Introduction
Fixed Index Annuities are contracts between the annuitant and an insurance company in which the insurance company promises to credit interest based on the performance of a certain stock market index. Fixed Index Annuities have an inbuilt capital protection feature, so your principal will remain safe even if the index goes down.
Annuities are complex products, and many advisors try to missell them without properly understanding the buyer’s needs. Thus, you must educate yourself on these products and not solely depend upon the annuity agent’s high-pressure sales pitch.
This article provides an in-depth review of the Lafayette Life Group Marquis Flex Flexible Premium Fixed Indexed Annuity. Unlike retail fixed indexed annuities, the Group Marquis Flex is issued exclusively to employer-sponsored qualified retirement plans, such as money purchase plans, profit-sharing plans, or defined benefit pension plans. It is an unallocated, trustee-directed annuity designed for new and existing retirement plans, making it a specialized option for employers seeking a reliable solution for their employees’ retirement savings. This flexible premium, deferred, fixed-indexed annuity focuses on growth and principal protection while offering straightforward indexing options. After extensive research and due diligence, I have provided an in-depth and unbiased analysis of this plan tailored for group retirement settings.
The review of the Lafayette Life Group Marquis Flex Flexible Premium Fixed Indexed Annuity will be broken into multiple subcategories:
- Product Description
- Product Policy
- Rates and Costs
- Riders
- The Good and the Not-So-Good
- Company Details
- Conclusion
Product Description
The Group Marquis Flex Annuity is a flexible premium, fixed indexed annuity (FIA) plan that offers the annuitant an opportunity to earn a market index-linked return without having to incur the risk of market downside. This is a suitable plan for people who are looking for a plain vanilla fixed indexed annuity (with no optional paid riders such as enhanced lifetime income, enhanced death benefit, etc.) and aim to grow and protect their retirement savings.
| Product Name | Group Marquis Flex |
|---|---|
Issuing Company | Lafayette Life Insurance Company |
AM Best Rating | A+ (2nd of 13 ratings) |
Withdrawal Charge Period(s) | 10 years |
Minimum Initial Purchase Amount | $1,200 |
Crediting Period and Strategies | 1-year point-to-point with participation and cap rate and 1-year fixed with interest rate guaranteed |
Plan Types | Only retirement plans |
Indexes | S&P 500 Index |
Free Withdrawals | Not Available |
Death Benefit | Upon the annuitant’s death, the beneficiary will get the Account Value without any surrender charges |
Free Benefits | Benefit Responsive Withdrawals Waiver |
Riders | No optional paid riders |
Surrender Value | Account Value less any withdrawal charges/ MVA |
Minimum Guaranteed Surrender Value | Premium paid grown at a minimum 3.00% minus withdrawals and enhanced benefit fees |
RMD Friendly | Yes |
Product Policy
How does the Lafayette Life Group Marquis Flexible Premium Fixed Indexed Annuity policy work?
The Lafayette Life Group Marquis Flexible Premium Fixed Indexed Annuity is specifically designed for use in employer-sponsored qualified retirement plans, such as money purchase plans, profit-sharing plans, and defined benefit pension plans. As an unallocated, trustee-directed annuity, it allows trustees to manage retirement plan contributions flexibly and efficiently. Employers can make ongoing contributions to the annuity to help grow the retirement plan’s value over time, ensuring alignment with the plan’s financial goals and long-term sustainability.
Unlike individual retail annuities, this group annuity does not have an age limit for eligibility, as it is issued to a retirement plan rather than individual policyholders. The annuity provides returns linked to the S&P 500 Index, calculated using a predefined formula, which we will explore in detail shortly. Apart from the regular crediting period, various events may trigger earnings credit: for plan distributions, a participant’s long-term care event, terminal illness or injury, or when a death benefit becomes payable. All these interest credits accumulate in a central “Account Value,” which serves as the retirement plan’s pooled annuity balance, managed by the plan trustee.
The Lafayette Life Group Marquis Flexible Premium Fixed Indexed Annuity allows the annuitant to choose from either or both a crediting strategy linked to the S&P 500 Index or a fixed interest strategy.
The S&P 500 index is one of the most popular and oldest indexes in the world. It tracks 500 large-cap publicly traded stocks listed in the United States. It is a reliable index and has often succeeded in the test of time. It is very important to note that, similar to most other annuities, the Lafayette Life Group Marquis Flexible Premium Fixed Indexed Annuity offers the S&P 500 index with cap rates in place, meaning that your interest-earning capacity is capped. These rates change frequently; I will discuss the rates in detail shortly.
