Group Annuity Contract

A group annuity contract is an annuity that’s purchased by a company on behalf of its employees. Many employers include annuities as part of a retirement benefits package to offer their employees a guaranteed stream of income once they stop working.

Jennifer Schell Headshot
  • Written By
    Jennifer Schell

    Jennifer Schell

    Financial Writer

    Jennifer Schell joined Annuity.org in 2022. She is a professional writer with more than three years of experience creating content for a variety of industries ranging from travel to tax accounting. She combines her strong writing skills and her passion for educating others to write engaging and informative financial content for Annuity.org.

    Read More
  • Edited By
    Savannah Hanson
    Savannah Hanson, financial editor for Annuity.org

    Savannah Hanson

    Financial Editor

    Savannah Hanson is an accomplished writer, editor and content marketer. She joined Annuity.org as a financial editor in 2021 and uses her passion for educating readers on complex topics to guide visitors toward the path of financial literacy.

    Read More
  • Financially Reviewed By
    Rubina K. Hossain, CFP®
    Rubina K. Hossain

    Rubina K. Hossain, CFP®

    Certified Financial Planner™ Professional

    Certified Financial Planner Rubina K. Hossain is chair of the CFP Board's Council of Examinations and past president of the Financial Planning Association. She specializes in preparing and presenting sound holistic financial plans to ensure her clients achieve their goals.

    Read More
  • Updated: July 24, 2022
  • This page features 10 Cited Research Articles
Fact Checked
Fact Checked

Annuity.org partners with outside experts to ensure we are providing accurate financial content.

These reviewers are industry leaders and professional writers who regularly contribute to reputable publications such as the Wall Street Journal and The New York Times.

Our expert reviewers review our articles and recommend changes to ensure we are upholding our high standards for accuracy and professionalism.

Our expert reviewers hold advanced degrees and certifications and have years of experience with personal finances, retirement planning and investments.

Cite Us
How to Cite Annuity.org's Article

APA Schell, J. (2022, July 24). Group Annuity Contract. Annuity.org. Retrieved September 26, 2022, from https://www.annuity.org/annuities/types/group-contract/

MLA Schell, Jennifer. "Group Annuity Contract." Annuity.org, 24 Jul 2022, https://www.annuity.org/annuities/types/group-contract/.

Chicago Schell, Jennifer. "Group Annuity Contract." Annuity.org. Last modified July 24, 2022. https://www.annuity.org/annuities/types/group-contract/.

Why Trust Annuity.org
Why You Can Trust Annuity.org
Annuity.org has provided reliable, accurate financial information to consumers since 2013. We adhere to ethical journalism practices, including presenting honest, unbiased information that follows Associated Press style guidelines and reporting facts from reliable, attributed sources. Our objective is to deliver the most comprehensive explanation of annuities and financial literacy topics using plain, straightforward language.

Our Partnerships, Vision and Goals

We pride ourselves on partnering with professionals like those from Senior Market Sales (SMS) — a market leader with over 30 years of experience in the insurance industry — who offer personalized retirement solutions for consumers across the country. Our relationships with partners including SMS and Insuractive, the company’s consumer-facing branch, allow us to facilitate the sale of annuities and other retirement-oriented financial products to consumers who are looking to purchase safe and reliable solutions to fill gaps in their retirement income. We are compensated when we produce legitimate inquiries, and that compensation helps make Annuity.org an even stronger resource for our audience. We may also, at times, sell lead data to partners in our network in order to best connect consumers to the information they request. Readers are in no way obligated to use our partners’ services to access the free resources on Annuity.org.

Annuity.org carefully selects partners who share a common goal of educating consumers and helping them select the most appropriate product for their unique financial and lifestyle goals. Our network of advisors will never recommend products that are not right for the consumer, nor will Annuity.org. Additionally, Annuity.org operates independently of its partners and has complete editorial control over the information we publish.

Our vision is to provide users with the highest quality information possible about their financial options and empower them to make informed decisions based on their unique needs.

What Is a Group Annuity Contract?

A group annuity contract is similar to an individual annuity in that it is designed to offer guaranteed retirement income based on the growth of an initial premium. In the case of a group annuity, the contract itself is held by an employer rather than by the individual who will receive the annuity payments.

Group annuities were initially created as a way to help companies meet the obligations of retired employees who were receiving pensions. The first group annuity contract in the United States was issued by the Metropolitan Life Insurance Company (MetLife) in 1921. Before long, employers all over the country were purchasing group annuities to provide for their employees. By 1955, group annuity contract sales totaled over $900 million.

Guaranteed income contracts like group annuities have become even more popular in recent years in the American workforce. The 2021 Lifetime Income Survey from the Teachers Insurance and Annuity Association of America found that over 70% of workers “would choose to work for, or stay with, a company that offers access to guaranteed lifetime income in retirement over one that does not.”

How Group Annuity Contracts Work

Employers purchase group annuity contracts from insurance companies as part of the retirement benefits package they offer to employees. The premium for the contract, which is the initial amount of money used to purchase the annuity, is invested in the annuity when the employee begins receiving their retirement benefits.

Throughout the employee’s working years, the annuity is in its accumulation phase. During this time, the value of the annuity will grow at a fixed or variable rate depending on the type of annuity.

Once the employee reaches retirement age, the value of the annuity contract is converted into a stream of income payments. Depending on the terms of their employer’s contract, the employee can opt to receive income payments for the rest of their life and may also be eligible to choose spousal benefits for their partner.

Variable Group Annuities

Many group annuity contracts are a type known as fixed deferred group annuities. This means that the annuity contract earns interest during its accumulation phase based on a fixed rate before converting the value of the annuity into guaranteed lifetime income payments.

