The TIAA-CREF ad urges federal employees to roll over their assets from the federal retirement savings plan without telling the workers they will encounter higher fees if they do.
The move by TIAA-CREF and a refusal by Fidelity Investments to stop running a similar ad were sparked by letters from U.S. Senator Herb Kohl (D-Wisconsin) demanding the two providers re-examine their marketing campaigns aimed at members and beneficiaries of the Federal Thrift Savings Program (TSP).
In addition to Kohl’s contention that the TSP offers lower fees, a statement from the Senate Special Committee on Aging quotes Gregory Long, executive director of the Federal Retirement Thrift Investment Board, as pointing out that TSP members are able to leave their money in the fund when they separate from federal service. Kohl is chairman of the committee.
“Although these other products may be useful, they are not always the best choice for every consumer,” Kohl asserted in his letter to Fidelity CEO Edward Johnson III. “In particular, consumers can suffer unnecessary harm when they choose rollover plans that have higher fees than their original 401(k) plans. Therefore, it is of the utmost importance that consumers have complete, clear and concise information on all the terms of such products before making any decisions.”
Fidelity indicated in a letter that it would continue with its rollover ad campaign, which characterizes TSPs as “old’ and encourages participants to roll over their government accounts to a Fidelity 401(k) or IRA products.
“I applaud TIAA-CREF’s decision to pull the ads, and am disappointed that Fidelity has not chosen to follow suit,’ said Kohl, in the committee statement. “The TSP has the lowest administrative costs of any retirement program in the country and I think these misleading ads are a disservice to hard-working public servants.’
Fidelity defended its position in its response to Kohl: “Fidelity’s rollover IRA offers investors extensive investment flexibility with no additional account fee, the extra convenience of aggregating retirement assets, and financial guidance services.’
The Senate committee’s statement, including letters from the providers and examples of the controversial ads, is available here.