At the leading retirement fund for academics, procrastination often meant money in the bank.
When college educators asked for changes in their retirement accounts, they alleged Teachers Insurance and Annuity Association-College Retirement Equities Fund, better known as TIAA-CREF, sometimes would wait up to a month to execute trades.
A $19.5 million class action settlement calls for refunds on investment income allegedly generated between the promised and actual transaction dates. TIAA-CREF made no admission of wrongdoing under the agreement.
U.S. District Judge J. Garvan Murtha in Brattleboro, Vt., gave preliminary approval Feb. 25 to the proposal allowing payments to 58,786 educators for transactions from Aug. 17, 2003, to May 9, 2013. He plans a final hearing on the settlement in September.
The class was represented by attorney T. Tucker Ronzetti, a partner with Kozyak Tropin & Throckmorton in Coral Gables. He was brought in by Norman Williams and Robert Hemley, partners at Gravel & Shea in Burlington, Vt.
Ronzetti said his partners, Harley Tropin and Ken Hartmann, also worked on the case.
Like millions of people who manage their retirement accounts, Ronzetti said members of the class contacted TIAA-CREF to move money among stock and bond funds.
“TIAA-CREF would indicate to the account holders that their transaction occurred that day, but in fact the transaction frequently wasn’t processed then. Instead, TIAA-CREF would complete the transaction at a later date and often would make money due to the delayed processing,” Ronzetti said.
Of course, TIAA-CREF, sometimes would lose money, but the activity violated Employee Retirement Income Security Act, according to the lawsuit.
The class action cast a light on allegedly unscrupulous activity at TIAA-CREF, which was ranked 97th on last year’s Fortune magazine’s list of the 500 largest corporations in America. TIAA-CREF serves 3.7 million active and retired employees with $487 billion in combined assets under management.
“We are pleased to have reached a settlement, which is pending court approval. We continue to deny any wrongdoing and have resolved this litigation to avoid the distraction and expense of litigation. As always, our clients remain a top priority for us,” said TIAA-CREF spokesman John McCool.
The issue was first pressed by Norman Walker, associate professor at St. Michael’s College in Colchester, Vt. The court granted summary judgment against his claim on the grounds that he received his funds within the time stated by the prospectus. TIAA-CREF subsequently settled with Walker individually.
The class action was filed in 2012 by Christine Bauer-Ramazani and Carolyn Duffy, also St. Michael’s educators, alleging breach of fiduciary duty, consumer fraud and ERISA violations.
Unlike some class action settlements, Ronzetti said there will be no claims process. Any class member who does not ask to be excluded from the settlement will receive a check averaging $332.
“All the teachers who had investments across the country who had excessive delays in the receipt of their money and are affected will, if they don’t opt out, receive a check,” he said.
“The amount of money is significant,” Ronzetti said. “I think a lot of people won’t be anticipating receiving the checks. It’s a happy circumstance.”