August 8 update: This is now confirmed.

This is unconfirmed but in the last few hours, two employees at TIAA-CREF have written to Consumerism Commentary to share the knowledge that workers in the the Charlotte, North Carolina office are being laid off by management at this very moment. The layoffs began on Monday and will reportedly affect 10% of the workforce.

There have been no media reports yet and no official word from the company. TIAA-CREF has been plagued with customer service problems for the last several years and changes in executive management during that time period has not solved the problems.

Many people, including public school teachers, have no choice but to invest with TIAA-CREF inside 401(k) and 403(b) plans.

The Charlotte Business Journal reported TIAA-CREF laid off 158 out of the city’s total 2,850 employees.

In January 2006, thousands of TIAA-CREF customers experienced service problems with the financial services firm when attempting to transfer funds, withdraw funds, or receive distributions.

The company publicly blamed its problems on a tough transition from one computer system to another. This was the reason for my missing contribution that occurred during this period.

Since then, TIAA-CREF recycled their executive team and brought in new leadership, but technical problems persisted. One year passed, and visitors to Consumerism Community continued reporting their woes. On May 31, 2007 (almost a year and a half after the first major reporting of the issue), Joann wrote:

TIAA CREF has serious customer service problems and the problems detailed on this page are quite typical. Their call center operators are completely ill-equipped to deal with most customer problems. They have been going through a major system conversion for the last several years, and almost all problems are blamed on technical glitches beyond their control. It’s frustrating for those of us who have depended on TIAA CREF and don’t have other options.

A supposed former TIAA-CREF employee of eight years added this commentary in July 2007:

Forty-two percent of the employees have been there two years or less. Morale is extremely poor. It is no wonder that service is poor. Don’t blame the employees. When the current CEO came on board several years ago, there was a need for change and improvement. He seemingly had a plan. However, the execution has been dreadful… Both individual and institutional customers are pulling out their assets. Those of us who can’t are very worried about the future. It is astounding that the Boards of Trustees have let this continue.

The Chief Technology Officer (perhaps the individual responsible for computer system transition problems) was forced out of the company by August 2007, but apparently computer issues are still to blame.

Today, Red wrote in to say the following:

About two years ago, TIAA-CREF failed to deposit my monthly withdrawals for two months. I was told they were transitioning to a new computer system and having trouble. Evidently, they are still using this very lame excuse, because when my monthly withdrawal and directs deposit didn’t happen for July, I called and was told TC is “transitioning to a new computer system.”

In the back of my mind, I wonder just how fast TC wants to get my (and other’s) retirement disbursement out. I mean, is it not to TC’s advantage to hold onto our money just as long as possible (due to computer glitches, of course)?

In January 2006, my contribution to TIAA-CREF was missing. I asked for my contribution to be on a certain date and for the funds to purchase shares in a mutual fund. The date came and went, and no purchase was recorded. It was several weeks before they were able to record my transaction. Since the original date, the price of the mutual fund had increased. When TIAA-CREF eventually recorded the transaction, it was backdated to ensure I received the agreed-upon price for the mutual fund shares.

But I wonder if the same holds true for distributions. If they do not sell an investment as instructed due to a “computer glitch,” are they earning interest or keeping a profit on the funds held by the broker until they finally release the funds to the customer?

Regardless, I am not surprised that customer service representatives are still using the “computer system transition” excuse. How many transitions should a company experience over two and a half years?

The last contribution to my 2007 Roth IRA was invested last Monday. Ever since my first Roth IRA several years ago, I’ve been maximizing the contribution each year by automatically investing equal amounts twice each month. One reason for using that technique, usually known as “dollar cost averaging” was to reduce risk. With the market going up and down throughout the year, sometimes money is invested at a good prices while other times the prices are not as good.

The other option (although it certainly is possible to mix the two strategies) is to invest the entire $5,000—the maximum for 2008—in one lump sum. That would give me the benefit of having the entire year for the full amount to grow. That is, if the stock market grows next year, the full amount will grow. If the market is shaky, then I will have put my entire faith in one date in the year.

Another reason I used the dollar cost average strategy each year is it wouldn’t damage my cash flow. I didn’t always have enough savings ready to be invested, and slow, regular investments allowed me to spread out the contribution over twelve months. While I’d like to keep a large amount of cash on hand for when I eventually make a down payment on a house, if I needed to, I could withdraw Roth IRA contributions without penalty for that purpose.

On a side note, I called to stop my 2007 Roth IRA contribution at TIAA-Cref, and I intend on investing my 2008 Roth IRA with Vanguard.

If you maximize your Roth IRA contribution, how do you do it?

At the end of the year, I will be ceasing my investment in TIAA-Cref funds for retirement. There are less expensive options at Vanguard, and TIAA-Cref’s customer service record has been spotty. I haven’t had any problems lately, but other people still face difficulties.

My original post about my problems with TIAA-Cref from almost two years ago still receives occasional comments. Here’s the latest comment, from Ed, with his experience.

After two months of wrangling with TIAA-CREF [to cash out], I was finally able to get a portion of my money. When I called to get the rest, the company told me that they had made a mistake and that it would be 12-15 business days before they could send out the rest of the funds. I knew from my previous interaction with them that they have a system in place to “walk through” payment requests and to get them processed in 3-5 business days. I pushed for the 3-5 day process.

