Agilis Launches Lifetime Income Tool PensionBuilder

Agilis Partners LLC announced on Thursday the launch of a new lifetime income product, the Agilis PensionBuilder, which allows participants to purchase an annuity at group pricing to create a “personal pension.”

In collaboration with Alight Solutions, PensionBuilder enables eligible employees and retirees to convert their defined contribution plan savings into a guaranteed income stream for life. Unlike other lifetime income products that have come to market recently, the Agilis product functions outside the plan, and Agilis takes on the bulk of the fiduciary responsibility for selecting an annuity provider.

Michael Clark, chief commercial officer at Agilis, explains that if an employer decides to offer PensionBuilder, Agilis would gain access to some of that company’s recordkeeping data and would send communications to eligible participants, asking if they would like to convert some of their DC balance into a monthly income stream.

Eligible participants would be participants 59½ or older and those who have already retired.

PensionBuilder offers support services and allows participants to use tools to model different annuity options and match them with retirement goals. Alight’s call center can also walk participants through the modeling of annuity options.

After a participant makes preliminary elections, deciding how much money to annuitize and what type of annuity to use, Agilis would bid and evaluate a pool of insurers and compare pricing options. Clark says this strategy, which the firm also uses when helping defined benefit plan sponsors conduct pension risk transfers, is competitive with transparent pricing.

“[This] removes a lot of the fiduciary risk from the employer, because we’re taking on that fiduciary responsibility,” Clark says.

A plan sponsor using this service would still have a level of fiduciary responsibility in allowing Agilis to make this offer and select the insurer.

Benefit Can Be Offered Periodically

Another key aspect to PensionBuilder is that participants have a 60-day time window to elect to use the tool and either take their benefit as a lump sum or forgo the lump sum and have that benefit transferred to an insurer to receive the annuity payments. The time window starts at an arbitrary date for the eligible group, Clark says. The eligible group can all be inactive participants age 55 or older with a minimum balance and/or can include employees age 59.5 or older (if there is an in-service withdrawal option) and a minimum balance as well.

Clark says the idea is that a plan sponsor could offer PensionBuilder at a regular cadence—most likely annually—to capture newly eligible participants and to give participants the option to transact multiple times.

“Having those deadlines put on people actually creates the urgency for them to make a decision,” Clark says. “We feel like 60 days gives people ample amount of time to explore [their options].”

Clark says only about 10% of employers offer any sort of lifetime income option, and fewer than 10% of employees who have access to these solutions actually use them. Clark attributes this lack of utilization to employees saying they will “do it later” and a lack of urgency, which causes them not to act.

 Rollover Protects Against Withdrawals Being Taxed

When it comes time to purchase the annuity, Clark explains that the money would come out of a participant’s DC plan balance and roll into an individual retirement account. A group annuity contract will then be created on behalf of the IRA holders. The IRA money is rolled over to the insurance company to buy the annuity and is not withdrawn. This strategy avoids the taxation that occurs when withdrawing from a 401(k) plan.

Clark adds that PensionBuilder offers several annuity options, including single-life annuities, joint survivor annuities and return of premium options.

With many in-plan lifetime income products, Clark finds that plan sponsors often have to commit to a product that uses the same life expectancy assumption across that employer’s entire workforce.

“That’s problematic, because we know that women live long than men, so those lifetime income amounts should be priced differently,” Clark says. “You can’t do that legally with an in-plan solution, and it’s something that the lifetime income solution providers like to sweep under the rug.”

He argues that because PensionBuilder offers “competitive and transparent pricing,” as well as flexibility in annuity options, employers can count on their employees getting an annuity reflective of their life expectancy.