Rhode Island cop blocked from accessing his retirement savings under any circumstances — quitting may be his only option

Jason Allaire, a captain with the Rhode Island Division of Sheriffs, is sounding the alarm on a much-scrutinized retirement plan managed by TIAA Financial Services after he found that the 401(a) plan, which had been sold to him and his colleagues as being nearly identical to a 401(k) plan, came with some caveats.

Allaire has saved thousands of dollars in the state retirement plan, which was overhauled after Rhode Island’s severely underfunded public pension plans were in crisis, with enough funding for less than half the pensions’ combined liabilities, according to CNBC reporting (1).

A 401(a) is a 401(k) equivalent for government workers, so when Allaire decided to pull some money from his fund to help his daughter with her college tuition, he assumed he would simply have to pay the penalty and taxes as with a 401(k)

However, he found out that he wouldn’t be allowed to access his money until he stops working for the state.

“We cannot touch it, borrow against it or move it,” even in an emergency, he said in an interview with NBC News (2).

“This plan is pretty much holding us hostage.”

As of 2023, the Rhode Island 401(a) accounts were switched from the management of low-cost provider Vanguard to TIAA, which CNBC reports draws a large profit from managing the plan.

While Rhode Island officials defend their choice to change the management of the plan, it turns out that the decision was a swift and quiet one: It was made during a single meeting of the Rhode Island Investment Committee in May 2023, reports CNBC, and no details of the deliberations appear in the state records.

Allaire’s experience may be a common one, and not just limited to those with public retirement plans managed by TIAA. CNBC cited critics who claim that Americans with retirement plans can fall victim to predatory practices, including being sold risky financial products, accepting plans with complex rules and hidden costs, and undisclosed conflicts of interest.

“Our system depends on Americans’ ability to invest well for their retirement,” Barbara Roper, an expert in investor protection and former senior adviser for the Securities and Exchange Commission (SEC), told the news outlet.

“But the majority of Americans are not good at investing — they pay too much for substandard products recommended by conflicted representatives.”

TIAA is currently under investigation by regulators in three states: Montana, Vermont and Washington — who are probing allegations that it steers retirement savers into costly TIAA products, including one in the RI Plan, according to former consultant-turned-whistleblower.

Speaking to NBC News last year, Ted Siedle, lawyer for the former TIAA consultant who filed the complaint with the SEC in 2024 said, “This is a company that’s been plagued by disturbing whistleblower allegations for over a decade now” (3).

“These state regulators are seriously concerned about the integrity of the advice that’s being offered by TIAA and its sales and representative licensing practices.”

Responding to NBC News about the investigations, TIAA spokesperson Michael Tetuan said at the time, “We cooperate fully and transparently with all regulatory authorities.”

And regarding the Rhode Island retirement plan, in a statement to the news outlet Tetuan said, “Rhode Island makes all legally required disclosures available to participants,” adding, “Ultimately, it’s up to participants to decide which specific investments best suit their financial goals.”

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A 401(a) plan is intended to be similar to the 401(k) that you’re likely familiar with, but there are a few important differences.

First, 401(a) plans are available to those working in government agencies, educational institutions and nonprofit organizations. 401(a) plans typically have more modest growth compared to plans with broader investment options, as government employers tend to limit investment options to only the safest and lowest-risk options. This type of plan gives employers more control over their employees’ investment choices.

Just like with a 401(k), an employee can (under normal circumstances) transfer the funds in their 401(a) to a 401(k) plan or individual retirement account (IRA) if they leave their employer. The employer also controls the 401(a) plan and determines the contribution limits for employees.

It’s important for government or other public employees to seek as much information as possible on their 401(a) retirement plans — especially if the fund is being changed to another provider.

Read the fine print, or have the contract reviewed by a financial advisor or a lawyer who specialized in this area. You may be able to pool together with your colleagues to cover the cost of legal advice. If these professionals find any gaps in the information you’ve been provided, you will have a strong case for demanding full access to the information you deserve.

There are also alternative retirement investments to a 401(a), including a Roth IRA or traditional IRA. However, the IRA’s contribution limit is considerably less than a 401(k) or 401(a).

You can supplement your IRAs with certificates of deposit (CDs) while interest rates are high, or invest in annuities or permanent life insurance policies. Finally, investments such as mutual funds, stocks, bonds or real estate can help pad your retirement fund so that you don’t have to depend as much on your employer’s 401(a).

Unfortunately, there isn’t much that Allaire and his colleagues can do about their retirement plan. Speaking up, both to your employer and to the media if you feel your 401(a) is being mismanaged, may be a necessary step to help ensure your rights as a worker are taken seriously. You may also opt to consult with a lawyer individually or with your colleagues to determine if you have a case to sue for changes to your plan.

In many cases, the only option to gain more control over your retirement may be to change jobs, and thereby transfer at least a portion of your 401(a) balance to IRAs, or to your new employer’s plan. Be sure you understand your 401(a) contract and rules clearly before you take this step, to ensure you aren’t losing any portion of your savings as a result. In many cases, you may either cash out your plan as a lump sum and reinvest in yourself, or rollover to another retirement plan from your new employer.

The bottom line is to know your investment contracts inside and out. Robert Jalette, a colleague of Allaire’s with the Division of Sheriffs, was also barred from accessing his funds.

“I don’t think any of us knew that it was going to be locked in,” he said.

Allaire, meanwhile, continues to fight for better treatment.

“This whole situation from the onset,” he said, “was a disaster.”

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CNBC (1); NBC News (2); NBC News (3);

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.