Teachers Insurance and Annuity Association (TIAA) has used group annuities to give millions of teachers a comfortable retirement, by offering them annuity-based versions of the 403(b) plan — the ancestor of the 401(k) defined contribution plan.
Since TIAA popularized the 403(b) plan, it has turned into such a big, diversified retirement services provider that even some people in the financial services sector have no idea that, in its heart, TIAA is an insurance company.
Now, TIAA is putting the focus back on annuities, by promoting efforts to add “annuitization options,” or access to lifetime income annuities, to 401(k) plans and other defined contribution plans.
TIAA was part of the broad coalition of life insurers, other financial services companies, and labor and consumer groups that persuaded Congress to pass the Setting Every Community Up for Retirement Enhancement Act of 2020 (Secure Act), at a time when little gets through Congress.
One provision in the Secure Act encourages employers to offer retirement plan annuitization provisions, by offering a strategy an employer can use to pick an annuitization option provider without having to worry about being sued over problems with the annuitization option provider.
Tim Walsh, a senior managing director at TIAA, helped TIAA persuade members of Congress to pass the Secure Act. He testified on behalf of the bill that created the law in May 2018, at a hearing on Capitol Hill organized by the U.S. House Education and Workforce Committee’s Health, Education, Labor and Pensions subcommittee.
Here are five things Walsh said about the new retirement plan annuitization option market, drawn from a recent email interview.
1. Some retirement plans that are close to Walsh’s heart have been offering annuitization options for a long time.
To laypeople, 403(b) plans are simply 401(k) plans for teachers.