WASHINGTON—A draft report on the nation’s largest teachers’ pension system recommends a variety of new investment choices for its policyholders—but still may not silence its swelling chorus of critics.

The report by a special trustee committee of the Teachers Insurance and Annuity Association-College Retirement Equities Fund (TIAA-CREF) calls for adding six pension funds to the $63 billion system. More than 1 million policyholders have joined the system in plans offered by some 3,800 colleges, universities, independent schools and nonprofit research institutions.

Current policyholders have been limited to the TIAA fixed annuity fund and the CREF equity fund, although a money market fund will soon be added. The small number of choices and the lack of transferability between funds have drawn much criticism. The new options recommended in the report include adding a second fixed annuity fund to TIAA and five variable annuity funds—including a bond fund and several equities funds—to...

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