TIAA-CREF Dumps Foreign Colleges
For decades, American colleges overseas have relied on TIAA-CREF to handle retirement accounts for their many faculty members who are U.S. citizens or who have the right to work in the United States.
But TIAA-CREF has stunned these colleges, telling them that by the end of the year, the institutions can no longer make contributions to employees' retirement accounts. Although TIAA-CREF is willing to continue managing the accounts that exist, colleges that want to provide any funds for professors' and administrators' savings need to find another company to manage the funds.
"People are angry and confused and worried about their money, and it's going to be hard to allay their fears until we have a new system set up," said an administrator of one American institution abroad, who asked not to be identified because he is involved in discussions with TIAA-CREF about the transition. Another official said that when faculty members at his institution were told that their retirement company was dropping them, professors called the move "outrageous" and "irresponsible."
Stephanie Cohen Glass, a spokeswoman for TIAA-CREF, said that the company decided to phase out foreign institutions because of a variety of new laws.
"There have increasingly been laws abroad, such as privacy laws in the European Union, and internal U.S. policies that were designed to combat money laundering that have made it difficult to maintain these relationships," she said. "We are a U.S.-based company."
Glass said that fewer than 100 institutions were affected, and that a number of them are American high schools, not colleges. She said that TIAA-CREF hoped that other companies would step in and help out the American colleges abroad.
At the American University of Beirut, about 170 faculty members and other employees have TIAA-CREF accounts, and the institution has worked with the company for more than 25 years. At the American University in Cairo, which has been with TIAA-CREF for more than 40 years, the figure is about 500.
As these institutions' names suggest, they and others like them in the Middle East and Europe are in fact American institutions, generally with accreditation and charters in the United States, and large numbers of American faculty members and administrators. Many of the universities' American employees valued TIAA-CREF because they worked at institutions in the United States and abroad over the course of their careers, and wanted a U.S.-based retirement vehicle.
Privately, officials at some of these colleges say that they are particularly angry at the change because their institutions' role -- providing a model for American educational values in parts of the world that badly need those values -- is especially relevant today.
In addition, officials noted that with the rise of online financial management, faculty members anywhere in the world can connect with their TIAA-CREF accounts, and that maintaining the business would not have required the pension company to open up offices abroad. "Access to an account these days is as easy in Lebanon as in Florida," said Howard W. Ray, comptroller of American University of Beirut.
There are numerous practical issues in play as well. Several officials said that they were in negotiations with TIAA-CREF to make sure that their employees could -- if they want -- transfer funds in TIAA-CREF accounts quickly to new retirement accounts. And colleges are working to come up with new ways to make their own contributions to employee retirement funds.
Ray said that American University of Beirut has asked for proposals from other finance companies and is receiving interest. "Some of our people might be just as happy in the end," he said.
The university will make sure that its faculty members have good retirement options, he said, but he added that he and others at the university did not appreciate being forced to change plans, after being loyal customers for so long. Said Ray, "I think we're all pretty annoyed."