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Retirement Income Adoption…It Ain’t That Hard

Retirement Income

Last December, Nevin Adams wrote a thought-provoking article titled "6 Obstacles to Retirement Income Adoption." Nevin makes several interesting points, but in our view the obstacles he describes can be easily addressed as employers consider lifetime income solutions for their defined contribution retirement plans. 

Here are our thoughts on Nevin’s “obstacles”:

1. There is no legal requirement to provide a lifetime income option.    

While the statement is true, we believe the absence of a legal requirement is irrelevant.  Until this year (with the adoption of SECURE 2.0), there was no legal requirement to implement automatic enrollment, yet many plans implemented it voluntarily because it results in a higher level of savings and was therefore the right thing to do. Adding a retirement income option is not any harder than adding any investment to the plan and is likely easier than implementing automatic enrollment.

2. The safe harbor for selecting an annuity provider doesn’t feel very “safe.”

What can be safer than the safe harbor set out in SECURE 1.0? Plan sponsors have an absolute right to rely on written representations from an insurer unless they have actual knowledge that the representations are not true.

Further, there are various retirement income solutions available, some of which include a guaranteed income feature, like an annuity, but many others do not. Providing retirement income does not require providing an annuity.

Frankly, the selection of an annuity provider (if they select an insured product for their plan) should not be a concern for plan sponsors. 

3. Operational and cost concerns linger. 

Nevin refers to the portability concern regarding annuities saying that the “cost and complexity” would be “daunting, at best.” He also refers to the “‘learning’ curve, and…in some cases, an UN-learning curve — for plan fiduciaries, and those who advise them.” 

SECURE 1.0 resolved the portability issue by allowing a participant to take a distribution of a product no longer supported by their plan and rolling it into an IRA. The costs associated with adopting this are routine — establish the administrative process, amend the plan, and communicate the rules. 

Providers are also making it easier to transfer a retirement income product so that the product can remain as an investment alternative in the plan. If this option is available, plan sponsors can weigh the complexity and expense relative to the distribution approach. 

Finally, since fiduciaries must act in the interest of the participants, plan sponsors and advisors may have a fiduciary duty to learn about retirement income solutions. Using this as an excuse to avoid consideration of retirement income solutions is, in our view, inappropriate.    

4. Participants aren’t asking for it.

Recent studies, such as Greenwald Research’s 2021 In-Plan Insights Program Plan Participants Want Options that Generate Retirement Income in Their Workplace Retirement Plans, indicate that some 85% of DC plan participants wish their employer’s retirement plan had an option to help generate income in retirement. Additionally, the same study found 8 in 10 plan sponsors agree that participants need in-plan income options.

Numerous studies exist supporting this conclusion (see appendix).[1] So this statement simply is not true.

Even if it were, participants were not asking for automatic enrollment, and yet many plan sponsors implemented it before SECURE 2.0 mandated it.

5. Participants don’t take advantage of the option when offered. 

We agree with Nevin on this point. Participant take-up rates are, in fact, “disappointing” and unlikely to approach adoption levels of target date funds without being easy or simple. 

However, we are not as skeptical as Nevin after witnessing how communication of target date funds has evolved to make an arguably complex investment understandable. With clear and straightforward education about why retirement income is important to living successfully in retirement — which admittedly to date has been lacking — we have faith in the American worker to take timely action as they have with TDFs.

Alternatively, plan sponsors can adopt the strategy that propelled the domination of target date funds: include it in the qualified default investment alternative (QDIA).

6. (Most) advisors (still) aren’t promoting it.  

We agree with Nevin when he says that “retirement income options are still sold, and not bought.” However, we do not see that as an obstacle to retirement income adoption so much as a wakeup call to advisors to learn about what is available, why it is important and how the advisor can benefit from being a retirement income expert and improving the value of the plan benefit delivered to participants. 

According to Cerulli’s U.S. Defined Contribution Distribution 2022 report, “the overwhelming majority (88%) of DCIO asset managers relay that conversations with plan sponsors, advisors, and consultants related to in-plan retirement income have increased in the last 12 months.” (Source: Exhibit 1.06) Being prepared for the discussion is the first step toward supporting retirement income solutions.


Nevin is correct when he says retirement income solutions have not been added to plans at the rate that many think is necessary to secure the retirement of American workers. While we highlighted where we disagree with the “obstacles” Nevin identifies, we do appreciate having them succinctly articulated so that we can respond and advance the adoption and utilization of retirement income solutions. 

SECURE 1.0 made changes in law that efficiently address employer concerns regarding adding retirement income to plans. Interest in retirement income solutions continues to build at both the employer and employee level. In our view, now is the time to begin focusing less on obstacles and more on turning the next 10 years into the decade of retirement income. 


Bruce Ashton, General Counsel, Alta Trust; Martha Tejera of Tejera & Associates; and Michelle Richter-Gordon of Annuity Research and Consulting, LLC; respond as representatives of the Institutional Retirement Income Council (IRIC).  

The IRIC is a nonprofit think tank with a mission of facilitating the culture shift of defined contribution plans from supplemental savings plans to programs that provide retirement security through institutional income strategies and solutions within our defined contribution system.

The views expressed in this article are the opinions of the authors and may not reflect those of the American Retirement Association or its affiliates. 


[1] Appendix:

The above ASSPA article cites Invesco’s “Show me the Income” report.  

“With research showing that almost 70% of employee respondents are worried about running out of money in retirement, it’s vital that employers help them overcome that fear, bridge the gap with retirement income options and education,” says Greg Jenkins, Managing Director and Head of Institutional Defined Contribution at Invesco. 

“Nearly 9 in 10 employees would be more likely to stay in their plan if it were able to generate a regular income stream in retirement — yet almost one third of participants were unaware that staying in the plan after retirement was even possible — highlighting the need for improved communication.”