TIAA commingles Roth and non-Roth retirement funds?

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NoHeat
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TIAA commingles Roth and non-Roth retirement funds?

Post by NoHeat »

This question concerns SRA (supplemental retirement annuity) contracts at TIAA.

For many years I've had a salary reduction agreement with my employer, to fund an SRA. Until recently, all my contributions were pre-tax dollars. I recently asked my employer to change the nature of my contributions thereafter to Roth instead of pre-tax. The first Roth contribution under this arrangement took place June 1, and I noticed that it was deposited into the same contract number as the older pre-tax funds. The contribution was indicated (My Account > Account Details > Net Contributions tab) as being Roth (instead of employee pre-tax). That's an indication that a contribution is distinguished according to Roth vs. non-Roth. However, the account balances are not similarly distinguished -- they just combined into one total, without any subtotals or other indication of Roth vs. non-Roth.

I phoned today to ask how it works. The TIAA representative confirmed that they do commingle the pre-tax and Roth contributions into the same contract, and there's no separate account numbers to distinguish Roth balances and pre-tax balances that TIAA holds for me in this contract. When I pointed out that a broker will always maintain separate accounts with separate balances for Roth vs non-Roth IRA funds, and I asked why TIAA does not do the same with my retirement funds, the representative had no response.

There are plenty of unresolved questions that I have about this messy arrangement.

I asked for a prospectus or some other written material to explain to me, as an investor, how these commingled funds are handled, but I was told that none exists. There are only monthly statements for me to read, I was told.

I asked about changing investments in the future. I was told that going forward it will be impossible for me to change investments separately for pre-tax vs Roth funds that are commingled in the account (if I move some funds from a stock index fund to a bond index fund, for example, TIAA will move all such funds proportionally, both Roth and pre-tax -- or so I was told by the representative).

I asked also about making withdrawals (when I retire, or when I roll over funds into an outside IRA account) and I asked whether I will be able to specify Roth vs. pre-tax funds that I am withdrawing. The TIAA representative tried to deflect this question by saying that's a long way off -- when I pressed he said he didn't know about withdrawals and he offered to submit a request for more information.

Has anyone else figured out how TIAA handles Roth and pre-tax funds commingled in the same SRA contract?
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dodecahedron
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Re: TIAA commingles Roth and non-Roth retirement funds?

Post by dodecahedron »

I am in a similar position (originally had only pretax balances in my SRA 403(b) TIAA contract, but switched to making Roth contributions a few years ago.)

When I log into my account I see not only the total balance on my SRA contract but a detailed breakdown of the pretax portion and Roth portions. I just pulled up the PDF of my most recent statement. At the top of page 3, I can see the total balance in the contract. In the bottom half of page 3 I see the detailed breakdown showing the balance in the pretax portion is 96.97% of the total balance. In the top half of page 4, I can see that the balance in the Roth portion is 3.03% of the total balance. It is, as you say, all in one contract number (and thus it is not possible to choose different asset allocations for the pretax and Roth portions.)

Essentially the same information is also shown (but harder to see--in small print) in the HTML account summary display that updates at the end of every business day, but it is easiest to see the explicit and detailed breakdown in the quarterly account statements.
stlrick
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Re: TIAA commingles Roth and non-Roth retirement funds?

Post by stlrick »

I dealt with this a couple of years ago. When I switched to Roth contributions in my 403(b), I was able to direct my contributions to Vanguard while the employer's contributions went to TIAA. I was therefore able to invest them differently. When my employer switched to TIAA as the single record holder for the 403(b), my Vanguard Roth 403(b) was rolled into my TIAA GRA. It was commingled with my previous pre-tax contributions and the employer's contributions in the GRA. I complained to my HR office, the senior management of my employer, and TIAA. There was nothing to be done about it. Eventually, I was so annoyed with not being able to invest the Roth contributions differently that I pulled them all out into a Roth IRA and stopped making Roth contributions to the 403(b).

Keep fighting. It's outrageous, and clearly not in the best interests of the employee. Maybe if they hear this enough, they will do something about it.
Geologist
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Re: TIAA commingles Roth and non-Roth retirement funds?

Post by Geologist »

It is just different from what you are used to. Your quarterly statement will show pre-tax and after-tax Roth contributions and total values for each separately. (At least my quarterly statements do so.) TIAA can account for these separately within a single contract (and of course they have to do so legally); they aren’t commingled really. Separate accounts would be another kind of messiness.

I do have some annoyances because some information is not on the Web (as I guess you have discovered) but only on the periodic statements and some isn’t on the periodic statements or the Web. An example of the latter is that I have investments in Vanguard mutual funds and the dividends are not separated into pre-tax and Roth in the quarterly statements or Web so I have to call up TIAA to get this information.

Contributions are required to be proportionately the same for both pre-tax and Roth. I gather from talking to colleagues with other providers that this happens with a number of providers. I’m not sure about moving funds among investments because I haven’t chosen to do so in recent years.

I haven’t worried about what happens at the back end with withdrawals.
stlrick
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Re: TIAA commingles Roth and non-Roth retirement funds?

