Vestwell Adds TIAA Lifetime Income Offering

TIAA is offering its target-date series with an in-plan annuity investment to midsize and small retirement plans through a new partnership with Vestwell, the firms announced Wednesday. They also noted an investment TIAA Ventures had made in a Series D fundraising round for Vestwell at the end of 2023.

Vestwell will offer plan sponsors, starting in 2025, access to the TIAA Secure Income Account, a guaranteed lifetime income product for defined contribution plans.

Vestwell had been seeing increasing interest in a “lifetime income paycheck” in its regular surveying of plan sponsors, savers and advisers, which fed into ongoing discussions it had been having with TIAA, says Vestwell Founder and CEO Aaron Schumm.

“[Lifetime income] was a topic that kept coming up in our conversations and surveys,” Schumm says. “It just became more and more convincing that there was something to be done there.”

TIAA’s goal with the partnership is to bring its in-plan income product to middle- and smaller-market plan sponsors, says Phil Maffei, its senior managing director of corporate retirement income products, via email. 

“We see Vestwell as a key player in helping TIAA to bring in-plan lifetime income to the middle and small end of the market that most lifetime income providers have not historically focused on in the past,” Maffei says. 

Empower, the country’s second-larger recordkeeper, had announced it was offering TIAA’s in-plan annuity product in March.

Vestwell, meanwhile, has been encouraged by plan advisers to offer its platform to larger plan sponsors than it has traditionally, according to Schumm.

Investment, Too

In the same announcement Wednesday, Vestwell announced TIAA’s venture capital arm, TIAA Ventures, invested in Vestwell as part of a Series D fundraising round. The investment is an equity, not controlling, stake in the firm and is separate from the TIAA guaranteed income product being on Vestwell’s platform, says Schumm.

“It doesn’t sway anything that we do on the product or the delivery side,” he says. “But what we have found is that when we have strategic players that are investors in Vestwell, it keeps ships more tightly aligned with where we’re pointed in terms of resources and focus.”

Vestwell has numerous options to choose from for an in-plan retirement income option, with new products coming to the market frequently in recent years. JP MorganChase is the latest to market, announcing a product in August partnering initially with insurers Equitable and Prudential.

Schumm says he was originally apprehensive about adding an in-plan annuity option to the platform. But the more he and the firm “dug into it,” he says, it started to make sense. And while Vestwell was approached “by a number of players,” he believes TIAA is the best partner due in part to the firm’s long history of providing in-plan annuity as a pension-option in 403(b) plans.

He also notes that Vestwell’s participant pool skews slightly younger than most competitors, with an average age of about 40, making this what he and his team felt was a good time to start incorporating and educating on the in-plan products.

“We were looking at the age group and were thinking, ‘This is actually a good time to start introducing them [to the offering], having these conversations and carrying it on the platform,’” Schumm says.

TIAA Secure Income Account will be available through target-date structures available to 401(k) and 403(b) plans on the Vestwell platform and to Vestwell partner firms. TIAA SIA offers guaranteed interest while participants save for retirement and a “pension-like retirement income” via an annuity in retirement.

Underserved Markets

Vestwell’s “technology and scale” will be important in helping TIAA penetrate new markets, says product director Maffei.

He declined to share details of other recordkeeper partners for TIAA’s offering, but said: “It’s safe to say that TIAA is in active discussions with numerous players to build a coalition of retirement champions so that we can offer lifetime income to more Americans. We know that women retire with 30% less. We know that 64% of Hispanics do not have access to a workplace plan. We are working to change that.”

In late August, TIAA announced a multi-year partnership with technology and consulting firm Accenture to assist in modernizing its recordkeeper platform and participant services. That move will see some 1,500 TIAA employees in the U.S. and India be offered jobs at Accenture, with the alternative of leaving the company.

Vestwell, meanwhile, now has an in-plan annuity option to add to its offering. The provider offers 401(k), 403(b), individual retirement accounts, state retirement plans, 529s, and ABLE accounts, among other services.

In May, the recordkeeper announced an expanded partnership with JPMorganChase’s asset management arm to distribute the bank’s workplace savings platform, Everyday 401(k), via Vestwell.