News Summary
Rhode Island’s 401(a) retirement plan is facing criticism for high fees and withdrawal restrictions, affecting state employees’ access to their savings. The plan has come under investigation due to concerns over the provider, TIAA, and its practices. Participants are frustrated with the lack of transparency and rising costs, following the removal of lower-cost options. This situation highlights challenges older Americans face regarding retirement savings and financial planning.
Rhode Island is facing scrutiny over its public employee retirement plan, specifically the 401(a) program, which has raised concerns due to withdrawal restrictions and high fees affecting state employees. Jason Allaire, a captain with the Rhode Island Division of Sheriffs, has found himself unable to access funds he has saved in this state pension plan. This situation highlights broader issues many older Americans confront regarding retirement savings and financial planning.
Financial experts have pointed to several factors that complicate retirement savings, such as risky products, hidden costs, and complex rules. The Rhode Island 401(a) plan automatically enrolls participants in a high-cost product offered by TIAA, a financial firm selected by the state. Participants are required to actively opt out to avoid undisclosed fees, especially since lower-cost provider Vanguard was removed from the plan in 2023. This decision has resulted in significant revenue for TIAA, benefitting from participants who may be unaware of the true costs associated with their savings.
TIAA is currently under investigation by regulators in Montana, Vermont, and Washington for allegedly steering clients towards expensive products that provide lower returns on investments. A whistleblower complaint filed against the firm claims they prioritize their own products over more cost-effective options, raising concerns about their business practices. In response to these issues, Carla Rojo from the Rhode Island Treasurer’s Office stated that TIAA was chosen through a transparent bidding process, and that legally required disclosures are provided to participants regarding the plan.
The retirement plan imposes restrictions on withdrawals in order to help secure retirement savings. Approximately one-third of TIAA’s 401(a) plans enforce similar restrictions; however, this has led to frustration among participants. They typically contribute 5% of their salaries, with the state contributing an additional 1%. The Rhode Island 401(a) plan was introduced after a pension crisis in 2011 aimed at supplementing underfunded public pensions.
The default product selected by TIAA primarily consists of an annuity with a higher cost structure, estimated between 1.2% and 1.5%, compared to Vanguard’s much lower cost of 0.06%. This raises questions about the transparency of costs, as participants were informed that the annuity’s cost was “0.00%,” despite incurring hidden fees that affect payouts. TIAA has opted not to disclose actual earnings from these annuities, citing proprietary concerns, leaving participants with limited information about their investments.
In the most recent fiscal year, the Rhode Island 401(a) plan incurred $1.3 million in administrative fees. By 2025, projections indicate that nearly 92% of participants’ assets will be invested solely with TIAA, a slight uptick from 90% in 2023, following Vanguard’s removal. This transition is estimated to have increased annual participant costs from $200,000 had they remained with Vanguard to approximately $4 million with TIAA.
Officials in Rhode Island maintain that the recent changes to the retirement plan are intended to enhance the overall retirement outcomes for employees, despite the increased financial burden on them. Participants, like Robert Jalette, have expressed their dissatisfaction particularly concerning the lack of transparency regarding costs and withdrawal access. Allaire, who has described his experience with the plan as a disaster, points to ongoing stress and frustration stemming from the inability to access his retirement savings while continuously facing fees.
As Rhode Island navigates these complex retirement plan issues, the scrutiny from employees, regulators, and financial experts alike sheds light on the various challenges faced by public employees in preparing for a secure financial future.
Deeper Dive: News & Info About This Topic
- NBC News: Rhode Island Sheriff’s Retirement Account Woes
- Wikipedia: Retirement
- Kiplinger: Taxes in Retirement
- Google Search: Retirement Savings Program
- Plan Adviser: Retirement Plans Ranking
- Encyclopedia Britannica: Retirement Savings
- Warwick Post: RI Private Retirement Plan Law
- Google News: Rhode Island Retirement Plan
Author: STAFF HERE PROVIDENCE WRITER
PROVIDENCE STAFF WRITER The PROVIDENCE STAFF WRITER represents the experienced team at HEREProvidence.com, your go-to source for actionable local news and information in Providence, Providence County, and beyond. Specializing in "news you can use," we cover essential topics like product reviews for personal and business needs, local business directories, politics, real estate trends, neighborhood insights, and state news affecting the area—with deep expertise drawn from years of dedicated reporting and strong community input, including local press releases and business updates. We deliver top reporting on high-value events such as WaterFire, Rhode Island International Film Festival, and Rhode Island Comic Con. Our coverage extends to key organizations like the Greater Providence Chamber of Commerce and Providence Warwick Convention & Visitors Bureau, plus leading businesses in finance and manufacturing that power the local economy such as Citizens Financial Group and Textron. As part of the broader HERE network, we provide comprehensive, credible insights into Rhode Island's dynamic landscape.
