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House approves expansion allowing CREF to market beyond educational institutions
Summary
The House passed a bill that redefines the eligible market for the College Retirement Equity Fund (CREF) to include governmental and nonprofit employees; sponsor described long negotiations and said the product discloses it does not guarantee investment performance.
The House approved legislation to allow the College Retirement Equity Fund to market its variable annuity product beyond educational organizations to include employees of governmental entities and nonprofits. Representative Farron, who took over sponsorship after studying the issue extensively, said he concluded that CREF does not enjoy an unfair competitive advantage and that the product's lack of guarantees is clearly disclosed in its prospectus.
During debate members raised consumer-protection concerns about the product name (variable annuity) and whether investors might reasonably expect guarantees. Representative Dunnegan and others said the product is "more like a mutual fund" and worried about possible marketing confusion; Farron replied that the prospectus explicitly states that CREF does not guarantee investment performance and that investors bear the risk.
After extended floor discussion, the bill passed the House and will be referred to the Senate.
