Sorry if the subject seems like made-up words. But they began to appear in The Chronicle of Higher Education in the 1980s in discussions of TIAA-CREF, and they were also used in TIAA-CREF's The Participant magazine. Although Congress had begun to think about TIAA-CREF's and Mutual of America's tax exemptions (a separate issue) in the 80's, it's not precisely correct to suggest that the US gov't cancelled the requirement for annuity-only payout of TIAA-CREF funds. Government pressure was involved, however. But just as in a lawsuit settlement or a consent decree, TIAA-CREF can claim credit for the entire galaxy of changes!
I wrote a little about the subjects of tax exemption and cashability/transferability in the past. To summarize the latter, academics had been chafing for years about being locked-in to TIAA-CREF, which essentially had a monopoly on non-state-employee retirement plans for faculty. The turning point came when even the staid TIAA-CREF saw the future of investing, and realized they had to have more than two investment options (TIAA Traditional and CREF Stock.) Because of rising interest rates (and I imagine, the desire to offer an apparently low-risk option as their first new product ...) they spent years planning the CREF Money Market Account.
But in order to offer it, they had to get SEC approval. A caucus of opportunistic mutual fund companies and long-oppressed faculty members joined to force changes at TIAA-CREF. The company was forced to create a plan to permit transfers between funds (including out of TIAA Traditional, what became today's TPA), withdrawals other than by annuitization, and transfers to other investment companies. Improvements in how TIAA-CREF was governed (meaning, primairily election procedures) which proved to be mainly window-dressing were also imposed.
Eventually
that anger would lead Stanford to spend hundreds of thousands of dollars in
legal fees to intervene in the case, and to ask officials in the Justice
Department's anti-trust division to consider intervening as well, on grounds
that TIAA-CREF's request could lead to an anti-competetive situation. Stanford
would become the most agressive higher-education critic in the case.
"It
really was a matter of principle", Mr. Schwartz [Stanford VP & General
Counsel] says. "We believed that
TIAA-CREF was wrong, legally and from a standpoint of fairness, in restricting
our employees." Colleges and
universities - not TIAA-CREF - should control their retirement plans, he says ....
Thus
did a routine regulatory notice evolve into a lengthy, expensive, and sometimes
acrimonious legal process that provided TIAA-CREF's critics with an official
forum in which to challenge the companies.
Several months later, TIAA-CREF announced a plan of its own the would,
for the first time, allow policyholders to transfer "old money" - the
accumulations in their basic retirement accounts.
"TIAA-CREF
vs. Critics: Long, Expensive Battle Nears Resolution by SEC",Mooney,
Carolyn J The
Chronicle of Higher Education; May 10, 1989; 35, 35;
There are a number of additional references in my older posts. The insert link button is greyed out in my Firefox, so this link may look odd. You can cut and paste the link itself if you want to read the old thread:
1997 Tax Exemption Loss/1989 Settlement: http://socialize.morningstar.com/NewSocialize/forums/thread/2177066.aspx
I'd also like to add that these recent discussions of annuities are confusing to newer TIAA-CREF participants. They may not understand how a discussion of generic single-premium annuities relates to retirement investing in the CREF variable annuities (not at all, is the answer) , or to annuitization of their TIAA-CREF balances during retirement (related, but not entirely "the same thing.")
Tim
