Compliance

TIAA Loan Practices Questioned in Latest ERISA Lawsuit

A participant who drew four loans from a retirement account over the years argues her provider inappropriately kept portions of interest payments that should have been credited back to her account. 

By John Manganaro editors@strategic-i.com | February 07, 2017
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A new lawsuit argues the practices used by the Teachers Investment and Annuity Association (TIAA) to credit portions of interest payments made by participants on loans taken from their own retirement accounts back to the firm—rather than to the borrowing participant—violate the Employee Retirement Income Security Act (ERISA).

The complaint, which names as defendant the Teachers Investment and Annuity Association, was filed in the U.S. District Court for the Southern District of New York. It seeks to recover money that TIAA “unlawfully took” from retirement accounts similarly situated in the Washington University Retirement Savings Plan and across its U.S. business.

Background information included in case documents shows the lead plaintiff borrowed money from her retirement account on four separate occasions. She has completely repaid two of the loans, she claims, plus interest, and is currently repaying the other two loans. All of the interest the plaintiff paid in connection with those loans “should have been credited to plaintiff’s account,” the suit argues.

According to the compliant, TIAA did not credit the full amount of paid interest to plaintiff’s account and instead “credited a smaller amount of interest to her account and kept the remainder for itself.”

The allegations go further and suggest the conduct at issue is systematic. “Defendant is retaining interest paid by similarly situated investors across the country,” the suit contends. “The amount of defendant’s ill-gotten gains exceeds $50 million per year.”

The action cites violations of ERISA Sections 502(a)(2) and 502(a)(3), along with the corresponding sections in the U.S. Code. 

NEXT: Examining the allegations