~ MetLife’s 2016 Lifetime Income Poll Reveals Plan Sponsors Want More Regulatory Clarity to Make It Easier to Offer Guaranteed Income Solutions ~
The Lifetime Income Poll gauged plan sponsors’ familiarity with – and knowledge about – regulatory developments by the
“No longer can DC plans exist solely as retirement savings plans,” says
“Plan sponsors are signaling that they are ready to reframe their DC plans to focus on lifetime income and provide their participants with solutions to help ensure successful retirement outcomes,” says
The Poll found nearly all plan sponsors (96%) agreed that it would be helpful if DC plan account balances were required to be communicated as lifetime income – in addition to the total account balance – on benefit statements. A nearly equal number of plan sponsors (92%) agree that it is important for the DOL to provide a workable safe harbor for annuity carrier selection criteria for individual account qualified plans in order to make it easier for plan sponsors to include income annuities in their DC plans. In determining the adequacy of the solvency of a potential annuity provider for their DC plan, 76% of plan sponsors surveyed would prefer to be permitted to rely on certifications from the annuity provider based on the regulatory process carried out by a state insurance commissioner, rather than to conduct the solvency due diligence process themselves as part of their regular due diligence process for plan providers.
“Today, only six percent of plan sponsors say that their 401(k) plan includes a guaranteed lifetime income option,” added Rafaloff. “This number could rise exponentially once the DOL completes the work on an updated safe harbor rule. Two-thirds of plan sponsors whose plans do not currently include a guaranteed income option reported that they would be at least somewhat likely to make income annuities available for DC plan participants once the rule is announced.”
Perspectives on DC Plan Design
In looking at DC plan design, plan sponsors overwhelmingly recognize the importance of simplicity. Nine in ten plan sponsors (90%) believe that it is in the best interests of plan participants to keep plan design changes simple, since complexity, such as too many choices and features, often leads to participant inertia. Connected to this goal of simplicity, 58% of plan sponsors do not believe that withdrawal solutions with minimum guarantees are easy to understand for the average DC plan participant.
“Guaranteed lifetime income options in DC plans should be simple,” adds Brown. “Adding complexity and features that participants will not use, but which add costs, will not lead to successful outcomes. Offering solutions, such as an immediate income annuity or a qualifying longevity annuity contract (QLAC), provide participants with a simple way to convert a portion of their savings into reliable income.”
When asked about their approach to retirement income, nearly eight in ten plan sponsors (79%) think that allowing plan participants to take a partial lump sum and a partial annuity from a DC plan is preferable to a plan design where participants must take their entire account balance as either a lump sum or an annuity. In addition, the Poll found that nearly three-quarters of plan sponsors (72%) agree that offering only lump sum or systematic withdrawal distributions may not always be in the best interest of plan participants.
About the Study
1 MetLife Retirement Income Practices Study,