Post by stlrick »

Geologist wrote: Sat Jun 02, 2018 11:25 am It is just different from what you are used to. Your quarterly statement will show pre-tax and after-tax Roth contributions and total values for each separately. (At least my quarterly statements do so.) TIAA can account for these separately within a single contract (and of course they have to do so legally); they aren’t commingled really. Separate accounts would be another kind of messiness.
The issue (for me) is that you cannot invest them differently. Someone might have different desired asset allocations for Roth funds and pre-tax funds, and might have different plans for the time frame in which they will be used in retirement. Either of these are basic reasons to allow the funds to be invested differently. The TIAA system does not allow it.
beardsworth
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Re: TIAA commingles Roth and non-Roth retirement funds?

Post by beardsworth »

My wife's supplementary employer plan contracts are G[roup]SRA, but I assume that the rules are the same as for the OP's SRA.

By default, TIAA mingles Roth and pre-tax contributions under the same contract number, and statements show the dollar figure represented by the Roth holdings relative to the total.

However, unless TIAA rules have changed, or unless this particular employer plan forbids doing so, It is possible to establish a new and separate GSRA contract in which only Roth holdings will be placed, in order to keep them separate from the pre-tax holdings in the original contract. I know this because my wife did it. We wanted to "cleanly" separate the two kinds of holdings according to their tax status. She has a GSRA consisting only of pre-tax TIAA Traditional and CREF holdings, and another GSRA consisting only of Roth TIAA Traditional and CREF holdings.

Some advice if you do this:

•You'll need to make sure that TIAA and/or the employer does the proper in-house coding, so that if a salary reduction agreement designates "TIAA/Roth" instead of "TIAA/pre-tax" (as allowed by the check-the-box format of the salary reduction form of my wife's employer), the contribution will in fact go to the intended Roth-only contract.

•If you move Roth holdings from their present location, i.e., inside an otherwise pre-tax contract, to the new separate Roth contract, verify that the internal values of the holdings, e.g., unit values for CREF and vintage structure for TIAA Traditional, have been properly reestablished and preserved in their new Roth contract location.

•And the same applies if you do Roth conversions from the original pre-tax contract to the new separate Roth contract.
student
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Re: TIAA commingles Roth and non-Roth retirement funds?

Post by student »

I have a somewhat similar example but with Fidelity. My school has different rules governing its contributions and my own contributions. At TIAA, they are completely separate as RA and SRA accounts. However, at Fidelity, it is in one account. On the surface, they are commingled. However, it does keep track of the breakdown of the sources. It will report 40% from employer and 60% from employee. Nevertheless, one cannot separate them in the sense that 100% of fund A are from employer and 100% of fund B are from employee. The proportion applies to every fund in the account. It seems that it is not an uncommon practice judging from the other replies.
dharrythomas
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Re: TIAA commingles Roth and non-Roth retirement funds?

Post by dharrythomas »

The TSP has the same thing, Roth and Traditional in one account with an inability to manage Roth and Traditional Funds separately. At least they are in the process of modifying the withdrawal options.
megabad
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Re: TIAA commingles Roth and non-Roth retirement funds?

Post by megabad »

Just to add to this. I have had several different 401k providers that handle this exactly the same. Very common in my experience (with 401ks, and it seems with TSP and 403bs as well). I wish you could invest funds differently as well. It has no other negative impact for me though since the order of withdrawals is fixed in plan documents and I intend to rollover most funds upon retirement.
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House Blend
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Re: TIAA commingles Roth and non-Roth retirement funds?

Post by House Blend »

If you are at a 403(b) type institution is possible that you have access to multiple providers. E.g., TIAA and Fidelity.

So even if TIAA and Fidelity both do the same dumb commingling of Roth and traditional contributions, there would be nothing stopping you from splitting your 403(b) contributions between TIAA & Fidelity, and making your Fidelity 403(b) 100% Roth.

Similarly, if you have access to a 403(b) and a 457(b) plan at TIAA, and haven't started contributing to the 457(b) plan yet, you could use it for your Roth contributions.

A third workaround, once you reach the stage in life where you have had multiple employers, is to keep all of your accounts at current employers tax-deferred, and manage your Roth vs. traditional diversification by doing conversions/rollovers from old accounts into Roth IRAs.
Toadandfriends
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Re: TIAA commingles Roth and non-Roth retirement funds?

Post by Toadandfriends »

I have a similar issue with my 457 managed by TRowe Price. My contributions are split between Roth and non-Roth but you can't elect different investments for the two types of accounts (and same choices for both). And, everything is presented on the website as a single account. When I called Trowe to ask about this they confirmed that there isn't anyway to separate the investment elections. However, I have found a way to go in each month and sell my Roth bonds and purchase stocks only in the Roth. It is complicated and a pain in the neck and not remotely intuitive. And the rep did not tell me about it! So in some situations for some people that might be a possibility.
Best wishes,
Toadandfriends
stlrick
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Re: TIAA commingles Roth and non-Roth retirement funds?

