Products November 10, 2023

Transamerica, ADP Each Add In-Retirement Plan Annuity Options

With the announcement, Transamerica becomes the first recordkeeper to offer State Street’s TDF with an embedded annuity, while ADP adds Income Solutions from Hueler.

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Recordkeepers Transamerica Corp. and ADP Inc. both announced separate retirement income options with annuities that will now be available to plan participants.

On Thursday, Transamerica announced it is offering the State Street GTC Retirement Income Builder series to its recordkeeping platform. The target-date-fund series has an annuity embedded in its glide path as a separate asset class, allowing for liquidity and portability to other plans, according to the announcement.

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State Street’s builder TDF is offered through a partnership announced in April with ARS, formerly Annexus Retirement Solutions, that embeds ARS’s Lifetime Income Builder annuity into the TDF glide path. Global Trust Co. is the fiduciary and trustee of the investment vehicle, which can also be used as the qualified default investment alternative in a plan.

ARS and State Street teamed up on the project as “advisers and plan sponsors have been asking for a solution that offers lifetime income, while still maintaining the benefits of a traditional TDF: most critically growth opportunity, liquidity and the ease of use/elimination of participant decisions,” an ARS spokesperson wrote via email. “This target-date series is able to deliver lifetime income without sacrificing these core benefits that have made TDFs successful over decades.”

The spokesperson said the firm is connecting to “multiple recordkeepers” and that it would be announcing a second “top-tier recordkeeper” offering the product next year.

The fund targets a 6% annual income rate and includes Transamerica Life Insurance Co.’s stable value product.

“We recognized that the industry was still asking participants to make decisions on solutions they didn’t understand,” Dave Paulsen, chief distribution officer at ARS, said in a statement. “By embedding lifetime income at the fiduciary investment management level, we eliminated those difficult decision points for the participant, while delivering the benefits they want.”

ADP Goes With Hueler

Separately, ADP confirmed it has brought the Hueler Companies’ Income Solutions onto its recordkeeping platform.

The Hueler solutions offer participants the chance to use workplace retirement savings to identify personalized, institutionally priced annuity options to create a retirement income stream.

“Hueler is recognized as a leading provider of retirement income annuity solutions in the marketplace,” an ADP spokesperson wrote in an emailed statement. “Their program offers access to a variety of insurance companies on their platform to give participants the ability to select a solution best suited for their personal financial needs.”

The country’s second-largest recordkeeper for plans with less than $10 million in assets, according to PLANSPONSOR’s 2023 Recordkeeping Survey, also noted that “Hueler has extensive experience working with retirement plans of all sizes.”

Pensions & Investments first reported ADP’s use of the offering.

Data & Research November 10, 2023

CITs Surpass Mutual Funds as Preferred Investment Vehicle for DCIOs

Providers of collective investment trusts are expected to target midsize and large DC plans in the coming year.

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Collective investment trusts have surpassed mutual funds as the preferred investment vehicle for defined contribution investment-only asset managers, according to a Cerulli Associates report.

As of year-end 2022, CIT assets amounted to $4.63 trillion, attributed to improved capital market conditions and sustained demand within defined contribution retirement plans, highlighted in Cerulli’s latest report, “U.S. Defined Contribution Distribution 2023: Adapting to Fiduciary Trends in the Adviser-Sold Market.”

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In 2021, asset managers’ DCIO assets by investment vehicle were split closely between mutual funds (37%) and CITs (35%), according to the consultancy’s survey of 30 DCIO asset managers. But as of 2022, CITs (36%) overtook mutual funds (34%), according to Cerulli, which did not provide an exact amount for mutual funds in DCIO investments.

Even with the growth, CIT providers should continue education efforts to get the lower-cost investment options into plan sponsor investment menus, according to the consultancy.

“Advisers lacking sufficient knowledge continue to present a concern for CIT adoption by DC plans,” Idin Eftekhari, a senior analyst at Cerulli, said in a statement. “Providers that are able to develop bespoke educational and fee arrangements will likely see greater adoption of their CIT investment offerings.”

Marketing Needed

To cater to various intermediary channels, CIT providers will need to adjust marketing efforts, fees and minimums, Cerulli recommended. Offering tailored education, especially for retail advisers, is increasingly vital, with 25% of respondents highlighting the knowledge gap as a significant challenge, and 66% considering gaining more knowledge somewhat challenging.

Over the course of the next year, CIT providers plan to focus distribution efforts on plans with assets of at least $25 million, according to the Cerulli report. That segment is generally comprised of retail-focused retirement plan advisers, retirement aggregator firms and institutional investment consulting firms. 

Among providers surveyed, 69% identified the $25 million to $249 million segment as a large focus, while 78% selected the $250 million to $999 million segment as a large focus.

Cerulli’s research revealed that national investment consultants remain the primary channel for distributing CITs into DC plans for 49% of providers. Direct placement of CITs into DC plans remains a leading channel, and distribution through registered investment adviser-based retirement aggregator firms held steady, with 18% of investor and client relationships intermediated by these firms.

Low-Cost Vehicle

Compared to mutual funds, CIT providers view lower costs as the primary benefit of the vehicle, with 66% ranking it as the most significant factor and 25% as the second-most significant. The ability to negotiate fees is also a noteworthy benefit.

Moreover, retirement plan aggregators such as CAPTRUST Financial Advisors and OneDigital are increasingly bringing collective investment trusts to small and midsize retirement plans, as CIT asset growth has outpaced mutual funds since 2018, as reported in October’s Cerulli Edge—U.S. Monthly Product Trends.

“We’re seeing continued adoption of CITs across the board,” says Rob Barnett, CEO of CIT provider Great Gray Trust Company. “We maintain that we don’t see CITs as an absolute end-all-be-all solution for everyone. We see it as a player in the space, but we also think that mutual funds and other types of vehicles are appropriate for plan sponsors as well depending on demographics and the needs of the plan.” 

Plan advisers and consultants play “an integral role” in understanding the client needs and providing the best guidance on whether a CIT is the right fit, and which type, Barnett says. He notes that Great Gray is seeing more retirement plan advisories of all types, whether large aggregators or independents, being more responsive to conversations and education on CIT use with clients. 


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