Yesterday [1], John told us how employee John McHenry was told that to get out of the Teamsters-controlled pension plan he would have to “quit, be fired or die.”

An article in yesterday’s New York Post [2] demonstrates why McHenry was wise to opt out of the union pension plan. In addition to being massively under-funded (only 3.2% [3] of multi-employer union pension plans have enough assets to pay the promised benefits), it seems that NEA union officials have taken to getting kickbacks for endorsing under-performing, high-fee investment plans to teachers:

Not including management fees, the NEA's only officially endorsed "retirement program" - the Security Benefit Life Insurance Corporation's Valuebuilder annuity - charges 0.9 percent to 2.6 percent a year. Throw in management fees, and the least expensive option costs a teacher 1.73 percent of her account balances each year, while the most expensive costs 4.85 percent.

Over time, a fee that large is devastating. Without inflation, the educator would have to earn nearly 5 percent each year simply not to lose money. Consider a teacher who socks away $500 a month and earns an average yearly return of 10 percent for 35 years: She'd wind up with $1,788,760 upon retirement - quite a sizeable nest egg. But if she were paying 4.85 percent in fees, she'd accumulate less than one-third as much - just $587,854.

It appears that the NEA is willing to endorse a shoddy plan in exchange for a contribution to its coffers. In 2004, the union collected nearly $50 million from the investment vehicles it endorsed.