[Federal Register Volume 86, Number 92 (Friday, May 14, 2021)]
[Notices]
[Pages 26572-26574]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-10159]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 34267; File No. 812-15143]


Teachers Insurance and Annuity Association of America, et al.

May 10, 2021.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice.

-----------------------------------------------------------------------

    Notice of application for an order approving the substitution of 
certain securities pursuant to section 26(c) of the Investment Company 
Act of 1940, as amended (the ``Act'').

Applicants: Teachers Insurance and Annuity Association of America 
(``TIAA'') and TIAA Separate Account VA-3 (the ``Separate Account,'' 
and together with TIAA, the ``Applicants'').

Summary of Application: The Applicants seek an order pursuant to 
section 26(c) of the Act, approving the proposed substitution 
(``Substitution'') of Vanguard Institutional Index Fund (``Replacement 
Fund'') for shares of Vanguard 500 Index Fund (``Original Fund'') held 
by the Separate Account to fund certain variable annuity insurance 
contracts (collectively, the ``Contracts'').

Filing Dates: The application was filed on July 13, 2020 and amended on 
November 13, 2020, February 26, 2021, and April 22, 2021.

Hearing or Notification of Hearing: An order granting the requested 
relief will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by emailing the Commission's 
Secretary at [email protected] and serving applicants with a 
copy of the request by email. Hearing requests should be received by 
the Commission by 5:30 p.m. on June 4, 2021, and should be accompanied 
by proof of service on applicants, in the form of an affidavit or, for 
lawyers, a certificate of service. Pursuant to rule 0-5 under the Act, 
hearing requests should state the nature of the writer's interest, any 
facts bearing upon the desirability of a hearing on the matter, the 
reason for the request, and the issues contested. Persons who wish to 
be notified of a hearing may request notification by emailing the 
Commission's Secretary.

ADDRESSES: The Commission: [email protected]. Applicants: Aneal 
Krishnamurthy, [email protected].

FOR FURTHER INFORMATION CONTACT: Harry Eisenstein, Senior Special 
Counsel, at (202) 551-6764 or Kaitlin C. Bottock, Branch Chief at (202) 
551-6825 (Division of Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's website by searching for the file number, or for an 
Applicant using the Company name box, at http://www.sec.gov.search/search.htm, or by calling (202) 551-8090.

Applicants' Representations

    1. TIAA is a stock life insurance company organized under the laws 
of the state of New York. TIAA is the depositor and sponsor of the 
Separate Account.
    2. The Separate Account is registered with the Commission under the 
Act as a unit investment trust. The Separate Account is divided into 
subaccounts and each sub account invests in a single underlying mutual 
fund, such as the Original Fund (all such underlying fund, ``investment 
options'').
    3. The Original Fund and the Replacement Fund are each registered 
under the 1940 Act as an open-end, management investment company and 
its securities are registered under the 1933 Act. The Original Fund and 
the Replacement Fund are each advised by The Vanguard Group, Inc., 
which is not an affiliate of the Applicants.
    4. The Contracts are registered under the Securities Act of 1933, 
as amended (the ``1933 Act''). The Contracts allow Contract owners to 
allocate Contract value to one or more of the investment options 
available in the Separate Account.
    5. As set forth under each Contract, as well as in the prospectus 
for each Contract, the Companies reserve the right to substitute shares 
of the underlying fund for shares of another underlying fund.
    6. The Applicants propose to replace shares of the Admiral share 
class of the Original Fund in the Separate Account with shares of the 
Institutional Plus share class of the Replacement Fund.
    7. The Applicants state they are seeking the Substitution because 
the Original Fund, thought it provides a relatively low ``Admiral'' 
share class, does not have an institutional share class which TIAA's 
clients are demanding. Additional information for the Existing Fund and 
the Replacement Fund, including investment objectives, principal 
investment strategies, principal risks, and performance, as well as the 
fees and expenses of the Existing Fund and the Replacement Fund, can be 
found in the application.
    8. The Applicants state that the Substitution will be described in 
a supplement to the prospectuses (``Supplement'') for the Contract 
filed with the Commission and delivered to all affected Contract owners 
at least 30 days before the Substitution Date. The Supplement will 
advise Contract owners that, for a period beginning 30 days before the 
Substitution Date through at least 30 days following the Substitution 
Date, Contract owners are permitted to make at least one transfer of 
Contract value from the subaccount investing in the Existing Fund or 
the Replacement Fund to any other available investment option offered 
under their Contracts without the transfer being counted as a transfer 
for purposes of transfer limitations and fees

