TIAA-CREF Courting California 529 Contract

February 13, 2006, 1:00 a.m. EST 1 Min Read

TIAA-CREF, known for providing pensions to teachers and college professors, is struggling when it comes to helping people save for higher education, according to Dow Jones. In 2003, the financial service provider lost its 529 contract with New York State, and last year, it lost Missouri.

The organization is now counting on California. "They're approaching a crossroads," said Brian Boswell, an analyst at Boston Financial Research Corp. "If TIAA-CREF is going to remain relevant in the 529 business, they have to retain some of the larger contracts. New York and Missouri were a sizeable loss, and the loss of California would be difficult for them to overcome."

TIAA-CREF entered the 529 business in 1998, and quickly came to dominate the marketplace.

The recent exchange of blows that the organization faced with its shareholders is one cause for its slip in stature. The Boston-based mutual fund arm of the organization attempted to raise fees in institutional mutual funds, which are offered in its 529 plans. Shareholders were not happy about this, especially at a time when other funds are cutting their fees, including Fidelity, Vanguard and American Century.

TIAA-CREF currently manages 529 plans in 12 states: California, Connecticut, Georgia, Idaho, Kentucky, Michigan, Minnesota, Mississippi, Missouri, Oklahoma, Tennessee and Vermont.

The fight to keep California tops the organization's agenda, because the plan is among the largest, with a $1.8 billion 529-college savings plan. TIAA-CREF has managed it since 1999.

"Certainly California is one of our largest accounts, so we are putting together a competitive bid to retain the business," said Brenda Griebert, program director of Tuition Financing, the TIAA-CREF subsidiary that runs its 529 plans. "We feel very confident that what we're putting forward is a good proposal."

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.