Lawsuit Against TIAA Over Managed Account Service Moves Forward

TIAA’s request was denied to dismiss a lawsuit brought against the insurance company for allegedly pushing for participants to use managed accounts in U.S. District Court for the Southern District of New York.

TIAA’s request to dimiss an amended lawsuit filed against it regarding a managed account service for participants was denied by a federal district judge in New York, with an order for the firm to provide an answer by June 21.

Plan participants John Carfora, Sandra Putnam and Joan Gonzales filed the initial complaint against TIAA in the U.S. Southern District Court of New York on October 2021 with lead attorney Schlichter Bogard & Denton LLP. The plaintiffs alleged that TIAA breached its fiduciary duties to participants under the Employee Retirement Income Security Act for allegedly cross-selling the firm’s adviser managed account service known as Portfolio Advisor, which comes at a higher cost than remaining in plan.

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The plaintiffs were part of separate university defined contribution plans serviced by TIAA—though the plan sponsors were cited as breaching their fiduciary duty, none are named as defendants in the lawsuit.

The suit, John Carfora et al v. Teachers Annuity Association of America and TIAA-CREF Individual & Institutional Services LLC, was initially dismissed in September 2022, after which plaintiffs’ attorneys filed an amended complaint.

On Friday, U.S. District Court Judge Katherine Polk Failla ruled in favor of  each of the arguments presented by the plaintiffs, noting that the suit shows “in great detail the systematic efforts on TIAA’s part to drive members from their ERISA plans and into TIAA-sponsored offerings, with little upside to those participants.”  

 “The named plaintiffs each represent that they were subject to aggressive cross-selling and rolled over their funds from their ERISA plans to Portfolio Advisor as a result,” the judge wrote.

Plaintiffs alleged that through its campaign, TIAA placed participants into individually model portfolios that often-included TIAA-affiliated funds, which added fees that they would typically not pay by keeping assets in the employer sponsored plan.

Judge Polk Failla also found that plaintiffs sufficiently alleged TIAA advisers cold-called participants in TIAA-administered plans under the guide of offering free financial planning services, but with the undisclosed intent moving participants to the managed account offerings. 

“For example, Carfora specifically alleges that he was subject to emphatic cross-selling by a TIAA representative, who disavowed any conflict of interest in connection with her recommendation that Carfora execute a rollover to Portfolio Advisor from the Loyola Marymount University Defined Contribution Retirement Plan, and failed to inform Carfora that the fees and expenses of moving assets to Portfolio Advisor were higher than remaining in his employer-sponsored plan,” Polk Failla wrote.

In its motion to dismiss the suit filed in November, TIAA argued that the plaintiffs failed to sufficiently plead that the plan sponsors breached any fiduciary duties in connection with their retention of TIAA as a third-party service provider. The firm also argued that the suit failed to allege facts sufficient to support any finding TIAA was a knowing participant in the breach.

TIAA is represented by attorneys with law firm Wilmer Cutler Pickering Hale & Dorr LLP.

Representatives of TIAA declined comment. Neither attorneys with law firm Wilmer Cutler Pickering Hale & Dorr LLP nor attorneys for Carfora responded to requests for comment.

Carfora, Putnam and Gonzales brought the lawsuit individually and as representatives of a class of similarly situated individuals but have not asked the court to certify the class or to appoint class counsel.   

 

Ascensus Restructures Sales Team

The tax-advantaged savings provider continues retirement division restructurings.

Ascensus has continued with retirement-related restructuring with an announcement Monday of various leadership team moves in its retirement sales team that took effect May 25.

The moves are all internal promotions and reshuffling with an eye toward enabling “long-term growth,” according to the announcement. In February, Ascensus restructured its retirement division into four units, including a core retirement division led by Jason Crane.

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“Our ability to make these changes from within recognizes both the talent and leadership strength inherent in our organization,” Crane said in a statement with the most recent sales changes.

The moves include:

  • Anthony Bologna

    Anthony Bologna has been promoted to a newly created role of national sales director. Bologna has been with Ascensus for over 25 years and will oversee leadership of retirement sales across field-based and internal operations. He was most recently division vice president, Eastern region. Jeff Simes, meanwhile, will be promoted to Bologna’s former role. He joined Ascensus in 2018 as regional vice president, Northeast.

  • Mickie Morley

    Mickie Morley will in turn take Simes’ place, assuming responsibility for Eastern Massachusetts, Maine, New Hampshire, and Vermont. She joined the firm in 2019 in internal sales.

  • Jim Walker, previously director, internal sales, has taken a newly formed role as head of enablement in core retirement. Walker joined the firm in 2019 and will report to core retirement head Crane. He will be focused on “accelerated delivery of data and analytics-driven insights used to optimize deployment of resources” along with governance and organizational readiness.

  • Russ Winchester

    Finally, Russ Winchester will take Walker’s prior role overseeing the internal sales consultant team. He joined Ascensus in 2020 after leading sales teams at Newport, Transamerica and LPL Financial.

The moves come under the leadership of Nick Good, who assumed the role of president in July 2023, and CEO David Musto, who previously held the role of president. The company was acquired by private equity firm Stone Point Capital in 2021.

Ascensus oversees more than $808 billion in assets under administration and provides services for qualified and nonqualified plans, third-party retirement administration through its FuturePlan by Ascensus, 529 education and ABLE savings program administration, corporate and bank-owned life insurance solutions and fiduciary and total rewards services.

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