There is growing interest among plan sponsors in offering a retirement income solution. But how does a DC plan sponsor go about choosing the right one?
To assist in evaluating suitable product options, Russell Investments has put together a Retirement Income Buyer’s Guide for DC Plans. The guide provides a framework to help plan sponsors become familiar with the retirement income offerings that are available in the marketplace to better understand the strengths and weaknesses of each.
The primary focus for DC plan sponsors has typically been on helping participants accumulate assets during their working years, with little support provided in retirement, the firm explains. But with the onslaught of retiring Baby Boomers, and with the SECURE Act providing a new fiduciary safe harbor for selecting an insurance provider and greater product availability, more DC plan committees are now expressing interest in evaluating retirement income solutions for their plans. This includes several large plans that are in various stages of implementing strategies, according to Russell Investments’ Kerry Bandow and Rob Seibly.
And Russell expects this trend to continue. Going forward, the firm estimates that most plan sponsors will eventually include a retirement income option in their DC plan. Yet, as more options become available in the marketplace, it may become more difficult for plan investment committees to choose a retirement income product that is best suited for their plan. As such, the guide is based on these nine criteria among seven different product types:
- QDIA eligible
- Captures market upside
- Investment risk
- Guaranteed income
- Stable/consistent income
- Longevity protection
- Explicit costs
- Liquidity
- Complexity
Russell does not rank the specific firm product offerings, but instead lays out what it believes are the strengths and weaknesses of the offerings, and leaves it to the investment committees to interpret the data based on their needs.
