Plan Sponsors Starting to Offer Guaranteed Income Products, but Many Have Questions
CHICAGO, IL, January 12, 2017 -- Guaranteed income products are a hot topic in 401k plans. The Plan Sponsor Council of America (PSCA) conducted a snapshot survey in the fall of 2016 to gage whether plan sponsors are adding them to their plans, and if not, why. Results were included in the recently released 59th Annual Survey.
"While guaranteed income products such as Lifetime Annuities have been in the headlines, Plan Sponsors are proceeding with caution," said Steve McCaffrey, Senior Counsel II at National Grid and PSCA's Board Chairman. "Plan sponsors continue to have questions about the role these products play as part of a plan, and the challenges and potential unintended consequences associated with them."
At the time of the survey, only five percent of all plans offer a retirement income guarantee product in the plan. Large plans were more likely to offer an income guarantee product (5.7%) versus small plans (4.4%). The types of retirement income guarantee products offered included Guaranteed Minimum Withdrawal Benefits (GMWB)/Guaranteed Lifetime Withdrawal Benefits (GLWB) (40%), Traditional Fixed Annuities (33%) Variable Annuities (33%), Managed Account Services (26.6%), Managed Payout Funds (13.3%) and Deferred/Longevity Annuities (13.3%).
However, 12.1% of respondents indicated their organizations are considering adding a retirement income guarantee product with large plans (18%) expressing more interest than small plans (7%).
The top concern plan sponsors expressed about adding a retirement income guaranteed product to the plan was fiduciary exposure (38.3%). Other concerns included high costs (33.3%), operational hurdles such as record keeping issues (32.9%), non-portability (28.9%), risk exposure from the insurer guaranteeing the product (26.5%), lack of interest from participants (17.3%), and "not the role of the employer" to provide lifetime income products (13.3%).
Not all plan sponsors had concerns; 34.5% expressed that they just had not added an income guaranteed product yet.
About the Survey
The results of the recent Plan Design Snapshot survey are included in PSCA's 59th Annual Survey reflects the 2015 plan-year experience of 614 DC plan sponsors. The survey is available now at https://www.psca.org/research.
PSCA is a diverse, collaborative community of engaged retirement savings plan sponsors, working together on behalf of millions of employees to solve real problems, create positive change, and expand on the success of the employer-sponsored retirement savings system. With members representing employers of all sizes and industries, we offer a forum for comprehensive dialogue. By sharing our collective knowledge and experience as plan sponsors, PSCA also serves as a resource to policymakers, the media, and other stakeholders as part of our commitment to improving retirement security for millions of Americans
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