Annexus Unveils 2nd TDF Income Solution


This article was originally published by NAPA.

Retirement Income

Annexus Retirement Solutions has joined forces with State Street Global Advisors—the world’s fourth largest asset manager—to develop a target date fund (TDF) with an embedded income solution for the defined contribution (DC) plan marketplace.

This is the second target-date fund (TDF) income solution on the market that leverages the Annexus Retirement Solutions patent-pending Lifetime Income Builder design. The firm announced an actively managed solution last year in partnership with Nationwide and Capital Group. That offering already has two plans committed, and another 30 in the pipeline, according to Dave Paulsen, chief distribution officer at Annexus.

Product Design

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, which a plan sponsor could consider to be Qualified Default Investment Alternative (QDIA)-compliant. And while that may sound similar to other recently introduced offerings, Paulsen says it’s anything but. “We started with a clean sheet of paper,” he told NAPA-Net, acknowledging that the growing interest in lifetime income has led to a recent surge in offerings. However, most of those, he commented are repackaging or updating old solutions; a “fresh coat of paint on an old product,” he maintains.

The new partnership with State Street leverages that organization’s asset management “heft,” as well as its long-standing experience both with DC plans and TDFs, and expands the focus to a passively managed solution for the equity component of the offering, according to Charles Millard, a former director of the Pension Benefit Guaranty Corporation (PBGC), and a senior advisor for Annexus Retirement Solutions. State Street will manage the solution’s underlying assets and provide the index for the group fixed indexed annuity.

“We’re excited about this opportunity to work with Annexus Retirement Solutions (ARS) 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) in a press release. “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 ‘Build’

Paulsen says the solution “build” “focused on the core tenets that the participant doesn’t have to give up on to get lifetime income.” He explains that typically participants have to give up growth—upside potential, as well as control—meaning liquidity during accumulation and portability when they change jobs. He says the Annexus design provides “full access all along the way.” The TDF/QDIA focus is designed to make it easy for the participant to get “in.”

“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 Paulsen. “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.”

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 Paulsen says can help lower participant costs and deliver higher income benefits and better outcomes. While a traditional TDF glidepath shifts from equity to more fixed income, this one glides into lifetime income builder—fixed index annuities with a guaranteed lifetime income benefit, which Millard notes pays 6% income based on the high-water market of the TDF. If the participant’s account balance runs out before the end of their life, the product includes an absolute guarantee of 4.5% on the high-water mark for the rest of their life.


One of the lingering concerns about adoption of these type programs is portability—the ability to move it from one provider platform to another, or for a worker to take it with them when they leave their current employer. To address those concerns, Annexus Retirement Solutions is providing access to the Annexus Retirement Data Exchange (ARDX), a proprietary middleware solution that streamlines data communication and administration. They say that ARDX also enables faster, seamless fund implementation and processing capabilities for the recordkeeper and all other parties. The TDF—securitized as a collective investment trust (CIT) with a CUSIP—will be available across multiple recordkeeping platforms.

Millard compares the overall design to that of an iPhone— “Complicated inside, but simple to use.”

The new DC plan product offering is scheduled to launch in the first half of 2022.

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