Please keep in mind this is a 1997 topic, although it still resonates today. TIAA-CREF, to my knowledge, has not publicly released any studies of the actual net results (i.e. through today) of the legislation. That would highlight just how much came out of our pockets and moved to Uncle Sam's. You can't blame 'em for keeping quiet about it!
This NY Times article (paywall!) is an excellent summary, but can only be read by paid members or subscribers. Of course, it's available on your institution's library network if you have Proquest or Infotrac. The citation is: "Budget Deal to Cost T.I.A.A.-C.R.E.F. Its Tax Exemption", by Reed Abelson, NY Times, July 30, 1997.
Excerpts:
"Mutual of America, another not-for-profit group that provides retirement services, will also lose its tax exemption under the bill. ...
"'As we consider the implications of T.I.A.A. and C.R.E.F. becoming taxable entities, we have an opportunity to re-examine many activities which previously have been foreclosed to us because of our exempt status,' Mr. Biggs said. 'I believe that we can turn this event into a long-term advantage for all our current and future T.I.A.A.-C.R.E.F. participants."
Some points T-C made (in a very early "FAQ") were:
"What would happen if TIAA-CREF lost its tax exemption? TIAA would have to pay taxes on the funds that it sets aside in contingency reserves. And since TIAA operates on a not-for-profit basis, these taxes would directly reduce the amount of dividends that could be credited on TIAA accumulating and payout annuities.
"What would be the impact of the tax on TIAA participants? ... complex and would be subject to year-to-year variations, a rudimentary estimate of TIAA's potential tax liability based on TIAA's 1996 statutory financial statement suggests that federal income taxes would cost the equivalent of about ½ of 1% of TIAA's assets each year. This would translate into a reduction of as much as 0.50% in TIAA's accumulating and payout dividend interest rates each. In practice TIAA would do everything that it legally could to minimize its tax bill, so that the actual cost of the tax might be considerably less. However, if we assume the ½% is approximately correct, long-term participants who are at the beginning of their careers could expect the compound effect of these dividend reductions to produce retirement income levels that are as much as 10% to 15% less than what they would otherwise have received. The retirement income of participants who had already accumulated substantial retirement funds before the imposition of the tax would not be impacted as much, since the reduction dividends would apply for fewer years. For example, a ½% reduction in the dividend interest rate for new retirees would reduce the lifetime level of monthly annuity income by about 3% to 5%. ...
"Would the loss of TIAA-CREF's tax exemption result in other changes? While the loss of TIAA-CREF's tax exemption would result in reduced dividend rates in TIAA, most other aspects of TIAA-CREF's operations would remain unchanged. ..."
To me, the most intriguing tidbit is the question of whether or not CREF is an insurance company. You would think that a company issuing variable annuities would be an insurance company. In fact, the CREF Constitution has many references to "the insurance law", "Superintendent of Insurance of the State of New York", and to "the Insurance Law of the State of New York." CREF vigorously states that it is not an insurance company, although I caught them writing (in An Overview of T.I.A.A.'s Executive Compensation Policy, (which of course justifies paying their executives as if they worked for ... you guessed it, a big insurance company ...) "TIAA and CREF's combined assets would make the organization the third largest U.S. life insurance company".
I can offer first-hand testimony on the resulting effects on the term-life insurance policy I took over when I stopped teaching. The rapidly increasing annual dividend (paid to me) suddenly stopped short on its path towards the total annual premium I was paying. (Yes, I'm saying that the policy looked like it would become "free" before it matured.) The dividend dropped sharply, then continued to rise at a slower rate, and has never reached the straight-line amount it seemed headed for, over a twenty year term. TIAA no longer sells "participating life insurance" like this.
A little-noticed side effect of the lost exemption is that CREF no longer had to file an IRS Form 990, which forced them to disclose quite a bit of executive compensation information. I hope to post the "last" Form 990 later.
At the time, the congressional research service produced a thorough discussion of the topic, which TIAA-CREF posted. I think it's an impartial look at the issue, and it's very readable. (I can't find a current link to that report.) There were a lot of behind-the scenes politics as well. Robert Kuttner wrote an incisive column at that time, titled, "Payback Time". (No longer online) It's still important today, not just for TIAA-CREF participants, but for the information about Republicans, taxes, and Bill Archer of Texas.
It's quite interesting that both the AAUP and the ACE (which were perhaps in an adversary position to TIAA-CREF during the later 1989 settlement) wrote letters to Congress opposing the legislation. Unfortunately, their collegial, low-budget lobbying was no match for richer and louder voices on "K Street".