Two upcoming changes will affect TIAA-CREF’s money market offerings—in different ways, and at different times.
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 protect investors, the Securities and Exchange Commission (SEC) amended certain rules governing money market funds. These changes, which must be put into effect by October 14, 2016, require 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-CREF 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. After a thorough due diligence process and analysis, we selected the government type for all of our money market funds. They will be designated as government type money market funds and any necessary changes will be implemented in them on or before October 14, 2016.*
A government type money market fund is required to invest at least 99.5% of its total assets in short-term government securities, cash and repurchase agreements that are collateralized fully by cash or government securities.
In contrast to retail and institutional type funds, government type funds generally are able to maintain a stable Net Asset Value (NAV)—price per share—of $1 and are not required to impose liquidity fees and withdrawal restrictions in times of economic stress. The other types of funds, which have a “floating” NAV, may experience fluctuations in the $1 share price, which can result in, for example, principal losses or taxable events for investors.
It should be noted, however, that yields from a government type funds may be lower than retail or institutional type funds because of the returns from the underlying investments.
The CREF and Funds Boards of Trustees determined that designating our money market funds as government types would best meet the needs of participants/shareholders. Government type money market funds have features that are similar to our current money market funds, including the same investment objectives, and full liquidity under all economic and market conditions.
The change will be automatic, and does not require any action on the part of either plan sponsors or participants. Apart from the requirements relating to underlying investments, they will see few changes in TIAA-CREF’s money market funds as a result of their becoming government type funds, with participants having access to fund balances under all market conditions.
Separately, TIAA will end the voluntary expense waiver for the CREF Money Market Account by April 14, 2017. Since 2009, TIAA has been voluntarily waiving expenses incurred for services provided to the CREF Money Market Account to help avoid a negative yield on the Account in the prevailing low interest rate environment. After extensive discussions with the TIAA and CREF boards and our state insurance regulator, it was determined that that the waiver should be ended. It is anticipated that after the waiver ends, unless interest rates rise sufficiently, one or more classes of the CREF Money Market Account may have negative yields.
* Please note, the TIAA Access Money Market Account, the TIAA-CREF Life Variable Annuity and the Variable Life Money Market Account are indirectly affected by the change because they invest in our money market funds.
The TIAA-CREF Money Market Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in the fund.
TIAA-CREF Individual & Institutional Services, LLC, Teachers Personal Investors Services, Inc., and Nuveen Securities, LLC, Members FINRA and SIPC, distribute securities products. Annuity contracts and certificates are issued by Teachers Insurance and Annuity Association of America (TIAA) and College Retirement Equities Fund (CREF), New York, NY. Each is solely responsible for its own financial condition and contractual obligations.
Certain products may not be available to all entities or persons.