AARP Attorneys Join ERISA Lawsuit Against TIAA

Two former TIAA employees have filed an amended complaint claiming the company violated the Employee Retirement Income Security Act by investing more than 28,000 plan participants’ retirement funds in a proprietary in-house fund that has failed to meet its market benchmark since 2009. Attorneys from the AARP Foundation joined the complaint as co-counsel on behalf of older adults enrolled in retirement plans offered by TIAA to its plan participants, according to a statement from AARP.

The original complaint, filed on May 20 by former TIAA employee Bryan Byrne, alleged TIAA breached its fiduciary duties under ERISA by opting for high-cost investment options in the plan’s investment menu, despite cheaper alternatives, and by not removing its underperforming College Retirement Equities Growth Fund from the plan. The complaint and the amended complaint are pending in U.S. District Court for the Southern District of New York.

The amended complaint adds two new plaintiffs, Charles David Sullivan and Sarah Johnson, both former TIAA employees. The plaintiffs are seeking class action status on behalf of all participants in and beneficiaries of plans that invested in the two affected fund classes: R3 share classes, starting September 16, 2022, and the growth fund class generally, starting May 20, 2019.

The complaint also alleges that plan participants were charged millions of dollars more than TIAA’s institutional clients in higher investment fees, while TIAA profited from fee income.

“By shaving five, 10, and even 15 basis points in higher fees from the R3 class assets from around September 16, 2022, and onward, … defendants quietly pocketed millions of dollars for themselves,” the complaint states.

The suit seeks to recover the losses to participants’ retirement savings caused by the alleged breaches.

The AARP Foundation is a charitable affiliate of the AARP that “works for and with older adults to expand economic opportunity, strategic grantmaking, volunteer-driven community service, and legal advocacy,” according to AARP’s statement.

“When companies mismanage retirement assets and seek to maximize their own profit by charging exorbitant fees, they jeopardize the retirement security of older adults, particularly harming low-and moderate-income workers,” said William Alvarado Rivera, senior vice president of litigation for the AARP Foundation, in a statement. “AARP Foundation is fighting to ensure TIAA participants get the retirement income they’ve earned—and the dignity they deserve.”

A TIAA spokesperson responded to an email from PLANSPONSOR by saying, “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 competitive costs. Our mission remains focused on helping those we serve, including our own employees, achieve a financially secure retirement.”

TIAA, its board of trustees and its investment advisory review committee are represented by Goodwin Procter LLP. Sanford Heisler Sharp McKnight is lead counsel for the plaintiffs.