Some insurance companies also offer types of annuity contracts called variable group annuities. With these annuities, the contract’s value is tied to a portfolio of investments such as mutual funds. Variable group annuities are often included in retirement plans you get from a public agency, such as 457(b) or 401(a) retirement plans.

Interested in Buying an Annuity?
Learn about the different types of annuities and find out which one is right for you.

Companies That Offer Group Annuity Contracts

Many companies who provide annuity contracts for individuals also offer group annuity contracts for employers. About 80% of the market share of group annuities is held by the 10 biggest providers.

Top 10 Group Annuity Providers by Direct Premiums Written in 2021
RankAnnuity ProviderDirect Premiums Written
1Athene Holding Ltd.$14,087,614
2Voya Financial Inc.$12,202,203
3Teachers Insurance and Annuity Association of America (TIAA)$8,240,648
4Prudential Financial Inc.$5,529,524
5Nationwide Mutual Insurance Company$5,090,377
6Lincoln National Corporation$4,575,216
7Massachusetts Mutual Life Insurance Co. (MassMutual)$4,546,503
8OneAmerica Financial Partners Inc.$4,261,194
9MetLife Inc.$3,889,131
10American International Group Inc. (AIG)$3,395,245

In the last few years, a few companies that formerly sold group annuity policies have withdrawn or sold these business lines. The companies include John Hancock Life Insurance Company, which halted all its annuity operations in 2012, and Great American Life Insurance Company, which sold its annuity business to MassMutual in 2021.

Deciding if a Group Annuity Is Right for You

If your employer offers an annuity contract as an option for your retirement benefits, you’ll likely have a choice when it comes time to use those benefits. You can either choose to receive your retirement savings in a lump sum or as a stream of annuity payments.

To understand which option is best for you, here are some things to think about:

Benefits and Risks

There are some benefits to receiving your retirement savings as an annuity. Annuities provide guaranteed income that you can’t outlive. A recent report from MetLife found that 96% of retirees receiving annuities felt that their budget was more predictable, and 95% reported feeling more financially secure.

However, certain circumstances might make an annuity less than ideal. For example, if you have a serious illness, annuity payments may not provide enough money to cover medical bills.

Other Factors to Consider

The question of whether you should receive annuity payments depends on your overall financial situation. When deciding how to receive your retirement benefits, you should consider what other income sources you’ll have in retirement, such as Social Security benefits or pensions from other employers.

You may also want to estimate how much money you’ll need in retirement, how much you have saved in other accounts such as an individual retirement account or savings account, and any debt that you owe. Taking a big-picture look at your finances can help you make the right choice. It’s also worth noting the tax implications of the annuity versus the lump sum option.

Frequently Asked Questions About Group Annuity Contracts

What’s the difference between a group annuity and an individual annuity?
The difference between a group annuity and an individual annuity is that the group annuity is held in an employer’s name rather than in an individual’s name.
What happens when a group annuity member retires?
In most cases, when a member of a group annuity retires, they will have a choice as to how they receive their payments. The choices will vary based on the terms of their employer’s contract.
Who is the contract holder under a group annuity?
Under a group annuity, the contract holder is the employer who purchases the annuity to fund retirement benefits for their employees.
Please seek the advice of a qualified professional before making financial decisions.
Last Modified: July 24, 2022

10 Cited Research Articles

Annuity.org writers adhere to strict sourcing guidelines and use only credible sources of information, including authoritative financial publications, academic organizations, peer-reviewed journals, highly regarded nonprofit organizations, government reports, court records and interviews with qualified experts. You can read more about our commitment to accuracy, fairness and transparency in our editorial guidelines.

  1. Black, K., Jr. Group Annuities. Philadelphia: University of Pennsylvania Press, 1955.
  2. Chang, J. (2016, September 7). Chapter 29: The “Misunderstood” Group Variable Annuity Contract. Retrieved from https://focusonpublicbenefits.com/chapter-29-the-misunderstood-group-variable-annuity-contract/
  3. Great American Insurance Group. (n.d.) What Is an Annuity? Retrieved from https://www.greatamericaninsurancegroup.com/for-individuals
  4. Insurance Information Institute. (n.d.) Facts + Statistics: Annuities. Retrieved from https://www.iii.org/fact-statistic/facts-statistics-annuities
  5. Mercado, D. (2012, January 18). John Hancock Latest to Yank Annuity Offerings, Pare Distribution. Retrieved from https://www.investmentnews.com/john-hancock-latest-to-yank-annuity-offerings-pare-distribution-2-40394
  6. MetLife. (2022, February 23). 2022 Paycheck or Pot of Gold Study. Retrieved from https://www.metlife.com/retirement-and-income-solutions/insights/paycheck-or-pot-of-gold-study/
  7. Pension Benefit Guaranty Corporation. (2020, September 18). Annuity or Lump Sum. Retrieved from https://www.pbgc.gov/wr/benefits/annuity-or-lump-sum
  8. Teacher Retirement System of Texas. (n.d.) Annuity Payment Options. Retrieved from https://www.trs.texas.gov/Pages/active_member_annuity_payment_options.aspx
  9. Teachers Insurance and Annuity Association of America. (2021, September). TIAA 2021 Lifetime Income Survey. Retrieved from https://www.tiaa.org/public/pdf/2021_TIAA_Lifetime_Income_Survey_Executive_Summary.pdf
  10. Teachers Insurance and Annuity Association of America. (n.d.) TIAA Traditional Questions & Answers. Retrieved from https://www.tiaa.org/public/learn/retirement-planning-and-beyond/how-do-traditional-annuities-work