Making matters worse for Allaire and his colleagues, the Rhode Island 401(a) account automatically funnels many participants into a costly product that generates profits to TIAA, the huge New York financial firm designated by the state to handle the plan. <\/p>\n
Participants must opt out of the product under a change made by the state in 2023 to eliminate low-cost provider Vanguard from the plan. That change has resulted in millions of dollars flowing to TIAA from participants unaware they are paying them because the costs are not disclosed. Rhode Island officials and TIAA defend the plan.<\/p>\n
![\"Jason](\"https:\/\/www.newsbeep.com\/ca\/wp-content\/uploads\/2025\/09\/250912-jason-allaire-mn-1545-47abdf.jpg\")
Jason Allaire.Sophie Park for NBC News<\/p>\n
TIAA is being investigated by regulators in three states \u2014 Montana, Vermont and Washington \u2014 who are probing allegations that the firm steers retirement savers into two costly TIAA products, according to Ted Siedle, a lawyer for a former TIAA financial consultant who filed a whistleblower complaint with the Securities and Exchange Commission in 2024. <\/p>\n
Last year, NBC News reported<\/a> on the former financial consultant\u2019s complaint, which contends that a key investment tool used by the firm pushes its clients into TIAA products, including one in the RI plan, that yield the firm significant profits but generate lower returns to investors. <\/p>\n \u201cThis is a company that\u2019s been plagued by disturbing whistleblower allegations for over a decade now,\u201d Siedle said. \u201cThese state regulators are seriously concerned about the integrity of the advice that\u2019s being offered by TIAA and its sales and representative licensing practices.\u201d <\/p>\n Spokespeople for the Montana state auditor\u2019s office and the Washington Department of Financial Institutions confirmed they have open investigations into TIAA. Vermont declined to comment. <\/p>\n Michael Tetuan, a TIAA spokesman, said of the investigations: \u201cWe cooperate fully and transparently with all regulatory authorities.\u201d <\/p>\n As for the RI plan, he said in a statement: \u201cTIAA participated in the state\u2019s competitive bidding process,\u201d and is proud to have been selected by the state to “provide a custom retirement default solution for its eligible employees.” <\/p>\n “Rhode Island makes all legally required disclosures available to participants,” the statement added. “Ultimately, it\u2019s up to participants to decide which specific investments best suit their financial goals.” <\/p>\n Accusations of undisclosed conflicts at TIAA have dogged the firm in recent years, with a raft of insiders alleging the firm pushes clients into high-cost accounts and products, putting its profits ahead of its customers\u2019 best interests. <\/p>\n A recent lawsuit, filed by former employees and supported by the AARP Foundation<\/a>, accuses TIAA of pressing its own workers into expensive investments that underperformed for years. TIAA says it will vigorously defend against the suit.<\/p>\n In 2021, New York state regulators and the SEC alleged the firm had quietly propelled clients into higher-cost accounts. TIAA paid $97 million to settle<\/a> the case without admitting or denying the allegations.<\/p>\n Carla Rojo, a spokeswoman for the Rhode Island Treasurer\u2019s office, said TIAA was selected after a transparent process and thorough evaluation. <\/p>\n \u201cThe Rhode Island Treasurer\u2019s Office, along with the State Investment Commission, is a careful, conscientious steward of the retirement plan investments for more than sixty thousand current and retired state and other government employees,\u201d she said in a statement. \u201cTogether with the defined benefit pension system, the 401(a) Plan allows for secure and more portable retirement savings.\u201d<\/p>\n The 401(a) plan does not allow withdrawals \u201cto ensure financial security in retirement,\u201d Rojo said, adding that one-third of TIAA\u2019s 401(a) plans similarly bar withdrawals. <\/p>\n Allaire was not wrong in assuming he could withdraw money from his 401(a) plan before retiring, as 401(k) holders can. The IRS, whose rules govern these plans, says<\/a>:\u201cRetirement plans established for the benefit of governmental employees generally function similar to those covering private employers.