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Life Health > Annuities > Fixed Annuities

Annexus and State Street to Create In-Plan Annuitization Program

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What You Need to Know

  • Three insurers will power the indexed annuity behind the program.
  • State Street and Annexus say plan sponsors should be able to use the new product as a QDIA.
  • Annexus is also working on an in-plan annuitization effort with Nationwide.

State Street Global Advisors will be using a feature developed by Annexus to persuade employers to add lifetime income options to 401(k) plans.

State Street is putting the Annexus Lifetime Income Builder annuitization program in a new target date fund aimed at 401(k) plan sponsors.

State Street is an asset manager with $4.1 trillion in assets under management.

Annexus is an annuity product designer. Its Annexus Retirement Solutions arm is also participating in an in-plan annuitization product project with Nationwide.

Why It Matters

The new Annexus-State Street alliance is an example of the Setting Every Community Up for Retirement Enhancement Act, or Secure Act, at work.

One Secure Act provision was designed to clear away some of the fiduciary liability concerns that had slowed 401(k) plan sponsor adoption of annuitization options.

For current commercial retirement services players, the Secure Act could be a defense against efforts to shift workers into government-run retirement plan programs.

For retail retirement planning specialists, the new emphasis on in-plan annuitization options could lead to:

  • More competition for retail annuities and other individual retirement planning arrangements.
  • More promotion of and interest in all kinds of income planning efforts.
  • A new responsibility for holistic advisors to see whether a client has access to an employer-sponsored in-plan annuitization option, and how that option might fit in with the client’s other assets and options.

The Machinery

The Annexus feature combines group non-variable indexed annuities with a guaranteed lifetime withdrawal benefit.

Annexus and State Street say they plan to work with three different life insurers to power the lifetime income feature.

The participating insurers would bid on the annuity pricing each month.

The multi-insurer bidding process should help the employers and plan participants get lower plan costs and more benefits, Annexus and State Street say.

The Annexus Retirement Data Exchange system will handle administration for the new target date fund, and State Street will manage the assets and provide the index for the group indexed annuity.

Two or more vendors will offer recordkeeping services for the new program.

State Street and Annexus say they believe that a defined contribution plan sponsor will be able to use the new target date fund, with the annuitization feature, as a qualified default investment alternative.

A QDIA is an investment option that federal regulators classify as being suitable for plan participants who do not give explicit instructions about how they want their plan assets to be invested.

(Photographer: Michael Fein/Bloomberg)