There’s a new “e-Guide” for that, courtesy of Annuity Research & Consulting (ARC), which has launched a new educational website to help plan sponsors and advisors explain lifetime income illustrations on participant statements.
According to the firm’s announcement, the site will be free until Aug. 1, 2023, and then cost $30 a year per subscriber. In addition to explaining the default income illustration, it also provides information about the “how’s” and “why’s” of single premium immediate annuities (SPIAs), including Nobel Laureate Bill Sharpe’s view of their “utility.”
ARC notes that the resource may become especially useful for those plans and advisors that have yet to embrace the idea of adding annuities inside a plan. The paywall will not be activated until the end of July 2023 to give advisors and sponsors an opportunity to review it as a potential benefit for their participants. As a fee-only RIA, ARC receives no commissions, referral fees or AUM revenue from asset managers, insurance companies or product distributors; the $30 subscription ensures the e-Guide is unbiased, the announcement notes.
“We think of participant education needs in terms of triage; employees planning to retire this year and next may need to consider immediate annuities much more so than the deferred products that are the private industry’s big sellers both inside and outside plans,” notes ARC co-founder Mark Chamberlain. “This may become especially useful for trustees that have yet to include an annuity option but are using the illustration safe harbor—a SPIA calculation—and want to provide retirement income education for employees retiring this year and next. That said, the information may also be useful to those planning ahead.”
The 2019 SECURE Act amended ERISA to require 401(k)s and other DC plans to include lifetime income illustrations in participant benefit statements on an annual basis. In general, the income illustrations must show a monthly income amount based on a DC plan participant’s account balance as of the last day of the statement period converted to a lifetime income equivalent as a single life annuity (SLA) and qualified joint and survivor annuity (QJSA) involving a spouse. Starting last year, plans were required to begin furnishing the illustrations.
ARC co-founder Michelle Richter-Gordon anticipates there will be questions about participant lifetime income illustrations after the release of second quarter recordkeeping statements. “For plans relying on SECURE’s safe harbor provision, the illustration is modeled on SPIA payout rates; our e-Guide explains the meaning of these illustrations, discusses how SPIAs fit into Nobel Laureate Bill Sharpe’s book on retirement planning for individuals, and suggests key questions consumers should ask about the different product features available, which can vary between issuers.”
The new site includes links to multi-carrier SPIA platforms where participants can model current SPIA cash flows with different options online and ask questions of licensed agents either at the platform companies or independently of them through plan advisors. The website is intended to be educational only, the announcement further emphasizes.
“In 2nd quarter 2022 we had many plan adviser calls asking for guidance on how to explain these illustrations,” adds Richter-Gordon. “Without access to unconflicted information, middle class Americans who choose to leave their employer’s plan at retirement may end up with higher-cost annuities or investment advisory solutions that exclude protected income entirely.”
For additional information, visit: www.RetirementSoon.org. Recordkeepers and plan advisors can contact ARC about a free trial subscription through their website: www.annuityresearch.com.