[[Page 26573]]

that would otherwise be applicable under the terms of the Contracts.
    9. The Applicants will send the Supplements to all affected 
Contract owners. Prospective purchasers and new purchasers of Contracts 
will be provided with a Contract prospectus and the Supplement, as well 
as the prospectus and any supplements for the Replacement Fund.
    10. In addition to the Supplement distributed to Contract owners, 
within five business days after the Substitution Date, affected 
Contract owners will be sent a written confirmation of the completed 
Substitution. The confirmation statement will include a statement that 
reiterates the free transfer rights disclosed in the Supplement.
    11. The Substitution will be effected at the relative net asset 
value in conformity with section 22(c) of the Act and rule 22c-1 
thereunder. The Substitution will be effected by TIAA, on behalf of the 
Separate Account, by redeeming its Original Fund shares in cash on the 
Substitution Date and simultaneously purchasing shares of the 
Replacement Fund for the exact amount of the redemption proceeds.
    12. TIAA or an affiliate will pay all expenses incurred in 
connection with the Substitution. No costs of the Substitution will be 
borne directly or indirectly by Contract owners. Contract owners will 
not incur any fees or charges as a result of the Substitution, nor will 
their rights or the obligations of the Companies under the Contracts be 
altered in any way. The Substitution will not cause the fees and 
charges under the Contracts currently being paid by Contract owners to 
be greater after the Substitution than before the Substitution. In 
addition, the Substitution will in no way alter the tax treatment of 
affected Contract owners in connection with their Contracts, and no tax 
liability will arise for Contract owners as a result of the 
Substitution.
    13. The Applicants state that the Contract value for each Contract 
owner impacted by the Substitution will not change as a result of the 
Substitution. In addition, the Applicants also state that the benefits 
offered by the guarantees under the Contracts will be the same 
immediately before and after the Substitution. The Applicants further 
state that the effect Substitution may have on the value of the 
benefits offered by the Contract guarantees would depend, among other 
things, on the relative future performance of the Existing Fund and the 
Replacement Fund, which the Applicants cannot predict. The Applicants 
further note that, at the time of the Substitution, the Contracts will 
offer a comparable variety of investment options with as broad a range 
of risk/return characteristics.
    14. The Applicants state that TIAA will not receive, for three 
years from the date of the Substitution, any direct or indirect 
benefits from the Replacement Fund, advisors, their underwriters or 
their respective affiliates in connection with the assets attributable 
to the Contracts affected by the Substitution at a higher rate than it 
had received from the Original Fund, advisors, underwriters or their 
respective affiliates, including, without limitation, 12b-l 
distribution, shareholder service, administrative or other service 
fees, revenue sharing or other arrangements. In addition, the 
Applicants state that the Substitution is not motivated by any 
financial consideration paid or to be paid to the Insurance Company or 
its affiliates by the Replacement Fund, its investment advisor or 
underwriter, or their affiliates.

Legal Analysis

    1. The Applicants request that the Commission issue an order 
pursuant to section 26(c) of the Act approving the Substitution. 
Section 26(c) prohibits any depositor or trustee of a unit investment 
trust that invests exclusively in the securities of a single issuer 
from substituting the securities of another issuer without the approval 
of the Commission. Section 26(c) provides that such approval shall be 
granted by order from the Commission if the evidence establishes that 
the substitution is consistent with the protection of investors and the 
purposes of the Act.
    2. The Applicants submit that the Substitution is consistent with 
the protection of investors and the purposes fairly intended by the 
policy and provisions of the Act. In particular, the Applicants point 
to the following: (a) The Contracts permit the Substitution, as 
permitted by applicable law and the New York Insurance Department; (b) 
the prospectus for the Contracts contain appropriate disclosure of 
these rights; (c) the Substitution will be described in the Supplements 
delivered to all affected Contract owners at least 30 days before the 
Substitution Date; (d) the Supplements also will advise Contract owners 
that, for a period beginning at least 30 days before the Substitution 
Date through at least 30 days following the Substitution Date, Contract 
owners are permitted to make at least one transfer of Contract value 
from the subaccount investing in the Existing Fund to any other 
available subaccounts offered under their Contract without the transfer 
being counted as a transfer for purposes of transfer limitations and 
fees that would otherwise be applicable under the terms of the 
Contracts; (e) the Replacement Fund and the Existing Fund have 
substantially similar investment objectives, principal investment 
strategies, and principal risks; and (f) the net operating expenses of 
the Replacement Fund are lower than those of the Existing Fund. The 
Applicants assert that, based on the terms noted above, and subject to 
the conditions set forth below, the Substitution does not raise the 
concerns underlying section 26(c).

