You can benchmark a mutual fund.
You can benchmark an index fund.
You can even benchmark a synthetic stable value fund—if you know what you’re doing.
But you cannot benchmark a General Account or Separate Account fixed annuity.
That is not an accident. That is the design.
And it is the reason fixed annuities do not fit inside an ERISA fiduciary framework built on comparability, measurability, and transparency.
You’ve written for years that GA/SA annuities are prohibited transactions in practice. The missing piece most fiduciaries, consultants, and courts still don’t grasp is this:
Fixed annuities have comparables in the marketplace.
They do not have a legitimate benchmark.
That difference is everything.
What a benchmark actually is (and why annuities can’t have one)
From the CFA Institute’s trustee framework and the Restatement of Trusts logic applied in cases like Brotherston, a benchmark must:
- Be investable
- Be transparent
- Use market value accounting
- Allow apples-to-apples fee and performance comparison
- Reflect the same risk profile
SEC-registered mutual funds do this perfectly. That’s why 401(k)s are built around them.
As your book chapter explains, fee transparency + performance transparency is the foundation of fiduciary oversight. Once disclosures improved in 2012, litigation increased, and fees fell. That is how the system is supposed to work.
Annuities break this system at step one.
They use:
- Book value accounting
- Opaque spread compensation
- No market pricing
- No fee disclosure
- No investable comparator
So what do consultants do?
The fake benchmarks consultants use
1) Money market funds
2) Short Treasuries
3) Hueler Pooled Fund Index
4) Synthetic stable value peer medians
These are not benchmarks. They are deflection devices.
Because these comparators are far less risky than a General Account annuity.
You’ve documented the risk differential from Fabozzi/Griffin:
GA annuities carry roughly 10× the credit risk of diversified synthetic stable value.
Yet consultants routinely say:
“This annuity is competitive with money markets”
“This annuity is in line with Hueler”
“This annuity beats cash”
That is like benchmarking a junk bond fund to a Treasury bill.
It is not just wrong. It is intentionally misleading.
What fixed annuities actually have: comparables
There is only one legitimate way to evaluate a fixed annuity:
Compare its crediting rate to the highest-credit, lowest-spread annuity in the market.
And there is one firm everyone knows fits that description.
TIAA as the market comparable
TIAA:
- Carries equal or higher S&P/Moody’s ratings than most GA providers
- Is known to take the lowest spreads in the industry
- Operates at scale
- Has enormous general account assets
- Is itself a party in interest in ERISA plans
Which is precisely why they should be forced to disclose their spread.
You estimated ~150 bps to NBC. TIAA refused to comment.
That refusal tells you something critical:
The spread is the fee.
And they will not say it out loud.
If TIAA—widely believed to be the lowest spread provider—is keeping ~150 bps, then what are the others keeping?
200? 250? 300?
This is the only meaningful comparison available in the marketplace.
Not money markets.
Not Hueler.
Not synthetic stable value.
Another annuity with the same risk profile and better credit.
Why synthetic stable value is not a valid “benchmark” for annuities
Synthetic stable value:
- Diversified bond portfolios
- Multiple wrap providers
- GIPS-presentable components
- Market value transparency underneath
- 1/10th the credit risk
Consultants love to say:
“Your annuity rate is similar to what Hueler shows.”
That is not benchmarking. That is concealing spread.
Because if a product with 1/10th the risk produces a similar crediting rate, the only explanation is:
The annuity spread is enormous.
. Fees drive performance. Transparency exposes fees. Litigation lowers fees.
Annuities are built so this cannot happen.
Why courts and consultants get fooled
Because they are trained to think in terms of benchmarks.
And annuities do not have one.
So defense experts muddy the water:
- “No apples-to-apples benchmark”
- “Unique accounting”
- “Principal protection”
- “Smoothing”
- “Different objectives”
All true.
All irrelevant.
Because you are not looking for a benchmark.
You are looking for a comparable.
And that is another annuity with:
- Better credit
- Lower spread
- Higher crediting rate
That’s it.
The fraud hiding in plain sight
When a consultant tells a plan committee:
“This annuity is competitive with stable value peers”
They are comparing:
- A 10× risk product
- To a 1× risk product
- With a similar rate
That statement is materially misleading.
It disguises the embedded fee.
It disguises the risk.
It disguises the prohibited transaction.
Why SEC registered mutual funds don’t have this problem
Because:
- Expense ratios are visible
- Performance is visible
- Benchmarks are obvious
- AMVR works
- SPIVA works
- Brotherston logic works
You can’t hide.
Weak state regulated Annuities are the only major asset class in 401(k)s where none of this applies.
Which is why they proliferate in:
- Small plans
- Insurance-sold plans
- Legacy menus
- Consultant-controlled plans
The single question fiduciaries never ask
“What is the spread relative to TIAA?”
If that question were asked in every RFP, annuities would disappear from 401(k)s overnight.
Because there is no good answer.
The reason this matters for ERISA
ERISA fiduciary law assumes:
- Transparent fees
- Comparable performance
- Objective benchmarks
- Measurable prudence
Fixed annuities are constructed to defeat all four.
They can only be evaluated by comparables, not benchmarks.
And the industry intentionally substitutes fake benchmarks to prevent fiduciaries from seeing the spread.
That is not poor practice.
That is systemic concealment.
The CommonSense 401k Project 