Lifetime income options have been a hard sell for defined contribution plans – but the SECURE Act and the Senate’s RESA legislation both take steps to improve the odds. This week, we’d like to know: Will it matter?
In the 2019 Retirement Confidence Survey (RCS), three in four survey respondents interested in both in-plan options and rolling into new products at retirement. Moreover, half expect that a guaranteed lifetime income product will be a source of retirement income for them, up from 35% in 2018, though only a third of retirees report that they receive income from this type of product.
Even today, industry surveys indicate that only about half of defined contribution plans provide an option for participants to establish a systematic series of periodic payments, much less an annuity or other in-plan retirement income option. Indeed, less than 10% of plans offer an in-plan annuity option, according to the 61st Annual Survey of Profit-Sharing and 401(k) Plans by the Plan Sponsor Council of America.
Now, there are lots of reasons given for this reluctance to embrace the design feature so many surveys suggest people want – and academic reports suggest people need. They span a wide gamut, but generally include fiduciary concerns, complexity, cost, and portability of the feature, both to other recordkeepers, and to other employer plans (see “5 Reasons Why More Plans Don’t Offer Retirement Income Options" and “Retirement Plans and Retirement Income: It’s Complicated”).
The issues generally considered to be most problematic – portability and fiduciary concerns – are ostensibly dealt with in the legislation now working its way through Congress. This week, we’d like to know what you think of these offerings, the objections typically raised, participant (non) response (surveys to the contrary notwithstanding), and if you think the legislation will be a game-changer.
You can respond to this week’s NAPA-Net survey at https://www.research.net/r/VQXDNK8.
And, as is our custom, we’ll have it all sorted out for you on Friday!