SUMMARY
This document is solely based on the information from the Complaint and no efforts have been made to verify or confirm the completeness or truthfulness of any facts and circumstances.
- According to the Complaint, TIAA and Morningstar acting as fiduciaries to retirement plans subject to Employee Retirement Income Security Act of 1974 (ERISA), devised a scheme that violated their fiduciary duties of loyalty, prudence and serving solely in the interest of participants and beneficiaries. Further, their actions of self-dealing are deemed prohibitive transactions violations under ERISA.
- TIAA wants to devise a process to leverage its position as a recordkeeper to employer-sponsored plans, in order to gain access to participants and make investment recommendations that favored its own products.
- The scheme began in or about 2013 when TIAA realized that its share of the market for retirement plan services and investments in their proprietary investment options were eroding. Further demographic trends would soon lead to a steeper drop in revenues with the flagship TIAA Traditional Annuity experiencing negative net asset flows,
- TIAA, together with Morningstar, developed an investment advice tool that would direct assets into two of TIAA’s most profitable proprietary investment vehicles: the TIAA Traditional Annuity and the TIAA Real Estate Account. The investment advice tool can be accessed through a self-help program and gain assistance from TIAA financial consultant. Or, access via TIAA managed account program. As fiduciaries, TIAA and Morningstar are duty bound under ERISA to act prudently and loyally when making investment recommendations to participants.
- TIAA incentivized their financial consultants by setting bonus quota for persuading a certain number of participants to use the two programs. By falsely telling participants that the recommendations in both programs are those of an objective, unbiased, and trusted third-party (i.e., Morningstar), and by tilting allocation to favor TIAA’s two proprietary products, TIAA and Morningstar have succeeded in driving needed revenue to TIAA. Through their dishonest actions to benefit themselves at participants’ expense, TIAA and Morningstar are violating their fiduciary duties under ERISA as well as ERISA’s prohibited transaction rules.
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