- 1 -
August 23, 1989
TO: BOARD OF GOVERNORS NO. 52-89
SEC RULES MEMBERS NO. 46-89
PENSION MEMBERS NO. 43-89
RE: SEC ORDER CONCERNING CREF PROCEEDING
__________________________________________________________
As we previously advised, the Securities and Exchange
Commission ordered a full evidentiary hearing on the request of
the College Retirement Equities Fund (CREF) for permanent
exemptions from a number of core provisions of the Investment
Company Act of 1940, including corporate governance, payment of
distribution expenses and redeemability of assets. (See
Institute Memorandum to Board of Governors No. 7-88, SEC Rules
Members No. 4-88 and Pension Members No. 6-88, dated January 22,
1988.) The Institute, a group of four mutual fund complexes,
educational institutions and a number of others that were
participants in this proceeding reached a settlement resolving
the outstanding issues, which was formally submitted to the
Commission in January. (See Institute Memorandum to Board of
Governors No. 81-88, SEC Rules Members No. 62-88 and Pension
Members No. 51-88, dated December 21, 1988.)
We are pleased to announce that the SEC has issued the
attached final order accepting and incorporating the terms of the
settlement agreement. As a result of this order, employees of
colleges and universities and certain other tax-exempt
organizations will be able to transfer their retirement
accumulations in CREF to mutual funds and other funding vehicles
outside of TIAA-CREF, if transferability is expressly permitted
by the terms of the employer's retirement plan. In addition, an
employer's plan will be deemed to permit transferability if (1)
the plan is silent concerning transfers and the employer offers
or makes available non-TIAA-CREF funding vehicles; or (2) the
employer consents to a particular transfer.
Employers may also allow lump-sum distributions of CREF
accumulations upon an employee's separation from service. Thus,
terminating employees may be able to roll their CREF retirement
accumulations into individual retirement accounts (IRAs).
- 2 -
Special rules are provided for those employees who have
been employed by and have retirement accumulations attributable
to more than one academic institution. In order to reduce
restrictions on transferability, certain presumptions are set
forth relating to the transferability of prior employer
accumulations. Thus, a participant may transfer CREF
accumulations attributable to a prior employer to any funding
vehicle permitted under that employer's plan. In addition, if
the prior employer's plan permits either transferability or lump-
sum distributions, the participant may transfer such
accumulations to any funding vehicle permitted under his or her
current employer's plan.
Under the order and settlement agreement, CREF generally
must make the transferability and lump-sum distribution options
available by February 22, 1990. In any event, CREF must
implement transferability to non-TIAA-CREF funding vehicles no
later than the date that transfers of existing accumulations to
any new CREF portfolios are permitted.
The settlement documentation also includes a separate
agreement between the Institute, TIAA-CREF and certain of the
other participants concerning transfers of accumulations in TIAA.
Under this separate agreement, employees will be able to transfer
TIAA accumulations to alternate investments over a ten-year
period if their employer's plan permits transferability. This
option generally must be implemented by August 22, 1991.
We will keep you informed of further developments.
Kathy D. Ireland
Assistant General Counsel
Attachment