Empower Partners With Variety of Firms to Pair Guaranteed-Income Products With Advice

Empower today announced partnerships with asset managers and insurance providers to supply plan sponsor clients with a menu of guaranteed retirement income products.

The firm announced multiple options to convert participant retirement savings into an income stream, which can be customized to individual needs.

Empower’s retirement business serves “smaller plans up to the some of the largest plans in the U.S., [where] the demographics [of each] are different, the needs of those plans are different, certainly preferences are different and so having a one-size-fits-all doesn’t make a lot of sense for us,” explains Tina Wilson, Empower’s chief product officer.

Each of the guaranteed options will debut on its own timeline, with all reaching market by October, Wilson adds.

“Some will [launch] within the next 90 days, but everything that [is launching] will be released by the [beginning of the] fourth quarter,” Wilson says.

A Suite of Offerings

Empower’s four new offerings include:

• Managed accounts with a guaranteed lifetime income withdrawal benefit, featuring Income America by American Century Investments;
• A target-date-fund series featuring American Funds and TIAA’s secure income account with flexPath Strategies managing the glide path allocations and the collective investment fund provided by Great Gray Trust Company LLC;
• Empower-managed spend-down strategy and proprietary variable annuity; and
• Access to an annuity marketplace that offers out-of-plan annuity offerings through Blueprint Income.

“They’re all insurance contracts,” Wilson says.

More than three-quarters (76%) of plan sponsors prefer to retain in their plans the assets of both retired and terminated participants, compared with 44% who had that preference in 2015, according to a March 2023 Empower white paper with data from the Callan LLC 2022 DC Trends Survey.

“We want to make sure that we do have a range of options to help those plans and their fiduciaries make the best decisions based on their needs, their demographics, and, frankly, what’s going to drive the right outcome for their participants who we’re all here to serve,” Wilson says. “If we’re going to serve the needs of those plans and those participants, a big part of that need is to have retirement income capabilities.”

For Empower, the increased plan sponsor interest in retaining assets means greater demand for guaranteed income products, “the time is right now” to launch because participants can invest to create a stream of income, Wilson says.  

Engineering Retirement Income in the Managed Account

Empower’s managed account will, by default, begin to invest in the guaranteed retirement income sleeve about 15 years before retirement.

“It’s highly personalized, meaning that the individual may or may not get a recommendation around income depending on whether they need it,” adds Wilson. “A lot of people do, [but also] there’s a cohort of people where guaranteed income doesn’t make sense for them.”

For participants, Empower’s “advice engine” delivers personalized guidance about how much guaranteed retirement income individuals should purchase, adds Wilson.

“We have a lot of information about [participants],” Wilson says. “Just by being a recordkeeping client, we know … your salary, we know your [retirement account] balance, we know how much you’re saving every period … we know your match, we know your plan design, so there’s a lot that we know about you without your ever giving us information. We call that passive personalization.”

Plan sponsors can also provide additional information, Wilson adds.  

Participants may choose to allocate between 0% and 30% of their assets to the retirement income sleeve for guaranteed income, according to Empower.

American Century will allocate participants’ assets to insurance products, within a collective investment trust that has investments as well as embedded insured components, Wilson says.

Empower plans to distribute the retirement income products through advisers and consultants, says Wilson.

“Income products have been around for a long time, but they’ve been there as stand-alone products that, frankly, participants couldn’t absorb on their own,“ she says. “They struggled with making the appropriate decisions, so what’s also changed is our ability to think about income in conjunction with advice.”

Empower is a retirement plan recordkeeper for $1.5 trillion in assets, for 18.5 million participants and for 70,00 plans, says an Empower spokesperson.

Data from the PLANSPONSOR 2023 Recordkeeping Survey show Empower ranked second overall among recordkeepers, serving plans with $1.231 trillion in assets, for 16.83 million people and more than 80,000 plans on its proprietary recordkeeping platform.