TIAA-CREF Pulls Thrift Rollover Ad

Copyright 2008 Euromoney Institutional Investor PLCAll Rights Reserved Defined Contribution & Savings Plan Alert

July 21, 2008

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TIAA-CREF Pulls Thrift Rollover Ad

TIAA-CREF pulled an ad last week aimed at persuading federal workers from rolling their Thrift Savings Plan accounts into an individual retirement account.

The decision followed a scolding by Senate Aging Committee Chairman Herbert Kohl (D-Wisc.), who wrote to the CEOs of TIAA-CREF and Fidelity Investments challenging them to pull such ads.

"TIAA-CREF regrets any misunderstanding that may have been caused by a recent advertisement directed toward Thrift Savings Plan participants," responded Ed Van Dolsen, TIAA-CREF executive v.p. in a letter back to Kohl. "To avoid any additional confusion, the company will not run this advertisement in the future."

Fidelity hasn't responded yet. "We have received the [Kohl] letter. We are reviewing it, and we intend to provide a reply to the senator," a spokeswoman told DCSPA.

Kohl and TSP Executive Director Gregory Long, who also penned a cautionary article to Thrift participants on the issue, object to comparatively higher fees typical of retail IRAs. The Thrift plan carries a 15 basis points administrative charge, which Long calls "the lowest administrative costs of any plan of its kind ­ or mutual fund for that matter."

Long writes some ads describe employees' Thrift accounts as "old," implying "that at some point your TSP account stops working for you."

He also countered mutual fund claims of "no fee or low fee" without directly comparing fees. "Let's be realistic; private sector companies are in business to make a profit... For example, there may be brokerage transaction fees, and your money might be subject to the underlying funds' portfolio management fees and expenses. These add up!" the letter says. -- Stan Wilson

August 6, 2008