Barclays adds annuity feature to 401(k)s

Barclays Global Investors has introduced a 401(k) program called SponsorMatch, which creates a new way for employers to give defined contribution plan participants the longevity protection of a defined benefit plan.
The program, expected to be included in plan-sponsor offerings next year, combines employees’ traditional investments in a mutual fund with a package of investment options for plan sponsors’ matching contributions.
One component of the employer’s contribution will be a deferred fixed annuity.
The San Francisco-based investment management firm said it is working with several insurance companies to provide the annuities.
Other components of the employer’s match will include a global, index-based portfolio and an alpha portfolio using Barclays’ active products and designed to outperform the market.
“We are trying to bring the best of defined benefit plans into a defined contribution option,” said Matthew Scanlan, head of Americas Institutional Business for BGI, at a gathering of reporters in New York.
He said the cost of program to sponsors will be about 0.85 percent, similar to the cost of other defined contribution plans.
Like a target-date fund, he said the SponsorMatch investment allocations and risk exposure will change as the participant grows older.
While a similar product for the IRA market is not now on the drawing, “we anticipate a retail adaptation over time,” said Kriti Mitchem, head of U.S. defined contribution.