John Hancock Retirement Plan Services Launches New 401k Rider
BOSTON, MA, April 9, 2008 -- John Hancock Retirement Plan Services (RPS) today officially launched and began enrolling employees in Guaranteed Income for Life, an optional rider on its 401k plans to help participants protect and build their retirement savings through a principal guarantee offering upside potential, downside protection and a source of income for life. Guaranteed Income for Life, which also offers an industry-first portability solution and carries a cost of 35 bps, was first made available for proposals on January 28, and has already been included in 25 new contracts and is pending in many others.
"We're very excited about the customer reaction to Guaranteed Income for Life and our early sales momentum," said Jim Brockelman, Executive Vice President, John Hancock RPS. "We really think this is the right product at the right time, and seeing the reaction so far, plan sponsors seem to agree."
"As individuals rely more heavily on 401k plans for their retirement funding, plan sponsors are looking for options that offer their employees more certainty," says Ed Eng, Senior Vice President, John Hancock RPS. "We believe that adding Guaranteed Income for Life to their plans is the right solution because it helps minimize some of the common risks encountered in retirement, like retiring in a down market or outliving retirement savings".
Guaranteed Income for Life (G.I.F.L.), the rider developed specifically for a 401k plan, is simple, low cost to the participant and is available with industry leading full enrollment support and materials in English and Spanish.
G.I.F.L allows participants who select it, to invest some or all of their 401k funds in one or more of four John Hancock Lifestyle Funds to create a benefit base. The benefit base, which is guaranteed, is used to calculate a 5 percent lifetime income amount (LIA) at the time of distribution. Once distributions begin, participants can receive the LIA for the rest of their lives.
Once a year, on the participant's anniversary date, if the market value of the funds with the guarantee option is higher than the benefit base, the benefit base is automatically increased to equal the market value, locking in market gains to the benefit base. Step-ups can occur both before and after the LIA has been set.
Participants who add the rider pay a fee of 0.35 percent annually based on the balance they have in the funds with the guarantee. If a participant wishes to extend the guarantee to cover the lives of themselves and a spouse, the fee remains the same and the LIA is calculated at 4.5 percent of the benefit base.
John Hancock has also addressed issues arising from employee mobility by providing ways for participants to retain their guarantees. If a participant who has elected G.I.F.L. experiences a distribution event such as retirement, employment termination, or plan termination, that person may preserve the benefit base by rolling it over to an eligible John Hancock vehicle which will have the similar fund options and retain the guarantee.
In the event the plan sponsor elects to change providers and a participant is not eligible to roll the funds over, the participant receives the market value of the account and John Hancock will refund the G.I.F.L. fees they paid, for a maximum of three years.
"We have removed much of the complexity around traditional income-for-life solutions, making this a relevant and low-cost option for participants," said Eng. "We think we have an important new option for today's 401k participants, and our customers seem to agree."
About John Hancock Retirement Plan Services
Among mutual fund, life insurance companies and banks, JHRPS is ranked as the #1 provider to 401ks based on number of 401k plans managed, according CFO Magazine. (CFO Magazine 401k Buyers Guide Study, published May 2007.)
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