A federal judge in New York on Monday revived part of a lawsuit against TIAA-CREF for which all allegations of ERISA violations had been dismissed 11 months ago.
Three participants in separate defined contribution plans sued TIAA in October for its role as a record keeper, accusing it, among other things, of "fraudulent sales practices" to encourage participants to invest in higher-cost investment options.
They also alleged that TIAA used participants' personal financial information to promote products to target participants nearing retirement with large accounts.
The plaintiffs are participants in six defined contribution plans among three universities — Dartmouth College, Hanover, N.H.; Loyola Marymount University, Los Angeles; and Georgetown University, Washington — and the Pacific Institute for Research and Evaluation, Beltsville, Md.
None of the sponsors is a defendant.
U.S. District Court Judge Katherine Polk Failla dismissed all allegations in September 2022, saying the plaintiffs' arguments incorrectly claimed that TIAA was a fiduciary in the case of Carfora et al. vs. Teachers Insurance Annuity Association of America et al.
"Plaintiffs may not transform their grievance they might have against the plans for utilizing TIAA into a claim that TIAA was itself a plan fiduciary," the judge wrote. "It is their plan sponsors who exercised discretion and control in the relevant sense, not TIAA."
The difference between fiduciary and non-fiduciary responsibilities is why the judge changed her ruling for part of her 2022 decision. Plaintiffs asked her to reconsider her ruling after the case had been closed.
The judge addressed three allegations by plaintiffs. She reaffirmed her dismissal of the allegation that TIAA acted as a fiduciary by using participant data for marketing purposes.
She also affirmed her dismissal of the claim that TIAA acted as a fiduciary by offering investment advice to participants and by providing information about rolling over their institutional accounts to TIAA's portfolio adviser account.
The third allegation in the original complaint only took up a few sentences, alleging TIAA was a "non-fiduciary recipient of ill-gotten gains."
The defendants "knowingly received improper profits derived from ERISA plan assets," said the original complaint. Even if the defendants "were not an ERISA fiduciary" each defendant was harmed financially.
In her latest ruling, the judge wrote that she had dismissed this claim because "both sides acknowledged that, as pleaded, the claim rose or fell with a finding of fiduciary status with respect to TIAA. Because TIAA wasn't a fiduciary, she dismissed this claim.
The judge also noted that original lawsuit was "quite sparse" with respect to the non-fiduciary allegation, offering no specific allegations.
After plaintiffs asked her to reconsider her ruling, she wrote that they "now allege that their plan sponsors breached ERISA fiduciary duties and that TIAA participated in those breaches." These comments never appeared in any of the plaintiffs' previous documents, she wrote.
However, plaintiffs "have suggested a means to replead this non-fiduciary claim in a manner that could plausibly survive a motion to dismiss," wrote the judge, adding that plaintiffs have until Sept. 11 to present a new complaint solely on the non-fiduciary allegation.
