TIAA Sued Over Alleged Mismanagement of Employee Retirement Funds

A complaint was filed Tuesday against TIAA by a former employee in U.S. District Court for the Southern District of New York, accusing the company of breaching its fiduciary duties under the Employee Retirement Income Security Act. The complaint, brought by former employee Brian Byrne on behalf of himself and other participants in TIAA’s retirement plans, claims the company mismanaged billions of dollars in employee retirement savings.

The plaintiffs allege that TIAA and other fiduciaries breached their fiduciary duties under ERISA by opting for high-cost investment options in the plan’s investment menu, despite cheaper alternatives, and for not removing an underperforming fund from the plan.

According to the complaint, TIAA offers an in-house investment option called the College Retirement Equities Fund, which held more than $2 billion in assets as of December 2023, across eight different investment accounts with different fees. The plaintiffs allege that TIAA offered employees the class of the fund carrying higher fees, despite the availability of virtually identical funds with significantly lower costs.

For example, the complaint states that a $100,000 investment in the lower-cost class would incur fees of just $170 over a five-year period, compared with $1,043 in fees from the costlier class, assuming 5% investment returns each year.

Furthermore, the complaint alleges that TIAA did not remove its CREF Growth Fund from the plan, despite its underperformance of its market benchmark, the Russell 1000 Growth Index. Participants had about $480 million invested in the underperforming fund as of December 2023, according to the complaint.

“Acting in their self-interest, rather than the best interests of the plans and their participants and beneficiaries, the TIAA Defendants retained a poorly performing investment option that benefited TIAA, rather than the plans, despite the availability of superior—and readily available—investment alternatives,” the complaint states. “A loyal fiduciary, in possession of the same investment performance information, would have removed [the fund] as an investment option in the Plans and replaced them with a more prudent alternative.”

The complaint states that since 2009, the Growth Fund has underperformed its stated benchmark by more than186%.

The complaint alleges that the actions by TIAA violate its fiduciary duties of prudence and loyalty under ERISA, while also alleging that the company engaged in prohibited transactions under ERISA.

“TIAA believes the lawsuit is without merit. The company provides its employees and participants with quality products and services that deliver strong long-term performance at reasonable costs,” a TIAA spokesperson said in a statement. “Our mission remains focused on helping those we serve, including our own employees, achieve a financially secure retirement.”

In December 2024, UnitedHealth Group settled for $69 million in a similar case.

The TIAA plans have approximately 28,000 participants with more than $9 billion in assets, according to the complaint.