Guaranteed Lifetime Income Options within Employment-Based Plans


IRI Research Identifies In-Plan Guaranteed Income Options as Addressing Risks of Defined Contribution System

WASHINGTON, D.C. – The Insured Retirement Institute (IRI) today released a new study that pinpoints guaranteed lifetime income options offered within employer-provided defined contribution plans as an opportunity to address many emerging retirement security challenges. The report found that workers who convert a portion of their accumulated assets into a guaranteed income stream can effectively manage many of the risks inherent to the defined contribution retirement system such as longevity risk, volatility and sequence of returns risk, as well as excess withdrawal risk.

 “With the demise of the traditional pension has come a host of new challenges, but guaranteed lifetime income options offered within retirement plans have the potential to help American workers attain a financially secure retirement,” IRI President and CEO Cathy Weatherford said. “With an increasing amount of consumers agreeing that annuities are a critical component of a retirement strategy, there is an appetite for these types of options. In fact, nine in 10 workers would like for their plan sponsor to offer an income-generating option within their retirement plan. And so there is a tremendous opportunity here for the insured retirement industry and plan sponsors to work together to make guaranteed lifetime income options more accessible and tangible. It’s in everyone’s best interest to overcome any hurdles and make it happen.”

Presently fiduciary concerns are the most significant obstacle to more widespread inclusion of guaranteed lifetime income options within plans. The Department of Labor adopted rules intended to help plan sponsors understand how to satisfy their fiduciary obligations, but the rules included a broad and vague requirement that employers conduct a detailed review of insurers’ financial condition and determine that all long-term commitments can be met. Given the long horizon of these obligations, many plan sponsors may not be well-equipped to manage the prescribed endeavor and related legal complexities. As a result, fiduciary concerns linger and remain a deterrent to the large-scale availability of these in-plan options.

The IRI report also noted the benefits to plan sponsors of offering in-plan options. In addition to providing employers with a workforce management tool, in-plan guaranteed retirement income options have been found to increase plan participants’ satisfaction, confidence, and improved long-term investing behaviors.

The full report can be found HERE.