QOTW: Annuities in TDFs

We have had some questions lately about annuities in target-date funds after a recent report from Cerulli. We haven't heard of many plan sponsors offering these yet, but are curious if anyone is, and if it will be a trend in the future. We asked members in this week’s QOTW if they offer a TDF with an annuity and their thoughts on these products. Unsurprisingly, only 2.3 percent of respondents offer one (two plans), while 10.5 percent are considering one, and 8.1 percent have not heard of these products. Though the topic of retirement income products in plans is still divisive, some respondents definitely have it on their radar as something to consider in the future. Comments follow.

• Annuities have no place in employer retirement plans
• At this time we just converted to new record-keeper and added managed accounts and a stabilizer fund.  We may consider in the future.
• Easy to foresee these as a future trend. We're not close to offering it though.
• Haven't heard anything about adding an annuity option for our target date fund.  As a 403(b) plan sponsor, we have annuities available in one of our vendors
• I don't expect we will give serious consideration to a built-in annuity product in our target date funds. We haven't found an annuity product that provides a real cost benefit over potential for return on investment.
• I think it is an idea that we will explore in the future.  As with most annuities, it needs to be vetted for cost as well as appropriateness for the individual.  I do think this could help some users feel more confident in what their retirement income will look like.  The other issue would be portability if an employee goes elsewhere does this option follow him/her once they leave a particular plan sponsors plan.
• I would be a little leery of the fees associated with an annuity component as part of the target date funds...
• It's not something we would consider here. We have an annuity option outside of the fund options that participants can transfer assets to after termination, but no one has ever taken advantage of it.
• Not needed at this time. More focused on global financial wellness.
• Not sure ?  But, will check with our TPA.
• Not sure, need more information
• Our financial consultant does not recommend annuity.
• sounds simple, but probably isn't.  Still not convinced that all the portability issues have been worked out.  And, tied/defaulted to a QDIA, I'm sure that somebody, somewhere down the road is going to get sued.
• This has not been brought to the table for our investment committee.
• Unless we can continue to have the same very low fee target date funds we wouldn't consider it. It's okay to have a higher expense ratio for the specific retirement income fund, but not all the others. Interested to see how the industry addresses it!
• Very interested in learning more.
• We are investigating various decumulation options for plan participants who are retired. Annuities as part of a target date fund would seem to be a logical option.
• we are not yet comfortable with the fiduciary liability of annuities.
• We considered it several years ago and declined.
• We do not include target-date funds in our 401(k).
• We don't have this product in our 401k investment fund line-up, but I really like the idea.  It is a means to provide retirement income to employees whose primary retirement vehicle is DC.  That said, it is a fiduciary decision to offer such a product, and then which product provides a reasonably cost-effective annuity option.
• We have evaluated whether to include a guaranteed income product w/in our proprietary TRF.   We came to the conclusion that not all participants needed additional guaranteed income (i.e. social security) and some had guaranteed income outside our plan through previous employment or their spouse.   We felt it was optimal to offer retirement planning and determine whether additional guaranteed income was needed. If it was, we can offer QLACs to our participants.
• We have target date funds, but it does not have the annuity product built in.
• We use our Target Date funds as QDIA so I don't think one with a built-in annuity would be prudent due to the added complexity, unless regulations specifically allowed it in the future.
• we will take a look at offering this product in the future.  I don't know enough about it at the current moment.
• We've heard about considering them, but not at the current time.
• Would like to see us add one.  Will be bringing it up for consideration.