financial literacy has a broad definition to a lot of different working parts. What parts of financial literacy would you prioritize in the education process?

Jim Westrum:   18:44
Financial literacy for a teacher or an employee of a public school district really is quite broad, as you mentioned, We obviously have many employees that will have some type of pension in the future when they retire. We also have many employees who will be eligible for Social Security. We also want to encourage our employees to save themselves, whether it be through a personal savings vehicle or whether it be through the district sponsored 403(b) plans or 457 plans. So those are one portion of a very broad financial literacy or financial plan that needs to be addressed by our employees. But there are other items as well. I think we're seeing an increase in student debt being a portion or student loan debt being a portion of the financial literacy plan. We're looking at, mortgages we're looking at consumer debt. We're also looking at risk management we're looking at should an employee give consideration or shouldn't individual give consideration to buying life insurance policies or long term disability insurance policies or long term care insurance policies? There are so many components to this financial wellness that is one reason why our school disher, in looking at best practices, has really concentrated on aligning our benefit package with our employees' needs to create not only financial wellness but to encourage our employees to see financial literacy. And I think that the financial literacy portion is really one of the primary benefits of working with an advisor. As we all know, with today's websites and everything, a lot of information is available out on the website. However, I think a financial advisor can bring value by working with an individual to provide clarity and because they're trusted and they're competent and they have experience with a wealth of different situations. A financial advisor can really be a strategic partner not only for the school district, but a strategic partner with an employee of a school district, specifically a teacher.

Ed Dressel:   20:54
So, do you have any dos or don'ts for advisors that work in your school district?

Jim Westrum:   20:58
Sure. Yep. So my recommendation for advisors working in a school district is you really--there's three things that you really want to do. You want to develop a strategic partnership not only with the district administration, but you also want to  build that strategic partnership with the employee's union leadership. And of course, you would want to also build that strategic partnership with individual employees that you serve. The second thing is, I would recommend that you gain visibility as a trusted expert committed to operational excellence, customer intimacy and product differentiation, showing how your product in your brand--you specifically, and the companies that you represent--can bring value to the employees. And then the last thing I would say is it attend as many formally organized events as possible. It's so important to connect with individual employees, and I think it's important to connect with individual employees in person. So many school districts will have a benefit fair. Many school districts will on occasion, have opportunities for an advisor to meet face to face with employees. And I think any time that you can do that, I would encourage you to do that. The primary reason for doing that, is individuals will notice that you're competent and that you're committed to their needs and that you could be a trusted advisor and a strategic partner, not only with the district, but with the employee.

Ed Dressel:   22:31
How about don'ts? You must have a few,  "Please don't do this when you come into school district"?

Jim Westrum:   22:37
Sure. So one of the things that I would share with an advisor is, there are some things that you probably don't want to do because they're not gonna build your brand. Actually, they may actually harm your brand. I would actually say, don't do your work so much as selling but instead as being a trusted strategic expert who can allow the district and its employees to achieve their objectives. I do know that in conversations that I've had with my colleagues and other districts, sometimes our financial advisors or advisors in the financial industry may grow a little frustrated because the access to employees has been restricted. Probably no secret that in today's day and age there is more emphasis on the security of public school buildings and a limitation on the number of visitors and the times of day that visitors can actually visit with employees or meet with employees within the school district. I think that provides some additional challenges for advisors. Many, many years ago, it wouldn't be uncommon for an advisor to be able to come in over the lunch hour and meet with teachers in an informal setting and just kind of create that rapport and maybe answer questions kind of on the fly. I think in this day and age, it's important for advisors to understand that the administrators and administrators in school districts and school board specifically have given a greater concern to this safe environment and providing a secure environment within the public schools for students And for staff as well. So one of the things is I would look at new strategies to connect with employees. And if you are feeling frustrated because you are unable to actually visit employees within the school building within the school day, continue to seek a solution that creates a double win for not only the school administrator, but for the employees. And perhaps that is communicating outside of the school day or sharing information either in a paper format or an electronic format to meet at a time other than during the school day.

Ed Dressel:   24:48
Jim, I appreciate you taking the time today, providing a unique perspective to financial advisors as they step into school districts and the perspective that a school district may have when they are looking for an advisor and how to differentiate their service. I appreciate you taking the time. And I wish you the best at the school district and that cold weather that you get in Minneapolis. 

Jim Westrum:   25:11
Thank you very much.