The State University of New York could rightfully brag. So could aerospace and defense conglomerate RTX.
Both took a bold step years ago that most employers are now just considering: They made annuities available in their workplace retirement savings plans.
SUNY has been offering annuities, including its “workhorse” TIAA Traditional fixed annuity, to workers in its two defined contribution retirement plans since 1964, said Michael Consorte, SUNY’s director of university-wide benefits.
Of the 85,000 active participants in the SUNY plans, 10% have annuitized, including a 107-year-old former professor currently receiving a monthly payment of nearly $20,000.
“She has been collecting on her annuity since she retired when she was 65,” Consorte said.
More recently, in a bid to increase the number of workers with guaranteed income in retirement, SUNY introduced a target-date fund embedded with the TIAA Traditional annuity called the SUNY Targeted Allocation Retirement Series or STARS.
The new target-date series, which Consorte refers to as the “North Star” of its plan investments, was introduced in July of 2024 and is now the qualified default investment option for SUNY’s two plans.
RTX was also an early adopter. One of its predecessors, United Technologies Corp., brought its annuity product to the workforce in June 2012 with the introduction of the Lifetime Income Strategy, a target-date-like investment created by Alliance Bernstein that begins allocating money to annuities about 15 years before employees’ target retirement age.
“With the increasing trend of defined benefit pension-plan closures across the retirement landscape, we introduced LIS in 2012 to provide our employees with a strong option for guaranteed income in retirement,” said Kimberly Masucci, director of pension investments at RTX.
Both RTX and SUNY stand out from other employers in their early adoption of annuity products. Of the 200 largest employers that completed Pensions & Investments’ annual Top 1,000 survey, for example, only 14 reported offering stand-alone retirement income options and/or in-plan decumulation strategies.
More employers, however, are considering adding annuities to their retirement plan investment menus as baby boomers retire in massive waves, many without the benefit of traditional pension plans. Target-date funds with built-in annuities, in particular, are gaining employer attention. Last year, for example, BlackRock rolled out its much-heralded LifePath Paycheck target-date series, an annuity-embedded target-date fund that six employers, including BlackRock, have already added to their investment menus.
Below are summaries of the annuity products that SUNY and RTX offer in their defined contribution retirement plans.
SUNY
SUNY has been offering annuities since 1964 due to a New York state legislative mandate requiring SUNY’s then new and pioneering defined contribution-like retirement plan program to offer annuities, Consorte said.
While SUNY offers three stand-alone annuities, its “workhorse”, he said, is the TIAA Traditional fixed annuity because it provides the highest payouts and offers many benefits.
Participants in SUNY’s two defined contribution plans — the $14.8 billion 401(a) plan and the $7.1 billion 403(b) plan — pay into the annuity and when they’re ready to annuitize their savings, they can annuitize all or part of the money they’ve saved.
“As you put money into TIAA Traditional, you are investing in a fund like any other option in our plan,” Consorte said.
SUNY negotiated a 3% floor of guaranteed income on TIAA Traditional, meaning the annuity will earn a minimum of 3% regardless of what the market is doing. “All of last year, it was paying between 5.5% and 6.5%, which is pretty good for a market-agnostic return,” Consorte said.
In addition, TIAA Traditional offers annuitants a “loyalty bonus” for years when TIAA earns a profit. If a participant’s regular annuity payment is $1,000, they could receive a loyalty bonus of, say, 30% or an extra $300 to the regular payment, according to Consorte.
“You get these bumps along the way, but they do add up,” he said, explaining that there have been only two years in the past 20 when no loyalty bonus money was paid out.
In July of 2024, SUNY introduced the STARS target-date series, a custom target-date fund with TIAA Traditional embedded in it. STARS gradually allocates a growing percentage of assets to TIAA Traditional, increasing from a 1% allocation for the youngest users to a 44% allocation for the oldest.
Since it was introduced, STARS has accumulated more than $600 million in assets and is on track to grow past $1 billion in 18 months’ time, if not earlier, Consorte said.
SUNY added the STARS series to help target-date fund users who weren’t annuitizing their savings and to negotiate a better fee than the one it was paying for its traditional target-date fund.
SUNY negotiated with TIAA to offer STARS for 6 basis points, a dramatic improvement over the 40 basis charged for the former traditional target-date fund in its plans.
“What’s even better is once we hit the $1 billion break point, that would go down to 4 basis points,” Consorte said.
RTX
Being among the first to offer an in-plan annuity investment — a feat RTX accomplished in June 2012 — wasn’t easy but worthwhile, said RTX’s Masucci.
“There was legal and regulatory uncertainty, and we had to find the right vendor partners, but this was overcome by knowing it was the right thing to do,” she said, adding that the team had support from senior leadership.
The Alliance Bernstein Lifetime Income Strategy that the company made available in its $58.3 billion 401(k) plan allows participants to allocate a percentage of their balance to annuities held in the strategy’s Secure Income Portfolio. The gradually increasing allocations to SIP begin 15 years prior to a participant’s target retirement age.
Participants can customize their target retirement age, choosing any age between 60 and 70. They can also customize how much of their LIS balance they want to ultimately allocate to annuities, anywhere between 0% to 100%, in 10% increments.
Let’s say a participant plans to retire at 65 and wants to have 70% of their balance allocated to SIP. The participant would see gradually increasing allocations to SIP starting at age 50 until those allocations hit 70% of their balance at age 65.
If participants do not choose a retirement age, they are defaulted to a retirement age of 65. If they do not choose how much of their savings they want to annuitize, they are defaulted to a 100% “secure income level,” meaning that at retirement their entire balance will be in SIP and available for annuitization.
Masucci reports high participation in the investment option. Of the 215,000 active and inactive participants in the RTX 401(k) plan, 43% have a balance in the Lifetime Income Strategy.
At the end of 2024, the Secure Income Portfolio had almost $3 billion in assets, which is nearly half of the $7.5 billion in the Lifetime Income Strategy today, Masucci said.
