Pulitzer Prize–winning journalist Gretchen Morgenson has once again exposed the hidden risks and fees buried in TIAA’s annuity products. In her August 2024 NBC News investigation, I was quoted estimating that TIAA extracts excessive hidden spread profits of over 120 basis points (1.2%) annually on its flagship annuity, TIAA Traditional
Just one year later, in September 2025, I repeated my claim that TIAA’s hidden annuity spreads range from 120 to 150 basis points — and still, not a single insurer has challenged the accuracy of these numbers
Instead, TIAA’s spokesman declined to disclose what the company earns on these products, dismissing the question as “competitive and proprietary information.” That answer may suffice in public-sector retirement plans exempt from ERISA, but in ERISA-covered plans, the Supreme Court’s ruling in Cunningham v. Cornell makes clear that TIAA is a party in interest, and fiduciaries therefore have a duty to know and evaluate these spreads. Hiding them is a fiduciary red flag.
Liquidity Lockups and Credit Risk
The Rhode Island sheriffs who protested TIAA’s retirement products in 2025 were not just upset about undisclosed costs. What pushed them to the brink was discovering that their money was locked up, subject to liquidity restrictions that prevented access to their savings
As Dr. Tom Lambert and I explain in our forthcoming article in the Journal of Economic Issues, these restrictions are not incidental: they exist because nearly 50% of TIAA’s balance sheet consists of illiquid private credit and mortgages. Furthermore, if TIAA were downgraded, the liquidity would get worse.
Participants are forced to bear liquidity and single-entity credit risk. The risk of a General Account IPG product, such as the TIAA annuity, has been documented by Fabozzi to be 10 times that of a synthetic diversified stable value fund, like Vanguard RST or Fidelity MIPS. The return premium from these risks is quietly diverted into TIAA’s spread profits.
False Comparisons Against Vanguard
TIAA has also claimed, falsely, that its annuity-based Target Date Funds are cheaper than low-cost Vanguard index funds. In Rhode Island, state documents listed the cost of TIAA’s annuity sleeve as “0.00%”, while actual spread profits drained millions from participants each year
By comparison, Vanguard’s Target Retirement Funds charge around 0.06%. The economic reality: participants in the Rhode Island plan are paying TIAA about $4 million annually in hidden spread revenues, versus just $200,000 if their money had remained in Vanguard’s all-index solution
Regulatory Arbitrage: Weak State Oversight
Unlike SEC-registered mutual funds, annuity contracts operate under state insurance regulation. This allows TIAA to present products with:
- No fee disclosure (spread profits hidden),
- No diversification (single-issuer credit risk), and
- Liquidity restrictions that participants do not control
Meanwhile, TIAA funnels these opaque contracts into state-regulated Collective Investment Trusts (CITs) — weak vehicles that lack the transparency and accountability standards of mutual funds. This stealth tactic could set the precedent for hiding not just annuities, but also private equity and even crypto allocations in retirement defaults.
The Broader Pattern of Misrepresentation
This is not an isolated scandal. Regulators in Montana, Vermont, and Washington have been probing TIAA for steering participants into high-cost proprietary products
In 2021, the SEC and New York Attorney General fined TIAA $97 million for propelling clients into higher-cost accounts without disclosure
In 2024, the SEC fined TIAA another $2.2 million for conflicts of interest in IRA recommendations
These actions expose a consistent pattern: TIAA maximizes profits by obscuring true costs while claiming to offer “low-fee” retirement solutions.
Conclusion: Fiduciary Breach in Plain Sight
TIAA’s hidden annuity spreads represent not just an accounting quirk, but a structural breach of fiduciary principles:
- Excessive hidden fees (120–150 bps vs. 5 bps index funds),
- Liquidity lockups that enrich TIAA at participants’ expense,
- Single-entity credit risk that violates the duty to diversify.
As I said in my NBC interview, annuities “flunk the most basic investment principle of diversification — do not put all your eggs in one basket.”
The bottom line: annuities should be prohibited as default investments in ERISA retirement plans. Until regulators impose SEC-style transparency and fiduciaries demand disclosure of spread profits, TIAA will continue to extract billions in hidden fees from unsuspecting teachers, nurses, and public servants.
References
- Gretchen Morgenson, “TIAA pushes costly retirement products to cover losses,” NBC News (Aug. 2024). Link.
- Gretchen Morgenson, “Rhode Island sheriffs’ retirement account woes bring scrutiny to state-run plan,” NBC News (Sept. 2025). Link.
- Chris Tobe & Tom Lambert, “Safe Annuity Retirement Products and a Possible U.S. Retirement Crisis,” Journal of Economic Issues (forthcoming 2025). SSRN link.
- Federal Reserve Board, “What’s Wrong with Annuity Markets?” FEDS Working Paper No. 2021-44 (Aug. 2021).
- Cunningham v. Cornell Univ., 86 F.4th 961 (2d Cir. 2023).
- Handbook of Stable Value Investments, edited by Frank J. Fabozzi, CFA 1998. Chapter 14
TIAA investigations, settlements, and lawsuits
The CommonSense 401k Project 