TIAA Money Market Funds are Changing: What this Means

Two changes will affect TIAA’s money market offerings—in different ways, and at different times.

SEC Money Market Reform—TIAA’s money market funds have been designated as “government” type funds

The financial crisis of 2007–2008 raised a number of questions about the risks associated with money market mutual funds and variable annuities (“funds”). Regulators were especially concerned about the potential negative effects on money market fund investors of large-scale withdrawals in economically turbulent times.

To help protect investors, the SEC made rule changes that required all money market funds to be designated as “retail,” “institutional,” or “government” type funds, each of which have different restrictions in terms of liquidity, fees and/or investor profiles.

TIAA currently offers several money market funds, including the CREF Money Market Account, the TIAA-CREF Money Market Fund and the TIAA-CREF Life Money Market Fund, all of which were designated as government type on October 14, 2016.*

What is a government type money market fund?
A government type money market fund is defined by the SEC as any money market fund that invests 99.5% or more of its total assets in short-term government securities, cash and repurchase agreements that are collateralized fully by cash or government securities. In addition, government type funds are not currently required to impose any liquidity fees and/or withdrawal restrictions.

Keep in mind, however, that the returns on the underlying investments held in a government type fund will likely result in lower yields than those of a retail or institutional type.

Why was the government type selected?
The new rules require institutional and retail types to impose liquidity fees that could limit access to assets in volatile markets and withdrawal restrictions that could negatively affect total returns on holdings in the funds. To limit clients’ exposure to these fees and restrictions, TIAA’s money market funds were designated as government type.
What does this mean for plan sponsors and participants?
The change to government type funds happened automatically and did not require any action on the part of either plan sponsors or participants. Apart from the requirements relating to underlying investments, clients will see few changes in TIAA’s money market funds as a result of this new fund designation, and participants will have access to fund balances under all market conditions.

End of the Voluntary Expense Waiver for the CREF Money Market Account

After extensive discussions with the TIAA and CREF boards and our state insurance regulators, TIAA will end the voluntary expense waiver for the CREF Money Market Account by April 14, 2017.

Unless interest rates rise sufficiently, among other factors, one or more classes of the Account may have negative yields after the waiver ends. This means plan participants who are invested in the Account could lose money.
For more information visit our Resource Center for Money Market Changes.
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