In addition to allocating the funds to the S&P 500 index, the annuitant also has the option to allocate funds at a fixed interest. These Fixed Rates change from time to time. The 1st year Fixed Value Rate for the 8-year withdrawal charge period at the time of writing this article was 3.00%.
It is very important to note that the Lafayette Life Group Marquis Flexible Premium Fixed Indexed Annuity comes with a participation with a cap for the S&P 500 index, meaning that you will be credited only a part of the index return to your annuity. These rates change frequently; I will discuss more on these rates more shortly.
Rates and Costs
The earnings crediting formula
The earnings crediting formula is the most important part of this annuity discussion. It is important to know that we don’t simply get the index return credited to our annuity. There are rate mechanisms (such as participation rate, cap rates, etc) that the company has in place that affect your earnings. These rates tend to change over time, and the updated rates can always be checked through your trusted financial advisor.
Let’s have a look at the Lafayette Life Group Marquis Flexible Premium Fixed Indexed Annuity (8-year surrender charge) rate sheet (as of December 2024) to understand how the earnings are determined.
From the above rate chart, you will notice that there are 2 interest crediting options (1 fixed and 1 indexed). Let’s have a look at different terms that are used by the company in the Lafayette Life Group Marquis Flexible Premium Fixed Indexed Annuity rate sheet:
Participation Rate with Cap Rate: The participation rate determines the percentage of the index's return that the annuitant is eligible to receive. For example, if the participation rate is 100% and the index achieves a 10% return over the agreed period, the annuitant would receive 100% of that return, equaling 10%. However, this return is subject to a cap rate, which sets an upper limit on the credited return. For instance, if the cap rate is 3%, the annuitant will only receive a 3% credit, even though the index returned 10%. The cap rate ensures that returns are limited to a predefined maximum, regardless of how much the index gains.
Fixed Account Rate: If you opt for a fixed account rate, you simply earn the fixed rates for a particular period specified by the company before your policy begins. These rates are usually low/at par as compared to other fixed avenues, such as CDs and MYGAs, so you should avoid fixed rates in a general scenario. The 1st-year annual fixed rate on this policy at the time of writing this article was 3.00%.
When allocating premiums in a fixed-indexed annuity, individuals can distribute their money across both these indexing strategies. This means you can decide how much of your premium goes into each strategy, allowing for a tailored approach to potential growth and risk based on your financial goals and comfort level.
My Allocation Recommendation
Overall, the return expectations from this annuity are quite low compared to other annuities in the market. In general, I would recommend avoiding new payments to this annuity based on the rate sheet available at the time of writing this article. However, if you still decide to allocate funds to this annuity, I recommend opting for the fixed-rate option under the current rates. Here's why:
The indexed option is capped at 3%, meaning that no matter how well the index performs, the maximum return you can earn is limited to 3%. This significantly restricts your upside potential and makes the indexed option less appealing compared to other annuities with higher cap rates or no caps at all.
In contrast, the fixed-rate option guarantees a 3% return right away, offering certainty and stability without relying on market performance. This ensures predictable growth and eliminates the risk of earning less than the capped rate in volatile or underperforming markets.
While the current rates favor the fixed-rate option, it’s important to note that annuity rates are not static. They can change if the company decides to improve competitiveness or if broader market conditions, such as interest rates or economic trends, shift. For instance, if the cap rate for the indexed option increases in the future, it may make the indexed strategy more attractive.
Free Withdrawal and Surrender/Early Withdrawal Charges
The Lafayette Life Group Marquis Flex Fixed Indexed Annuity does not offer any free withdrawals, which is a notable limitation. In contrast, most annuities in the market typically allow 10% free withdrawals annually, making this lack of flexibility a concerning drawback for policyholders who may need access to their funds.
Any amount withdrawn is subject to a Surrender Charge. Below is the Surrender Charge schedule for the Lafayette Life Group Marquis Flexible Premium Fixed Indexed Annuity:
| Contract Year | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9+ |
|---|---|---|---|---|---|---|---|---|---|
10-Year Plan | 8% | 7% | 6% | 5% | 4% | 3% | 2% | 1% | 0% |
Market Value Adjustments - In case you need to surrender your policy, a Market Value Adjustment (MVA) will be applied to the portion of the withdrawal or surrender that exceeds the free withdrawal amount during the withdrawal charge period. The surrender charge schedule is different for the different tenures of annuities and also changes for some states.
