TIAA-CREF is strongly protesting a measure contained in the tax relief proposal passed by the House of Representatives last week that would repeal the tax-exempt status of its defined contribution plan services, retroactive to Jan. 1, 1996.
The proposal was shepherded through the House by Texas Republican Rep. Bill Archer. The bill is now in the hands of the Senate. The House Ways & Means Committee, chaired by Mr. Archer, says the proposal will raise about $1.5 billion in tax revenue within a decade.
TIAA-CREF, with $185 billion, claims the provision will impose an unfair tax on the pension benefits of 2.6 million teachers and educators, which could reduce their benefits 3% to 5%. TIAA-CREF President John H. Biggs reportedly has written to the presidents of many U.S. universities to gain lobbying support against the proposal.
State Universities' Retirement System of Illinois, Champaign, dropped its brokerage commission recapture program for the $8 billion pension fund, said John R. Krimmel, associate investment officer. The system's board dropped the program over concern, about adverse impact on performance, among other reasons.
Separately, James M. Hacking, executive director, said the system added $75 million to a large-cap value portfolio run by Smith Barney Capital, bringing the total assignment to almost $200 million. Assets will come from equity index funds run by Barclays Global, leaving it with more than $2.5 billion. Ennis Knupp assisted in the reallocation.
Fulton County Retirement System, Atlanta, is considering a search for a minority-owned manager this summer, a source familiar with the $633 million fund said. The type and size of the portfolio have not been decided. If approved, a search probably would take two to three months. Watson Wyatt is the fund's consultant. The board meets again July 9.
Montgomery County Employees' Retirement System, Rockville, Md., is considering adding more options from bundled service provider Fidelity Investments for the $4 million defined contribution plan created in 1994, said Julie Dellinger, executive director.
The $1.3 billion system's DC plan offers 10 investment choices. The system also might replace some existing funds with new funds, limiting the total investment choices around 20. The system's staff will make recommendations for adoption by the board at the Sept. 5 meeting. The plan covers new employees other than police and fire employees.
Financial Executives Institute's Committee on Investment of Employee Benefit Assets is asking lawmakers to stop the 401(k) Protection Act from being included in the big tax bill now being considered.
``What you need is better enforcement'' rather than a change in the rules, said Gina Mitchell, director of government relations for the group, whose members manage almost half of all 401(k) plans. Sen. Barbara Boxer, D-Calif., introduced the bill in response to the disaster at Color Tile in January 1996, when the company filed for bankruptcy and nearly 1,500 employees lost most of their 401(k) assets, which were invested in the company.