\u201d <\/p>\n Eliminating a low-cost provider<\/p>\n When RI state officials selected TIAA to administer the 401(a) plan for its public workers, the plan was meant to supplement those workers\u2019 severely underfunded public pensions. It was 2011, and RI pensions were in crisis, with enough funding for less than half the pensions\u2019 combined liabilities<\/a>.<\/p>\n State officials began requiring workers like Allaire to contribute to a 401(a) retirement account while the state worked to shore up the beleaguered pensions. Most workers contributed 5% of their salaries to their 401(a) accounts each year, with the state kicking in 1%.<\/p>\n After a bidding process, the RI State Investment Commission unanimously selected TIAA to run the 401(a) plan in July 2012, a press release<\/a> shows. <\/p>\n \u201cOur goal was to choose a provider whose priorities are low-cost and secure investment products, along with robust and dependable customer service,\u201d Gina Raimondo, then the state\u2019s general treasurer, said at the time. \u201cWe have accomplished that with the selection of TIAA-CREF,\u201d then the name of the company. <\/p>\n Experts question the assessment of TIAA as a company with low-cost priorities, especially when its signature product\u2014an annuity\u2013is in the mix. Annuities are contracts that promise to provide income for holders during their lives, but their often-higher costs can be hidden from view. <\/p>\n TIAA\u2019s annuity is included in the RI plan\u2019s \u201cdefault\u201d product, where participants\u2019 money automatically goes if they do not opt out and make their own choices.<\/p>\n Raimondo, now a distinguished fellow at the Council on Foreign Relations, did not return an email seeking comment.<\/p>\n Chris Tobe, a retirement investment expert and former trustee of the Kentucky Retirement Systems public pension, estimates the annual cost of the TIAA annuity in the RI plan\u2019s default investment product at between 1.2% and 1.5%, making that product more expensive to participants than the previously offered target date fund from Vanguard at a 0.06% cost. <\/p>\n RI plan participants are not told of the annuity\u2019s costs. Instead, state documents<\/a> list the annuity\u2019s expense as \u201c0.00%,\u201d saying TIAA provides RI plan participants \u201can inexpensive fee structure (estimated at 0.022%).\u201d <\/p>\n TIAA says its annuity, known as Traditional, has zero costs because it is \u201cnot an investment for purposes of securities laws,\u201d and does not have an \u201cidentifiable expense ratio,\u201d or cost, like a mutual fund. The money TIAA makes on the annuity is generated by the difference between what the insurer earns on its investments and what it pays out to its annuity holders, known as the spread or also as a markup. <\/p>\n The higher the spread, the lower the payouts annuity holders receive; as such, the spread represents a cost to those holders. While these costs do not have to be disclosed, they can be onerous.<\/p>\n Research <\/a>from the Federal Reserve Board in 2021 described the spreads annuity marketers earn on the products as \u201cnotoriously high life annuity price markups.\u201d Annuities are not federally regulated as mutual funds are.<\/p>\n The TIAA spokesman declined to say what TIAA earns on the annuity. That is \u201ccompetitive and proprietary information,\u201d he said.<\/p>\n Tobe, who worked as an insurance company executive for several years, said that response wasn\u2019t surprising. <\/p>\n \u201cThese products are created so you don\u2019t have to show the fees,\u201d he said. <\/p>\n In addition to the annuity costs, the RI 401(a) plan participants pay TIAA administrative fees. For the fiscal year ended June 30, 2024, those costs totaled almost $1.3 million, state records show.<\/p>\n Initially, RI plan participants were able to keep their costs low by investing in Vanguard funds. And most of them did so: by 2023, almost 90% of the plan\u2019s assets, or $1.2 billion, were in Vanguard products, state records show. <\/p>\n That changed when the Rhode Island Investment Committee, chaired by James A. Diossa, the RI Treasurer, eliminated the Vanguard option. The decision came during an executive session<\/a> at a May 2023 meeting, with no details of the deliberations, state records show.<\/p>\n![\"TIAA](\"https:\/\/www.newsbeep.com\/ca\/wp-content\/uploads\/2025\/09\/250912-tiaa-ONETIMEUSEmn-1510-50ced8.jpg\")
A TIAA office in New York.Glasshouse Images \/ Alamy file<\/p>\n
![\"Robert](\"https:\/\/www.newsbeep.com\/ca\/wp-content\/uploads\/2025\/09\/250911-retirement-risks-Robert-Jalette-mn-1010-66778a.jpg\")
Robert Jalette.Sophie Park for NBC News<\/p>\n