Annexus, State Street Partner on TDF with Embedded Income Solution


Financial firms team up to launch target date fund embedding an in-plan income solution benefiting all parties in the DC value chain

By Brian Anderson
This article was originally published by 401k Specialist.

Annexus Retirement Solutions is joining forces with State Street Global Advisors to develop a target-date fund (TDF) with an embedded income solution for the defined contribution (DC) plan marketplace.

The Scottsdale, Ariz.-based retirement income firm and State Street, the world’s fourth-largest asset manager, announced the partnership on March 31. This will become the second TDF income solution on the market that leverages the Annexus Retirement Solutions patent-pending “Lifetime Income Builder” design. Last year, ARS and Nationwide rolled out Lifetime Income Builder, which embeds a fixed indexed annuity with a guaranteed lifetime withdrawal benefit directly into a collective investment trust consisting of a series of target-date funds.

“We’re excited about this opportunity to work with Annexus Retirement Solutions to introduce an in-plan income solution that’s long overdue and complements our current DC plan offerings,” said Bob McGowan, managing director and head of the Financial Institutions Group at State Street Global Advisors (SSGA). “We pride ourselves on always focusing on the needs of plan participants and sponsors and this solution once more demonstrates our commitment to enhancing retirement outcomes. By combining our asset management expertise with ARS’ product innovation, our solution creates synergies to deliver a complementary in-plan income solution that benefits all parties in the DC value chain—most critically the participant.”

The investment solution embeds Lifetime Income Builder—a product that employs group fixed indexed annuities (FIAs) with a guaranteed lifetime withdrawal benefit (GLWB) – within the familiar and automatic structure of a TDF. Innovation in product design enables daily valuations of Lifetime Income Builder, a familiar trait for retirement plan products and seeks to provide participants with additional growth opportunity and 6% income in retirement.

By integrating Lifetime Income Builder into a TDF, the solution gives DC plan sponsors an efficient investment option which a plan sponsor could consider to be Qualified Default Investment Alternative (QDIA)-compliant. For participants, it offers a combination of liquidity, portability and ease of use leading up to and throughout retirement.

“Until Lifetime Income Builder, industry attempts to deliver in-plan lifetime income largely relied on existing individual-based products that weren’t optimized to meet participants’ needs in the DC plan space,” said Dave Paulsen, chief distribution officer for ARS. “That compromised approach created unnecessary complexities and required participants to sacrifice returns and a measure of flexibility and control to receive guaranteed income. Our patent-pending product innovation eliminates those barriers and is designed for better overall participant outcomes. We’re excited about the opportunity to work with State Street Global Advisors to bring the second target-date series with Lifetime Income Builder to market. Their proven approach to investment management—and the value it brings to participants—is a strong complement to our expanding solution lineup.”

The TDF design anticipates using three of the nation’s top-tier insurance providers to deliver lifetime income. This multi-carrier model allows the insurance providers to bid on pricing each month, which can help lower participant costs and deliver higher income benefits and better outcomes.

Annexus Retirement Solutions is providing its Lifetime Income Builder product and the Annexus Retirement Data Exchange (ARDX), a proprietary middleware solution that streamlines data communication and administration. ARDX also enables fast, seamless fund implementation and processing capabilities for the recordkeeper and all other parties. State Street will manage the solution’s underlying assets and provide the index for the group fixed indexed annuity. The TDF will be available across multiple recordkeeping platforms.

Designed to help participants regardless of age, financial experience or level of retirement savings, the solution is easily adapted to plans of any size, across most DC markets. The new DC plan product offering is scheduled to launch in the first half of 2022.

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