To make a long story short, I told the customer service phone rep to send a message to his supervisor informing him that as soon as I hung up the phone I was going to follow up with the SEC regarding the complaint I filed against TIAA-CREF (I gave them the name of the staff attorney and the file number for my complaint).

You can file a complaint against TIAA-CREF with the SEC here.

The outcome was that the balance of my money was in my checking account in less than 24 hours. Furthermore, it was seemingly impossible to get anyone at the company to do anything that would help me or resolve my case. But after mentioning the SEC, I received at least two calls from TIAA-CREF employees following up—finally—on my case letting me know how sorry they were.

Ed’s success came from filing a complaint with the Securities and Exchange Commission and making sure the customer service representatives were aware of the full complaint information. This escalated his case, and he was able to get some results.

I am still receiving comments from people who are having technical issues with TIAA-Cref, even almost a year and a half after my first problem with their system in January 2006. I’ve recently received a notice from a reporter who is looking to follow up with this story. If you are still having customer service or technical problems when dealing with TIAA-Cref, please contact Renee Ferguson. Here is her message:

I am a reporter with eWeek magazine and have covered the issues at TIAA-CREF in depth. I was under the impression that many of the company’s systems upgrade issues were resolved, but looking at these posts that doesn’t seem to be the case.

If, as of June 2007, you are still having issues with TIAA-CREF and are willing to speak to the press, please contact me, either via email or by phone. I can be reached at renee_ferguson@ziffdavis.com, or 518.580.8515.

Consider that an open invitation for legitimate issues.

Yesterday, Vanguard announced they have simplified their account fees. Effective on Thursday, here is the new fee structure.

• All fund accounts with a balance of less than $10,000 will be assessed a yearly fee of $20.

  Now that’s straightforward. In the old configuration, my recently-opened 2006 SEP IRA would have been charged $20 anyway. So why am I so happy with this change?

  Because there are several ways the new $20 fee can be avoided completely by

• keeping each fund account balance over $10,000;
• maintaining total assets at Vanguard at $100,000 or more; or,

• signing up for electronic delivery of all documents, like prospectuses and statements.

  With my assets at Vanguard totaling up to only about $3,000, it’s pretty clear which option was my choice.

  I have a Roth IRA and another SEP IRA at TIAA-Cref. The problems I’ve had with this organization, while they have settled down except for a request from their lawyers to remove their logo from this page, are well documented. Most importantly, the mutual funds at Vanguard that match up with the mutual funds at TIAA-Cref have lower expense ratios.

  The two funds currently invested in my Roth IRA at TIAA-Cref can theoretically be transferred to Vanguard because the balances are each above the $3,000 threshold. My 2005 SEP IRA isn’t above that level, but I may be able to combine it with my 2006 SEP IRA, already at Vanguard, if I don’t mind changing my asset allocation. The 2005 SEP IRA is invested in an international index fund, and the 2006 SEP IRA is invested in the total stock market index fund.

  I’d rather have all of my accounts at Vanguard, so I’ll be looking to make this transfer in the next few weeks.

This could be good news for anyone just starting out with investment accounts. Schwab lowered the minimum starting balance to $1,000 from $2,500 (or $2,000 for IRAs)and removed below-the-minimum fees for all their investment accounts as long as at least $100 is deposited into the account on a monthly basis. (Source: BusinessWeek.)

I recently opened a new SEP IRA with Vanguard. I chose Vanguard this time around because my fee-less TIAA-Cref account has too many problems.

Vanguard requires a $2,000 or $3,000 initial deposit (depending on the fund), but a minimum balance of $5,000 per fund to avoid maintenance fees. I’ll have to bring that balance up in the new few months.

My Roth IRA and SEP IRA are held at TIAA-CREF. I’ve had some problems with them in the past, which I’ve outlined a number of times. Most recently I noticed that my contributions for 2005 were included on my 2006 tax form. Their explanation was simply that 2005 contributions made during 2006 would appear on the tax form. I am hoping this won’t cause any problems.

The company’s general poor service has been well documented. I selected them originally because of their low barrier to entry; when I first started investing in an IRA, I didn’t have then $2,000 minimum required by Vanguard.

Yesterday, readers were kind enough to email their latest adventure, involving an issue with the annuities side of the TIAA-CREF house. T and R from Dilworth, Minnesota submit:

TIAA-CREF sent us a notice a week prior to our annual annuity payment saying it would be delayed due to a change in the computer system. That’s right ONE WEEK notice. So we called, and they said they would put a note to send the check by DHL so we could get it overnight when they wrote the check.

A follow up call says they sent the check by regular mail. We had even offered to pay to get it overnight.

We aren’t permitted to change our plan, not even our payment date, but TIAA-CREF can act like a little dictator and change things, and then not assist us in adjusting to the problems they created.

2006 was a bad year due to medical expenses, and we have no reserves left. We needed our payment on time. Someone needs to investigate why TIAA-CREF can change our annuity payment date when we can not change the date. There’s something very one-sided about this.

Here is my observation. This “change in the computer system” excuse has been TIAA-CREF’s method of operation for over a year. That was their excuse when my SEP IRA was not funded with the money I transferred. Here’s the original CNN article from February 2006 in which TIAA-CREF claimed “computer problems” caused major issues for a large number of customers.

It is appalling that similar problems—and this excuse—continue over a year later.