Compliance

TIAA Settlement Agreement Goes Beyond Monetary Compensation

By John Manganaro editors@assetinternational.com | May 12, 2017
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In addition to the $5 million settlement fund that will, practically but not legally speaking, pay back participants for the excessive fees they say they paid to TIAA, the settlement agreement also includes “certain therapeutic measures relating to the plans and their participants and beneficiaries … to the extent non inconsistent with ERISA.”

For example, TIAA has agreed to add at least 10 non-proprietary investment options to the plans, of which five will have investment management fees of 15 basis points or less. TIAA further “agrees to request the least-expensive share class available to the plans for these non-proprietary investment options.”

In the event new options pay revenue sharing, TIAA “agrees to credit the revenue sharing payments to the participants in the plans whose accounts are invested in the non-proprietary funds on a proportional basis.” This was seemingly a major point of contention for participants, who argued that TIAA's retention of revenue sharing was impermissible under ERISA 

A significant number of other non-monetary settlement terms are described, including that on a one-time basis TIAA will provide the class with overview information about the changes being made to the investment menu, particularly with respect to fees and revenue sharing. TIAA also agrees to offer a brokerage window to permit plan participants to invest in an even broader range of non-proprietary mutual funds—and to employ independent consultants to help oversee this transition process. In addition, TIAA agrees to implement an education program “based on its reasonable judgement of what is in the best interest of plan participants and in accordance with the terms of the plans.”

The full text of the settlement decision further details requirements TIAA will have to meet in order to resolve these claims and is available here

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