TIAA agreed to pay $5 million to settle a lawsuit alleging the firm breached its fiduciary responsibilities in two retirement plans it provides to its employees.
Plaintiffs brought the suit against TIAA in October 2015, claiming their plans overpaid in administrative and investment management fees. They also said the plans were filled entirely with investments managed by and paying fees to TIAA, the complaint said.
As part of the settlement, TIAA also agreed to make design changes in the plans, including adding non-proprietary and cheaper investment options. The plans should save more than $2 million a year in fees with the adjustments, according to the settlement filed Wednesday in New York district court.
The firm agreed to the settlement, but TIAA denies violating its fiduciary duties under the Employee Retirement Income Security Act of 1974.
"To avoid the significant time, cost and distraction of ongoing litigation, we agreed to settle," said Chad Peterson, spokesperson for TIAA. "We value our people and are committed to providing our employees with retirement plans that help ensure their financial well-being, and have always acted in their best interests."
The class-action lawsuit involved one 401(k) plan and a second retirement plan — both of which TIAA provides to its own employees — and was filed on behalf of plan participants from October 14, 2009, through the present.
TIAA is one of several financial services companies sued in recent years over its 401(k) plan administration.
In one recent case, Jackson National Life Insurance employees alleged the company chose high-cost, proprietary products for the firm's 401(k) plan, violating its fiduciary duty, according to a class action lawsuit in March.