The board of the Teachers Insurance and Annuity Association-College Retirement Equities Fund has approved a plan that would allow member institutions and policyholders to transfer their pensions to other investment funds.
Officials of the companies, which serve many private-school employees as well as college and university staff members, said the action was taken to meet criticism from investors that the pension funds were inflexible. Last year, a special committee recommended that the companies study the transferability issue.
As a condition of approving a new CREF money-market fund earlier this year, the Securities and Exchange Commission required the fund to allow greater flexibility in transferring premiums.
“We believe that TIAA-CREF has responded positively and responsibly to approve the larger degree of pension flexibility that some employing institutions and policy-holders desire in today’s financial marketplace,’' said Clifton R. Wharton Jr., chairman and chief executive officer of the companies, which have $60 billion in assets and serve a million participants in more than 4,000 educational institutions.
Currently, the participants in the companies’ pension system can invest in CREF, which consists of a stock fund and the new money-market fund, or TIAA, a life-insurance company providing fixed-income annuities.
During premium-paying years only, participants in CREF can switch assets to TIAA as often as they wish, but at no time can investors move assets from TIAA into CREF.
The proposal approved by the board permits participants to transfer accumulations between the CREF stock account and new money-market account, to TIAA, or to other competing funds approved by their employer, provided the employer offers a new group-annuity fund recently established by TIAA-CREF that would serve as the vehicle for transfers.
Transfers from TIAA are more complicated since the fund is less liquid, investing in real estate and long-term mortgage and corporate loans. Participants in TIAA would transfer their money through a special payout plan in which money would be moved in installments over 10 years to a special group-retirement account. The money then could be switched to CREF or competing investment companies.
The ability to transfer money hinges on the employer’s willingness to offer the new TIAA-CREF accounts, and other investment funds besides TIAA-CREF. A few institutions offer alternatives to TIAA-CREF, but the number is expected to increase with the board’s action.
Employer Support Required
The proposal has received approval in principle from New York State insurance officials, and the companies said they expected no problems with approval from government agencies that oversee insurance and pension laws.
TIAA-CREF is seeking SEC exemption from certain investment laws governing shareholder voting and money transfers. In January, the SEC granted temporary approval for the exemption, which cleared the way for CREF to offer the money-market fund. The SEC. will hold more proceedings to decide whether to grant the exemption permanently
Some colleges and investment organizations, including Stanford University and the Investment Company Institute, have actively opposed the exemption.--KG