Post by stlrick »

Toadandfriends wrote: Sat Jun 02, 2018 8:09 pm I have a similar issue with my 457 managed by TRowe Price. My contributions are split between Roth and non-Roth but you can't elect different investments for the two types of accounts (and same choices for both). And, everything is presented on the website as a single account. When I called Trowe to ask about this they confirmed that there isn't anyway to separate the investment elections. However, I have found a way to go in each month and sell my Roth bonds and purchase stocks only in the Roth. It is complicated and a pain in the neck and not remotely intuitive. And the rep did not tell me about it! So in some situations for some people that might be a possibility.
Best wishes,
Toadandfriends
Now that's an interesting idea. I'll look into it. Thanks.
Alan S.
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Re: TIAA commingles Roth and non-Roth retirement funds?

Post by Alan S. »

As indicated earlier, a plan that requires the contribution investments to be the same for pre tax and Roth, is simply a plan that does not offer investment flexibility. In no way does this result in commingling of Roth and pre tax balances, which is not allowed per the tax code.

However, many of these companies issue account statements that might lead one to believe these accounts are commingled. This is just poor statement design which does not provide a clear picture of these account balances. It is very possible that these investment restriction and statement design are related and in some cases not wanting to re design the plan processing platform or statements is an actual driver of the investment restriction. This issue becomes even more problematic if the plan allows IRRs (in plan Roth rollovers).
Topic Author
NoHeat
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Re: TIAA commingles Roth and non-Roth retirement funds?

Post by NoHeat »

Thank you everyone for the suggestions. The one that I will pursue, after more phone calls to TIAA and Fidelity, is this one:
House Blend wrote: Sat Jun 02, 2018 7:22 pm If you are at a 403(b) type institution is possible that you have access to multiple providers. E.g., TIAA and Fidelity.

So even if TIAA and Fidelity both do the same dumb commingling of Roth and traditional contributions, there would be nothing stopping you from splitting your 403(b) contributions between TIAA & Fidelity, and making your Fidelity 403(b) 100% Roth.
My phone calls to TIAA and Fidelity today revealed that it is indeed common for 403(b) type accounts everywhere to lump all kinds of incoming deposits into one account.

Fidelity:
The regional rep for 403(b) institutions said that even though Fidelity lumps all kinds of contributions into just one account for an investor, it does keep track of which dollars in your balance are Roth vs non-Roth, and it keeps track of their basis (useful for a five-year rule), and moreover Fidelity does allow withdrawing Roth separately from non-Roth, so in those respects the practice is not exactly commingling, even though just one account holds all the funds. However, there are limitations, varying depending on the university employer; the Fidelity rep told me that unlike my university, another nearby university does not allow employees to specify different allocations for contributions Roth vs. non-Roth.

TIAA:
My inquiry was uncommon enough that it was sent up to a rep at TIAA headquarters in Denver, who was nice. He said that in the last four years he could not recall anybody besides me expressing concern that my Roth balance was not separated. He suggested a workaround: I could separate my Roth dollars, after they were deposited into the same SRA contract as my non-Roth dollars, by rolling over from the SRA into an IRA at TIAA (Roth dollars in an SRA apparently can be specified for a rollover separately from non-Roth dollars; and IRAs are of course separate for Roth vs non-Roth). I could do these rollover separations as often as once a month if I wished. He also said that when the time comes for withdrawals I could specify that I wish to withdraw Roth vs non-Roth. However, there is no way to allocate contributions differently, for Roth vs non-Roth. He also claimed there was no way for me to create a new GSRA account, as suggested on this thread, to receive my future Roth contributions.
student
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Re: TIAA commingles Roth and non-Roth retirement funds?

Post by student »

NoHeat wrote: Mon Jun 04, 2018 8:31 pm TIAA:
My inquiry was uncommon enough that it was sent up to a rep at TIAA headquarters in Denver, who was nice. He said that in the last four years he could not recall anybody besides me expressing concern that my Roth balance was not separated. He suggested a workaround: I could separate my Roth dollars, after they were deposited into the same SRA contract as my non-Roth dollars, by rolling over from the SRA into an IRA at TIAA (Roth dollars in an SRA apparently can be specified for a rollover separately from non-Roth dollars; and IRAs are of course separate for Roth vs non-Roth). I could do these rollover separations as often as once a month if I wished. He also said that when the time comes for withdrawals I could specify that I wish to withdraw Roth vs non-Roth. However, there is no way to allocate contributions differently, for Roth vs non-Roth. He also claimed there was no way for me to create a new GSRA account, as suggested on this thread, to receive my future Roth contributions.
If you do decide on an IRA, please research on TIAA Traditional as I think the IRA version has a lower guaranteed rate and you may not have access to the same classes of funds.
Tamarack
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Re: TIAA commingles Roth and non-Roth retirement funds?

Post by Tamarack »

I just ran into this and perhaps TIAA has made some progress? Today I was told by a rep on the phone that it WAS possible for me to separately invest for my pre-tax and Roth 403 b funds. The catch is that I will have to call them and request a “manual transaction” every time. I have to decide if the pain of opening an account with another vendor outweighs the hassle of having to call TIAA quarterly when I want to rebalance my funds. :| when I asked why I couldn’t do this online, I was told it was because it is an unusual request.
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