The surrender charge for the Lafayette Life Group Marquis Flexible Premium Fixed Indexed Annuity is consistent with those of other annuity issuers; however, the absence of free withdrawals is a significant limitation.
One notable feature is the Benefit Responsive Withdrawals, which ensures that withdrawal charges are waived when account values are withdrawn to pay plan benefits under specific circumstances, including:
Death of a participant
Disability of a participant
Termination of employment
Retirement of a participant
This benefit makes the Group Marquis Annuity an adaptable option for employer-sponsored retirement plans, allowing seamless access to funds when plan benefits are triggered, without incurring withdrawal charges.
Contract/Administrative Charge
The Lafayette Life Group Marquis Flexible Premium Fixed Indexed Annuity does not impose any annual contract or administrative fees.
Riders
The Lafayette Life Group Marquis Flexible Premium Fixed Indexed Annuity is a plain-vanilla annuity that does not offer any optional paid riders. In my opinion, this actually appeals to many people who don’t understand or do not want to dive deep into the complex methodologies the riders often come up with.
The Good and the Not-So-Good
The Lafayette Life Group Marquis Flexible Premium Fixed Indexed Annuity has one notable feature that stands out: Benefit Responsive Withdrawals. This feature waives withdrawal charges for certain plan benefit payouts, such as participant death, disability, termination of employment, or retirement. This flexibility is particularly helpful in a group retirement setting, as it ensures plan participants can access their benefits without incurring additional costs during critical life events.
However, beyond this feature, the overall product feels underwhelming. With no free withdrawal option, capped growth potential, and limited features compared to other annuities, this product falls short in offering competitive value. For those seeking a robust annuity option, there are significantly stronger products available in the market that provide better growth opportunities, greater flexibility, and enhanced features.
Company Details
You must always keep in mind that, unlike CDs, annuities are not guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other federal insurance agency. An annuity's "guarantee" is only as strong as the insurance company that issues the annuity, so it is always important to assess the issuing company before buying an annuity.
The Lafayette Life Insurance Company
The Lafayette Life Insurance Company is a well-established insurance provider with a rich history spanning over a century. Founded in 1905, the company has maintained a strong presence in the insurance industry, offering a wide range of life insurance and annuity products to individuals and small businesses.
Lafayette Life is headquartered in Cincinnati, Ohio, and is licensed to sell individual life insurance in the District of Columbia and all states except New York. The company is a member of Western & Southern Financial Group (W&SFG), a Cincinnati-based diversified family of financial services companies and a Fortune 500 company.
Lafayette Life offers a comprehensive portfolio of insurance and financial products, including:
Life Insurance: Whole life, term life, and universal life policies
Annuities: Various annuity products for retirement planning
Retirement Services: Qualified plan products and administrative services for small to medium-sized businesses
It is rated as follows by the rating agencies:
| Rating Agency | Rating |
|---|---|
AM Best | A+ |
Fitch | AA |
S&P Global | AA- |
Lafayette Life Insurance Company has managed to maintain decent ratings for many years. It is considered to be strong and stable financially. Thus, going by the operating history and financial numbers, we can safely gauge that you can trust your savings with Lafayette Life Insurance Company.
Conclusion
With the advancements in healthcare and technology, the average American today lives longer than ever. So, it’s very important to have a retirement corpus that can grow safely and steadily and have the ability to provide a fixed stream of income during the retirement years. This not only helps you mitigate the risk of outliving your income but also ensures that you continue to live a decent life even in your retirement.
The Lafayette Life Group Marquis Flexible Premium Fixed Indexed Annuity has limited appeal, with its Benefit Responsive Withdrawals being the only noteworthy feature. While this provision adds value by waiving withdrawal charges for plan benefits triggered by life events such as death, disability, termination of employment, or retirement, the product as a whole lacks competitiveness.
The absence of free withdrawal options, coupled with capped growth potential and limited features, makes this annuity a weaker choice compared to other options in the market. For plan sponsors or trustees seeking a flexible and growth-oriented annuity for retirement plans, there are better alternatives that offer greater value and enhanced benefits. This product may meet basic needs, but it fails to stand out in a highly competitive annuity market.
We understand that choosing the right annuity can be a complex decision, influenced by a myriad of factors such as market conditions, individual financial goals, and evolving life circumstances. To better serve you in this critical decision-making process, we regularly conduct in-depth reviews of various annuity products, examining features, costs, and potential benefits. Delve deeper into our extensive reviews.