By Charles Paikert
NEW YORK — TIAA-CREF's days as a leader in the Section 529 college savings program business might be numbered.
The New York-based non-profit manages 529 plans for a dozen states, more than any of its competitors.
But as state contracts come up for renewal, there are growing indications that the number might be sharply reduced. That's because the company is struggling to bolster its business with larger states and might try to prune unprofitable relationships with smaller states.
Under the bottom-line-oriented leadership of Chief Executive Officer Herb Allison, a former executive with Merrill Lynch & Co. Inc. who joined TIAA-CREF nearly three years ago, the non-profit appears to be reassessing how it approaches the 529 business, especially its relationships with smaller states, which have relatively low assets in their plans.
Tennessee's BEST Savings Plan, for example, has only $27 million in assets, a far cry from the more than $12 billion in net assets that top-ranked Virginia has in its CollegeAmerica 529 plan in Richmond.
Tennessee's contract with TIAA-CREF runs out in May 2007, and Janice Cunningham, Nashville-based executive assistant to state Treasurer Dale Sims, does not expect the firm to continue the relationship.
"I think they are rethinking what they are going to do," she said.
Officials with the $72 million Idaho College Savings Program in Boise are also unsure if TIAA-CREF is interested in renewing its contract with the state, which expires next March.
"We're waiting for them to get back to us," said Liza Carberry, Boise-based investment manager for the state treasury and chairwoman of the program. "I don't know if they know what they're going to do yet. They've been very closemouthed, but they have said if they decide not to rebid for the contract, they would roll it over until we find someone else."
Phillip Rollock, vice president of TIAA-CREF Tuition Financing Inc., declined to be interviewed and did not answer specific questions by e-mail. He did, however, release a statement that reads in part: "As the 529 market continues to evolve, we continue to evaluate our plans to position ourselves to maintain our leadership in the 529 marketplace. We are continuously evaluating new opportunities to expand our business in order to meet the needs of families seeking to save for college."
While TIAA-CREF might be shying away from smaller states, keeping 529 contracts coming up for renewal with bigger states that have more assets could prove difficult, as might prospects for adding other states with attractive 529 assets.