Why is the CTU Promoting Whole Life Insurance?

The following information has been approved for distribution to all members by the CTU Policies Committee:

I’m sure no teacher thought twice when they received an email for Group Whole Life Insurance from the Chicago Teachers Union on October 16, 2023.

“Attention all CTU Members! Open Enrollment is here. CTU members are eligible. Group Whole Life Insurance is now available. Guaranteed issue. No Medical Requirements to Enroll! Mass Mutual  Up to $125K guaranteed issue coverage or Up to $250K!”

Because I have been looking more closely at teacher pensions and investments, I asked the 403bwise watchdog group on FB the following question: We received an email from our union for Group Whole Life Insurance. Does anybody know anything about this group?

“Whole life insurance in general is a bad idea for most people,” wrote Ryan Cruz, a top contributor. “It benefits very few people, and even fewer middle income earners in education.”

“I’ll also point out that you need to be careful of your sources when researching this. You’ll notice a pattern if you’re looking for it. Insurance companies and salesmen that profit from the sale of it are about the only people praising this insurance.”

Karl Fisch added, “Whole life insurance is a good solution for probably less than 1% of people (and you are very unlikely to be in that less than 1%).”

The 403bwise FB group was set up as a watchdog group after many teachers got burned investing their money in supplemental retirement accounts offered by their school districts that turned out to have high and hidden fees.

When you purchase whole life insurance, you not only get life insurance, but also an investment. People think they are getting the best of both worlds, when in fact, according to Fisch Financial, they are getting the opposite. The article stated, if you need life insurance, you should purchase term life insurance.

“They try to convince us you can turn life insurance into an investment instead of just insurance, but in the end, you get both subpar insurance and subpar investments.”

The premiums are expensive, and the cost of whole life insurance tends to be much higher than term life insurance. For example, a healthy 40-year-old man can expect to pay an average annual premium of $7,028 for a $500,000 policy, while a term life policy for that same person would cost only $334 annually on average, according to Nerdwallet.com. 

Plus there is a two-year surrender period if they choose to get out.

Erika Meza, a high school teacher who has researched supplemental investments for teachers, said a $25k death benefit is offered as a free benefit to CPS teachers, up from $10,000. CPS employees can also purchase additional death benefits up to 4x their salary for a very low fee, much less than what Mass Mutual is offering the teachers.

So why would the CTU send out an email that would only benefit 1 percent of its members?

The CTU email about the Whole Life Group was approved by the CTU Policies Committee. This Committee is traditionally the one that approves any vendors who want to hawk their products to the union’s 30,000 members. 

A quick search on the Illinois Sunshine website that lists donations to political groups showed that United Schools Associates (USA), Inc., which is listed as the party selling this seemingly subpar product, gave a $3,500 donation to the CTU PAC on August 28, 2023. This same vendor gave $3,000 to the union a year earlier on October 5, 2022. And last year teachers also received a similar email touting whole life insurance from the Chicago Teachers Union.

USA is a third party sales agent for Mass Mutual.

Unions have gotten into the financial game to raise money, and sometimes they get caught with their fingers in the cookie jar. In 2020 the Securities and Exchange Commission (SEC) charged VALIC Financial Advisors Inc. (VFA) for failing to disclose to teachers and other investors practices that generated millions of dollars in fees and other financial benefits for VFA. The SEC had found that VFA failed to disclose that its parent company paid a for-profit entity owned by Florida k-12 teachers unions to promote VFA and its parent company services to teachers. Valic is today Corebridge that sells the 403(b) supplemental retirement plan to CTU teachers.

Meza, who is also the chair of the CTU Tier 2 Pension Committee, said the Whole Life Insurance the CTU email sent out has high and hidden fees, along with subpar returns as mentioned above. These Whole Life products usually invest your money and guarantee a certain percent. For CTU members it is 4 percent. That guaranteed rate may sound like a good thing when the S&P 500 was down 18 percent last year, but it was above 25 percent in 2021. Had you purchased the Whole Life product, you would have made just 4 percent and Mass Mutual would have pocketed any gains. Considering the market on average returns 8 percent annually, there are better ways to invest your hard-earned money.

“This is not in our best interests,” Meza said. “We pay a mere $13 for supplemental life insurance where we can collect a payout of 4 times our salary. Term life is the best insurance. They are restructuring our insurance policy and preying on teachers. The rule of thumb is to keep insurance and investments separate.”

Meza said she applied to be on the CTU Policies Committee and is waiting to hear back.