This move, which is described in the state disclosure documents dated 6/2002, doesn't strike me as the state trying to provide additional incentives (whether they be carrot- or stick-based) for residents to use the NY plan. In fact, the plan itself expresses some uncertainty over exactly what the DTF means, since the DTF failed to consider all possible circumstances in its directive
Rather, it sounds like the DTF - having been tasked to shore up falling revenue - is making some arbitrary decisions and flexing its muscles doing so.
The move could prove to be short-sighted and counterproductive to building assets in the NY plan, as residents need to consider whether the tax deduction is worth taking on an effective limitation on the ability to change plans in the future.
Of course, given the recent market conditions and TIAA-CREF's not-quite-sterling performance history, it will be a number of years before DTF will see any revenue inflow as a result of this action.
[This message has been edited by tjb_nc (edited October 24, 2002).]