The widening insurance controversy surrounding the Los Angeles Dodgers is no longer just a story about billionaires, private credit and professional sports. It may also be a story about schoolteachers and their retirement savings.

Security Benefit Life Insurance Company has a huge presence in the K-12 retirement market. More importantly, Security Benefit has a remarkably close financial relationship with the National Education Association’s Member Benefits organization. The NEA Retirement Program says it has served more than 3 million NEA members through its relationship with Security Benefit.

And the relationship isn’t merely an endorsement.

Security Benefit pays NEA Member Benefits for the relationship. NEA Member Benefits currently discloses that the payment was approximately $4 million in 2025, that Security Benefit receives the exclusive right to offer products through the NEA Retirement Program, and that NEA Member Benefits generally cannot promote competing retirement investment programs to its members. NEA even acknowledges that this arrangement creates a “potential conflict of interest.” NEA Retirement Specialists, when making recommendations to members, offer only Security Benefit products when appropriate.

That makes what is happening at Security Benefit important to teachers.

The Dodgers Are in the Insurance Story

Security Benefit is controlled by Todd Boehly’s Eldridge organization. Boehly, of course, is also part of the ownership group of the Los Angeles Dodgers.

The Financial Times recently exposed how deeply Security Benefit embraced a form of investment called a collateral loan. At year-end 2024, Security Benefit reportedly held about $12.9 billion — roughly 47% of all collateral loans held by the entire U.S. life insurance industry. Regulators have been concerned that existing rules allowed insurers to hold substantially less capital against some collateral loans than they might have to hold against the underlying assets themselves.

One particularly eye-catching example reportedly involved approximately $185 million connected to Boehly’s interest in the Los Angeles Dodgers.

Security Benefit disputes the implication that these investments represent excessive risk. It says its collateral loans are secured, originated at no more than 80% loan-to-value, and have experienced zero principal losses since inception. The company reported an RBC ratio of 424% entering 2026.

But Security Benefit is nevertheless preparing to substantially reduce or restructure the collateral-loan portfolio before new NAIC capital rules take effect. Its own plan contemplates repayments, recapitalizations, capital injections, restructuring assets into rated securities, risk transfers and reinsurance. Security Benefit acknowledges that failure to take effective management actions could have a material adverse effect.

And this month Fitch supplied another warning sign.

Fitch maintained Security Benefit Life’s A- financial-strength rating, but changed the outlook on issuer ratings from stable to negative, focusing particularly on the collateral-loan portfolio and the execution risk associated with reducing it. Security Benefit strongly disagrees with Fitch’s decision.

That doesn’t mean Security Benefit is about to fail. It means somebody responsible for protecting retirement savers should be asking questions.

Tom Gober’s Bigger Concern: Look at the Reinsurance

Forensic insurance accountant Tom Gober has been warning about captive and affiliated reinsurance structures for years. The Security Benefit structure provides an extraordinary example of why.

Security Benefit owns Sixth Avenue Reinsurance Company, or SARC, a special-purpose financial insurance company domiciled in Vermont. Security Benefit ceded to Sixth Avenue certain guaranteed-lifetime-withdrawal-benefit obligations associated with annuities issued principally in 2018, 2019 and the first half of 2020.

Here is where it gets remarkable.

Vermont permitted Sixth Avenue to use an accounting practice different from normal NAIC statutory accounting. Security Benefit’s own statutory disclosure showed that the practice increased Sixth Avenue’s surplus by hundreds of millions of dollars.

The Kansas Insurance Department’s examination report couldn’t be much clearer:

“The Risk-Based Capital of SARC would have triggered a regulatory event had it not used the permitted practice.”

Security Benefit’s audited statutory statements repeat essentially the same disclosure. Without the permitted accounting treatment, the reported statutory value of its investment in Sixth Avenue would have been deeply negative.

That does not establish that Sixth Avenue or Security Benefit is currently insolvent. The excess-of-loss reinsurance supporting the permitted asset has economic value, and Vermont has legally authorized the treatment.

But it raises exactly the question Gober has been asking regulators for years:

How much of an insurer’s apparent capital is hard capital, and how much depends upon reinsurance, affiliated structures, regulatory exceptions and accounting treatment?

Now Put the Teacher Back Into the Picture

This is where the story becomes much more troubling.

The NEA tells teachers that it is proud to partner with Security Benefit. Its website says the relationship has lasted more than 20 years and reaches more than 3 million members. Security Benefit offers 403(b)s and annuities through the program, while NEA Member Benefits receives millions of dollars annually from Security Benefit.

Meanwhile Security Benefit is working through one of the most significant balance-sheet restructurings in the annuity industry.

Its collateral-loan concentration has attracted regulatory attention. The capital treatment of those loans is changing. Fitch has changed its issuer outlook to negative. Security Benefit is planning substantial changes to the portfolio. And buried deeper in the structure is a Vermont captive whose RBC would have triggered regulatory intervention without a special permitted accounting practice.

None of that proves teachers will lose money.

It proves something much simpler:

NEA Member Benefits should be asking Security Benefit some very hard questions on behalf of its members.

How much NEA retirement money ultimately depends upon Security Benefit’s general account? Which NEA annuity guarantees are exposed to Security Benefit credit risk? Which liabilities have been reinsured? How much exposure ultimately reaches Sixth Avenue or other reinsurers? What happens if Security Benefit is downgraded? Can teachers transfer their money without surrender charges or other penalties? And does the NEA program have a contractual downgrade provision that allows members to escape if Security Benefit’s financial condition materially deteriorates?

Those questions matter because an annuity guarantee is ultimately only as good as the financial structure standing behind it.

Teachers Need a Downgrade Escape Hatch

I have argued repeatedly that retirement annuities should contain meaningful downgrade provisions. A retirement saver shouldn’t have to wait until an insurance company actually fails before being allowed to protect himself or herself.

The Security Benefit story demonstrates why.

A teacher doesn’t need to understand collateral-loan RBC charges, Vermont captive accounting, excess-of-loss reinsurance or the capital structure behind the Los Angeles Dodgers.

The teacher needs something much simpler:

If the financial strength supporting my retirement guarantee deteriorates substantially, can I get my money out?

The NEA receives millions of dollars from Security Benefit and says it performs ongoing due diligence to protect its members.

Now would be a very good time for the nation’s largest teachers union to demonstrate exactly what that due diligence means.

Ask Security Benefit about the Dodgers. Ask about the $14 billion-scale collateral-loan restructuring. Ask about Sixth Avenue Reinsurance. Ask what happens after another downgrade. And most importantly, ask whether teachers have the contractual right to leave before a financial problem becomes a retirement crisis.