Industry Analysis | Published in May 2017

Income Solution Usage Stagnant

Spotlighting industry data from PLANSPONSOR’s proprietary research

By Judy Faust Hartnett | May 2017

For plan sponsors whose concern for their participants extends beyond the accumulation phase, determining how to help them plan for decumulation has grown increasingly important. But having to choose from in-plan or out-of-of plan products gets complicated by the risk of fiduciary breach and the various regulations detailing how to use either type.

Despite wanting to boost participants’ retirement income, many plan sponsors are holding off on utilizing retirement income products, the 2016 PLANSPONSOR Defined Contribution (DC) Survey data on plan benchmarking shows. Almost 4% (3.9%) more plan sponsors were aware of income products—compared with findings in the 2014 DC Survey—as that was the size of the decrease in respondents who “don’t know” if they offer them. Nevertheless, 6.1% fewer plan sponsors, according to the 2016 survey, have decided to offer them.

While plan sponsors may not want to embrace a product solution, they may allow systematic withdrawals from their plans to help participants create an ongoing income, with regular distributions made to mirror paychecks.

When asked whether their fund lineup allows for “systematic retirement withdrawals,” overall 49.8% of plan sponsors responding to the 2016 survey said, “Yes.” The likelihood of offering systematic withdrawals increases with plan size, with midsize, large and mega plans increasing their use of systematic withdrawals, compared with the 2014 survey results. 

Signing up for systematic withdrawals does not assure a participant that his money will last, and there are no insurance guarantees associated with the payment method.