Applicants' Conditions

    The Applicants agree that any order granting the requested relief 
will be subject to the following conditions:
    1. The Substitution will not be effected unless TIAA determines 
that: (a) The Contracts allow the substitution of shares of registered 
open-end investment companies in the manner contemplated by the 
application; (b) the Substitution can be consummated as described in 
the application under applicable insurance laws; and (c) any regulatory 
requirements in each jurisdiction where the Contracts are qualified for 
sale have been complied with to the extent necessary to complete the 
Substitution.
    2. TIAA or its affiliates will pay all expenses and transaction 
costs of the Substitution, including legal and accounting expenses, any 
applicable brokerage expenses and other fees and expenses. No fees or 
charges will be assessed to the affected Contract owners to effect the 
Substitution. The proposed Substitution will not cause the Contract 
fees and charges currently being paid by Contract owners to be greater 
after the proposed Substitution than before the proposed Substitution.
    3. The Substitution will be effected at the relative net asset 
values of the respective shares in conformity with section 22(c) of the 
Act and rule 22c-1 thereunder without the imposition of any transfer or 
similar charges by the Applicants. The Substitution will be effected 
without change in the amount or value of any Contracts held by affected 
Contract owners.
    4. The Substitution will in no way alter the tax treatment of 
affected Contract owners in connection with their Contracts, and no tax 
liability will arise for affected Contract owners as a result of the 
Substitution.
    5. Affected Contract owners will be permitted to make at least one 
transfer of Contract value from the sub-account investing in the 
Original Fund (before the Substitution Date) or the Replacement Fund 
(after the Substitution Date) to any other available investment option 
under the Contract

[[Page 26574]]

without charge for a period beginning at least 30 days before the 
Substitution Date through at least 30 days following the Substitution 
Date. Except as described in any market timing/short-term trading 
provisions of the relevant prospectus, the Applicants will not exercise 
any right they may have under the Contracts to impose restrictions on 
transfers between the sub-accounts under the Contracts, including 
limitations on the future number of transfers, for a period beginning 
at least 30 days before the Substitution Date through at least 30 days 
following the Substitution Date.
    6. All affected Contract owners will be notified via the Supplement 
at least 30 days before the Substitution Date about: (i) The intended 
Substitution of the Existing Fund with the Replacement Fund; (ii) the 
intended Substitution Date; and (iii) information with respect to 
transfers as set forth in Condition 5 above. In addition, the 
Applicants will deliver to all affected Contract owners, at least 30 
days before the Substitution Date, a prospectus for the Replacement 
Fund.
    7. The Companies will deliver to each affected Contract owner 
within five business days of the Substitution Date, a written 
confirmation which will include: (a) A confirmation that the 
Substitution was carried out as previously notified; (b) a restatement 
of the information set forth in the Supplement; and (c) the values of 
the Contract owners' positions in the Original Fund before the 
Substitution and the Replacement Fund after the Substitution.
    8. Applicants and their affiliates will not receive, for three 
years from the Substitution Date, any direct or indirect benefits from 
the Replacement Fund, their investment advisors or underwriters (or 
their affiliates) in connection with assets attributable to Contracts 
affected by the Substitution at a higher rate than they had received 
from the Original Fund, its investment advisors or underwriters (or 
their affiliates), including without limitation 12b-1 fees, shareholder 
service, administrative or other service fees, revenue sharing, or 
other arrangements.
    9. The obligations of the TIAA and the rights of affected Contract 
owners under the Contracts will not be altered in any way.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-10159 Filed 5-13-21; 8:45 am]
BILLING CODE 8011-01-P