403(b)s No Strangers to In-Plan Income Products

While 401(k) plan sponsors are hesitant about adding in-plan retirement income solutions, 403(b) plans have been using them all along. 

According to the 2016 PLANSPONSOR Defined Contribution (DC) survey, 27.2% of 403(b) plans offer in-plan income products that guarantee monthly income, compared to 7.3% of DC plans overall. More than 12% offer in-plan income products that guarantee a base benefit, compared to 3.6% of DC plans overall. Eleven percent offer in-plan income products NOT offering guarantees, and 5.2% offer an out-of-plan annuity purchase/ bidding service, versus 5.7% and 2.6% of DC plans, respectively.

Some of the numbers are even greater for 403(b) plans governed by the Employee Retirement Income Security Act (ERISA). Among those plans, 32.6% offer in-plan income products that guarantee monthly income, and 12.7% offer in-plan income products that guarantee a base benefit.

Among plans not governed by ERISA (non-ERISA 403(b)s), 29.9% offer in-plan income products that guarantee monthly income, and 18.6% offer in-plan income products that guarantee a base benefit. Nearly 23% offer in-plan income NOT offering guarantees, and 6.2% offer an out-of-plan annuity purchase/ bidding service.

The survey found 403(b) plans are also more likely than other DC plans to offer systematic distribution options in their plans (70.7% of 403(b)s vs. 49.8% of all DC plans). Nearly 72% of ERISA 403(b)s do so, and 70.3% of non-ERISA 403(b)s do so.

The 2016 PLANSPONSOR DC Survey received responses from 481 403(b) plans, including 112 non-ERISA plans.