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​TIAA-CREF Transition to a Group Platform
By Eduardo Gimenez, CFP®, AIF®, Raffa Retirement Services

A Brief History of 403(b) Plans and TIAA-CREF
For over 40 years, 403(b) plans have operated largely unregulated. This is unlike 401(k) plans, which have been more regulated from the onset. This all changed in 2006 with the introduction of new regulations impacting 403(b) plans. Essentially, the Department of the Treasury and the Department of Labor want 403(b) plans to operate more like 401(k) plans. This means that many 403(b) plans today may be subjected to ERISA (Employee Retirement Income Security Act).

For almost 100 years, TIAA-CREF has been a national leader in providing investments for the non-profit sector. TIAA- CREF 403(b) plans were set up as individual contracts, where the relationship was between TIAA-CREF and the employee. The employer was simply a facilitator for the contributions without any fiduciary responsibility other than facilitating contributions. Under the new regulations, the relationship is now expected to be between TIAA-CREF and the employer.

What This Means for Employers
An employer now has a major oversight responsibility for the operation of the plan. Furthermore, other enacted legislation has shifted the responsibility from the employer directly to the plan fiduciaries. The plan fiduciaries may be personally liable for the proper operation of the retirement plan for the benefit of the employees. Plan fiduciaries may include executive directors, chief financial officers, human resource directors, investment committee members, and board members – essentially any individual that has any discretion over the plan. However, TIAA-CREF is not a fiduciary.

Obstacles to Making Your Plan Compliant
Many TIAA-CREF plans are still set up as individual accounts. This format was perfectly fine prior to 2006, but it is now an outdated platform that may not allow for consistent compliance and proper fiduciary oversight. Additionally, some plans are also set up with two different types of individual accounts – employer contributions and employee deferrals. Each of these individual plans requires the filing of a Form 5500 after each plan year.

Strategies for Plan Governance
Fortunately, there are alternatives that can largely allow maintaining most of the TIAA-CREF investments. One option is changing the current individual platform to a group platform that can be managed by the plan fiduciaries. In the group platform, all of the employees still have their own accounts, but it is now under a group umbrella, allowing the employer to manage the plan in a consistent manner. This also has the added benefit of having to only file a single Form 5500.

Changing to a group platform does entail helping employees migrate their assets from the individual format to the group format. Fortunately, many of the TIAA-CREF funds found in these individual accounts can be maintained. Once the new group platform is setup, all contributions and deferrals will go to a plan that will enable the employer to apply consistent and uniform plan rules.

It is important to understand that under TIAA-CREF’s individual platform, each employee has the choice as to whether they would like to migrate to the new platform. However, they will not have a choice regarding all new contributions moving forward. It may be beneficial for the employees to migrate their assets to the new platform, as it will be a fund lineup that will be monitored in an effort to ensure a prudent fund selection and enable more cost efficiencies.

For more information, please contact Ed Gimenez at ed@raffaretirement.com or 240-403-2563.

This information was developed as a general guide to educate plan sponsors, but is not intended as authoritative guidance or tax or legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation. In no way does advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.