We have a client that wants to invest in an LLC taxed as a partnership inside either his SIMPLE IRA or his wifes's TIA-CREF plan. The ownership will be less than 5% and they will not be actively involved. Can this be done?

Probably okay, assuming they do not have an existing interest in the LLP. The trustee will need to have the partnership valued each year, and extra fees will apply.

I don't believe that TIAA/CREF is set up to have earmarked accounts, but I may be wrong

I prepared Forms 990-T for an individual who invested in his employer that was operating as a partnership. When the business was acquired by another entity, most of the gain was ordinary income due to receivables and inventories. The UBIT applied for two years and was over $20,000. Also you can't rely on not filing the year before to avoid penalties on Form 990-T so there were Form 2220 penalties as well.

Unless the LLC couldn't possibly generate UBI, I wouldn't recommend that kind of investment for an IRA, SEP or other retirement vehicle.

Tiaa-CREF only offers annuity contracts or investments in mutual funds to its participants. Investing in a LLC has many issues that make IRA custodians wary. If the LLC is an offshore co it will probably not be accepted. Some custodians will limit investments to publicaly traded cos. Also the IRA cannot invest in an LLC that is more thn 50% owned by the IRA owner. If the llc value goes down the owner cannot use the loss to offset the capital gains on other investments. And the gains on the LLC will be taxed as ordinary income not as capital gains.